Indian bond gains disappear as oil prices rebound
Benchmark bond yields rose by noon on Tuesday following reports of US strikes on Iran's Qeshm Island and volatile crude prices.
Early gains in Indian government bonds were lost on Tuesday as crude oil prices became volatile following reports of fresh US-Iran attacks, according to the Economic Times.
The benchmark 6.94% 2036 bond yield reached 7.3220% by noon, after an initial drop of 4 basis points in early trade. This followed a nearly 10 bps decline in the previous session.
Brent crude prices rose to $105.8 a barrel on Tuesday after reports that the United States struck Iran's Qeshm Island. This occurred after prices had previously fallen more than 7% to $104.8 a barrel following talks between Iranian and Qatari officials.
As the world's third-largest oil importer, India faces risks from higher crude prices, which can impact inflation, the rupee, and the government's fiscal outlook.
Traders are also monitoring a 299 billion rupee ($3.15 billion) state-debt auction. A private-bank trader said investors are unlikely to add duration with conviction while crude remains above $105 and headlines drive intraday moves.
In the overnight indexed swap (OIS) market, the one-year rate rose 1 bp to 6.6675%, the two-year rate was marginally down at 6.67%, and the five-year rate fell 1.75 bps to 6.76%.