Indian 10-year bond yield at 1-month high tracking global crude, U.S. peers

By Swati Bhat

MUMBAI (Reuters) - Indian bond yields rose further on Thursday, tracking an uptick in global crude oil prices, while expectations of a March rate increase by the U.S. Federal Reserve were reaffirmed by comments from its chairman, pushing up U.S. yields.

Oil prices extended their rally, with Brent rising above $118 a barrel as trade disruption and shipping issues from Russian sanctions over the Ukraine crisis sparked supply worries, while U.S. crude stocks fell to multi-year lows.

"Directionally, yields are likely to edge higher from here. Even if the geopolitical situation stabilises, we have the inflation impact and Fed rate hikes likely soon after," a senior trader at a private bank said.

India's benchmark 10-year bond yield was at 6.83% at 0555 GMT, after earlier rising to 6.85%, its highest since Feb. 4. It had closed at 6.81% on Wednesday.

Traders said with oil marketing companies yet to on-pass the recent increases in global crude oil prices to consumers, risks of inflation surging in coming months, has risen significantly.

India imports more than two-thirds of its oil requirements and rising prices pushes up the country's trade and current account deficit while also hurting the rupee and fuelling imported inflation.

The partially convertible rupee was trading at 75.67/68 per dollar compared to its close of 75.70. Cautious gains in the domestic share market were seen keeping the rupee rangebound between 75.55 to 75.80 range during the session, traders said.

U.S. Treasury yields surged overnight bouncing off eight-week lows, as Federal Reserve Chair Jerome Powell supported the U.S. central bank raising rates this month, while being flexible in response to the Russia-Ukraine war's impact on the economy. [US/]

Though the Reserve Bank of India has repeatedly said it is unlikely to follow the path of global central banks in terms of its own monetary policy, risks of rate hikes are rising with the surge in global crude.

 

(Reporting by Swati Bhat; editing by Uttaresh.V)