India govt bond yields edge lower as crude oil prices, US peers drop

Indian government bond yields fell on Wednesday as a drop in U.S. peers and oil prices from their recent highs improved investor sentiment.

The 10-year benchmark bond yield closed at 7.3408% after ending at 7.3769% in the previous session.
 

Oil prices dipped, with the benchmark Brent crude contract comfortably below the $90-per-barrel mark, as concerns about slowing European demand offset worries about Middle East supply disruptions stemming from the Israel-Hamas conflict.
 

"On the global narrative, tensions have not escalated but are just at the surface, waiting to move in any direction," said Anitha Rangan, an economist at Equirus Group.
 

 

Falling oil prices can ease some inflationary pressures for net importers like India. Local inflation breached the 6% upper tolerance limit in five of the last 12 months, but stayed between 4% and 6% in the other seven, including easing to around 5% in September.
 

The decision of India's monetary policy committee to reinforce the 4% retail inflation target follows inflation returning to its 2%-6% comfort zone, but does not necessarily signal rates will remain higher for longer, two external members of the committee told Reuters.
 

Meanwhile, the U.S. yields fell, with the 10-year down more than 20 basis points (bps) after rising above the 5%-mark on Monday as investors bought into the recent sell-off.
 

The 10-year yield was at 4.86% after hitting a more than 16-year high of 5.02% on Monday.
 

Market participants also continue to await any progress on the Reserve Bank of India's debt sale plan as the RBI will conduct open market sales of bonds once government spending picks up and there is an improvement in the durable liquidity surplus, Reuters reported.