India’s benchmark bond yield will likely rise further in the next few weeks amid higher crude prices and surging U.S. yields, providing the right entry point for investors, a senior fixed income official at Star Health Insurance said.
Aneesh Srivastava, executive director and chief investment officer (CIO) at Star Health Insurance, said he sees the 10-year bond yield crossing the key resistance level of 7.25% in the next quarter, a contrarian view to what is largely expected to be a relatively range-bound movement.
“I expect the benchmark to rise to the 7.40%-7.50% levels and at that point, we would be keen to add,” he said, advising investors to place bets strongly on the benchmark once the yield hits that level.
Srivastava expects the benchmark Brent crude contract to rise above $100 per barrel, with the 10-year U.S. yield hitting 5%. This would give a good opportunity to build fresh 10-year India bond positions, he said.
The CIO expects the dollar to strengthen further and inflationary pressures to persist, potentially pushing the Federal Reserve to hike rates one more time and triggering the U.S. yield’s move to 5% during the next quarter.
The 10-year U.S. yield hit a 16-year high of 4.5660% on bets of higher-for-longer interest rates and has jumped nearly 47 basis points so far in September.
India’s benchmark bond yield was last moving at 7.15%. It had eased to a two-month low of 7.07% last week after JPMorgan included India in its emerging market debt index.
The yield had been struggling to convincingly break the key 7.25%-7.26% levels recently.
“The index inclusion was a surprise, but the fact remains that it was already in the prices. Hence we saw an immediate reversal. Actual flows may start only later,” Srivastava added.
“We are waiting for an opportunity to deploy cash, and we expect bond yields to rise in the fiscal second half,” he said. (Reporting by Dharamraj Dhutia; Editing by Swati Bhat and Janane Venkatraman)
