scorecardresearchBond yields seen marginally lower as oil prices dip further

Bond yields seen marginally lower as oil prices dip further

Updated: 21 Nov 2022, 08:16 AM IST
TL;DR.
The benchmark 10-year yield is likely to be in a 7.27%-7.32% band, a trader with a private bank said. The yield ended a tad higher at 7.3077% on Friday. In the absence of any major local events, yields could move in line with global triggers this week.
FILE PHOTO: The Reserve Bank of India (RBI) seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui/File Photo

FILE PHOTO: The Reserve Bank of India (RBI) seal is pictured on a gate outside the RBI headquarters in Mumbai, India, February 2, 2016. REUTERS/Danish Siddiqui/File Photo

(Reuters) - India's government bond yields are expected to open marginally lower on Monday, tracking a decline in oil prices.

The benchmark 10-year yield is likely to be in a 7.27%-7.32% band, a trader with a private bank said. The yield ended a tad higher at 7.3077% on Friday. In the absence of any major local events, yields could move in line with global triggers this week.

After some consolidation on Friday, market participants are likely to take comfort from the easing oil prices, leading to a downward bias in yields at opening on Monday, the trader said.

Crude oil dropped by about 2% on Friday, logging a second weekly decline, due to concerns about weakened demand in China and further increases to U.S. interest rates. Brent crude settled lower for the third consecutive session on Friday.

The movement in oil prices has a direct impact on local inflation as India is one of the largest importers of the commodity. India's retail inflation eased to a three-month low of 6.77% in October, raising bets that the Reserve Bank of India (RBI) may slow down its pace of interest rate hikes.

Most market participants now expect the central bank to opt for a lower 35-basis points hike in the next meeting in December, after three back-to-back 50-bps hikes. The RBI has raised the repo rate by 190 basis points since May, to 5.90%.

Meanwhile, U.S. Treasury yields rose on Friday on expectations that the Federal Reserve will continue hiking rates while the yield curve held at deeply inverted levels on concerns that tighter policy will dent economic growth.

The inversion in the key two-year, 10-year part of the Treasury yield curve deepened on concerns about an impending recession. It was at minus 70 basis points on Friday, nearing levels last reached in 2000.

Market participants also await minutes from the Fed’s November meeting due mid week.

 

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First Published: 21 Nov 2022, 08:16 AM IST