Indian government bonds stabilized on Thursday morning after recent volatility, even as the 10-year U.S. Treasury yield touched the 5% threshold during Asian trading. Domestic investors are bracing for an auction of 340 billion rupees in 10-year notes scheduled for Friday. Although crude oil prices have fallen to around $92 per barrel from previous highs of $117, inflation breaching the central bank's target band keeps monetary tightening firmly on the table.
Key points
Anticipation of a December interest rate hike of up to 50 basis points is keeping domesti…: Anticipation of a December interest rate hike of up to 50 basis points is keeping domestic yields elevated.
A pullback in crude oil prices to $92 per barrel offers limited relief against wider glob…: A pullback in crude oil prices to $92 per barrel offers limited relief against wider global interest rate pressures.
Overnight index swap rates climbed across one-, two-, and five-year tenors as traders adj…: Overnight index swap rates climbed across one-, two-, and five-year tenors as traders adjusted for domestic inflation data.
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The 10-year US Treasury yield, a barometer for global borrowing costs, tested 5% in Asian trade as investors stepped up bets on a larger Federal Reserve rate increase in December.
Traders shrugged off a slight decline in oil prices to $92 per barrel as they awaited New Delhi's 340 billion rupee ($3.63 billion) auction of the 10-year note on Friday.
On Thursday morning, Indian government bonds remained stable, reflecting a pause after recent volatility. Market sentiment is influenced by declining oil prices and climbing US Treasury yields, with inflation data on the horizon. The Reserve Bank of India is expected to modify its policy rate in light of these figures. Meanwhile, the ongoing Iran conflict could affect oil pricing, as traders prepare for a significant bond auction set for Friday.
The benchmark 6.94% 2036 bond yield settled 3.5 basis points higher at 7.2467%, retreating from an intraday high of 7.2617%. The yield had logged its sharpest one-day jump in a month on Wednesday.
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