India bonds hang tight before supply as oil stalls
On Friday morning, Indian government bonds found stability as oil prices leveled off. The market reacted to hawkish minutes from the central bank and a sudden spike in crude prices. Later today, a major debt sale will gauge investor interest in bo...
By Reuters |
Agencies
Indian government bonds steadied early on Friday as oil prices stabilised, offering some relief after hawkish central bank minutes and a crude price spike put the market on track for its worst week since early April.
A 280 billion rupee ($2.93 billion) debt sale later in the day will test demand, with a 15-year bond making up more than half the supply.
The benchmark 6.94% 2036 bond yielded 6.8723% at 10:45 a.m. IST, perched near Thursday's close and a two-month high. The yield has risen about 12 basis points this week, on track for its biggest weekly increase since April 3.
"There is a weakening bias in the market because of the hawkish RBI policy minutes, though the auction should see sufficient demand," said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank.
Brent crude futures eased into a holding pattern at $93.5 a barrel in Asian trade.
Sentiment has weakened since the RBI released minutes of its August meeting on Wednesday, which struck a more hawkish tone than its policy statement.
Expectations of an RBI rate hike this year have resurfaced as inflation pressures build, while domestic support has ebbed after the central bank brought forward by a month the closure of a dollar-attracting scheme that had been a key source of bond demand.
Retail inflation in July accelerated to 4.45%, above the RBI's 4% medium-term target.
Traders said higher oil prices and global yields would shape the market's next move. The U.S. 10-year Treasury yield was near 4.70%, adding pressure.
The one-year swap rate was flat at 5.9250%, while the two-year rate rose 1 bp to 6.17%. The liquid five-year rate was little changed at 6.4725%.
A 280 billion rupee ($2.93 billion) debt sale later in the day will test demand, with a 15-year bond making up more than half the supply.
The benchmark 6.94% 2036 bond yielded 6.8723% at 10:45 a.m. IST, perched near Thursday's close and a two-month high. The yield has risen about 12 basis points this week, on track for its biggest weekly increase since April 3.
"There is a weakening bias in the market because of the hawkish RBI policy minutes, though the auction should see sufficient demand," said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank.
Brent crude futures eased into a holding pattern at $93.5 a barrel in Asian trade.
Sentiment has weakened since the RBI released minutes of its August meeting on Wednesday, which struck a more hawkish tone than its policy statement.
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Expectations of an RBI rate hike this year have resurfaced as inflation pressures build, while domestic support has ebbed after the central bank brought forward by a month the closure of a dollar-attracting scheme that had been a key source of bond demand.
Retail inflation in July accelerated to 4.45%, above the RBI's 4% medium-term target.
Traders said higher oil prices and global yields would shape the market's next move. The U.S. 10-year Treasury yield was near 4.70%, adding pressure.
RATES
India's overnight indexed swap rates awaited fresh cues after a sharp rise in the previous session.ADVERTISEMENT
The one-year swap rate was flat at 5.9250%, while the two-year rate rose 1 bp to 6.17%. The liquid five-year rate was little changed at 6.4725%.
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