Now Reading: Bonds in tight range as oil prices cloud inflation outlook
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Bonds in tight range as oil prices cloud inflation outlook
Indian government bonds were trapped in a narrow range on Wednesday, as rising oil prices curbed risk appetite ahead of local and US inflation data. The benchmark 10-year yield was nearly unchanged…
The Story in Brief
Indian government bonds were trapped in a narrow range on Wednesday, as rising oil prices curbed risk appetite ahead of local and US inflation data. The benchmark 10-year yield was nearly unchanged at 6.7822 per cent by mid-morning. Brent crude rose 0.8 per cent to $89.6 a barrel, adding to sharp gains after geopolitical tensions escalated. The Houthis reported new shipping attacks and Tehran said the Strait of Hormuz will stay shut unless US demands are met.
Expensive crude threatens to stoke inflation and strain India's oil-import bill, weighing on bond sentiment. The market awaits India's July retail inflation print, forecast at 4.50 per cent, and later US data. The RBI last week held rates and lowered its inflation forecasts. A trader said the 10-year yield is stuck in a 6.76, 6.80 per cent range, with higher global rates offset by strong foreign inflows from the RBI's diaspora deposit scheme.
The Indian Opinion
The market is caught between two competing pressures. Gloomy oil headlines stir inflation fears and push yields up, while the RBI's diaspora deposit scheme injects billions of rupees and pulls them down. Neither side seems ready to yield. Wednesday's domestic inflation print and the US reading later will test which force wins out. If July retail inflation comes in above the forecast 4.5 per cent, expect the 10-year yield to test the 6.80 per cent ceiling.
Source: thehindubusinessline.com
This story was synthesised by AI from the source linked above.
