MUMBAI – Indian government bond yields rose in the early session on Friday, with the benchmark yield jumping to a more than three-month high, tracking a rebound in oil prices, while fresh debt supply will also test investor appetite.
The yield on the benchmark 10-year bond was at 7.2136%, as of 10:00 a.m. IST, following its previous close at 7.1905%. Earlier in the day, the yield had hit 7.2274%, the highest level since Jan. 8.
New Delhi aims to raise 240 billion rupees ($2.87 billion) through the sale of bonds, which includes a new 40-year security.
“Bulls have taken a back seat as we are entering into territories that were unheard of some time ago,” a trader with a private bank said. “During geopolitical tensions, there is no sanctity of any particular level, so caution should prevail.”
Oil prices jumped on Friday in reaction to reports that Israeli missiles had struck a site in Iran, sparking concerns that Middle East oil supply could be disrupted.
The explosions were a result of the activation of Iran’s air defence systems, an Iranian official told Reuters on Friday, adding that no missile attack was carried out against Iran.
The benchmark Brent crude contract was hovering near the $90 per barrel mark. Higher commodity prices are a major negative for India as they impact local retail inflation and may make achieving the Reserve Bank of India’s 4% target more difficult, delaying monetary policy easing.
Meanwhile, U.S. yields came off their recent highs, although the 10-year yield remained around the critical 4.55% mark.
Investors have pared expectations over the timing and quantum of rate cuts in the world’s largest economy in 2024 and futures are now pricing the possibility of less than 50 basis points (bps) of cuts by the end of this year, according to CME’s FedWatch Tool. ($1 = 83.4950 Indian rupees)
