Indian government bonds fell for a fourth consecutive month in October as rising oil prices and tighter monetary conditions weighed on the market. The 10-year yield rose 22.5 basis points during the month to 7.4139%, while Brent crude climbed nearly 14%.
The benchmark 6.94% 2036 bond yield rose 2.5 basis points on Friday to 7.4139%, bringing its October increase to 22.5 basis points. Bond yields move inversely to prices.
Brent crude was poised for a fourth monthly gain, up nearly 14% in October, and reached an intraday high of $117.55 on Friday. Foreign investment in Indian bonds continued to flow out, with holdings of index-eligible notes at a more than four-month low. Earlier this month, the Reserve Bank of India raised its policy rate to 5.50% for the first time in nearly four years and adopted a “calibrated tightening” stance.
The 10-year yield fell about 6 basis points over the week, after rising more than 70 basis points in the previous 10 straight weeks. One-year overnight indexed swaps rose 51 basis points in October to 6.72%, two-year swaps gained 33 basis points to 6.74%, and five-year swaps added 21 basis points to 6.86%. Ketan Parikh of ICICI Life Insurance said the 10-year government bond yield could eventually reach 7.75% if geopolitical conflicts and foreign portfolio investment flows do not turn around.
