India bonds to decline on elevated oil, hawkish RBI
TLT•Indian government bonds are likely to weaken Monday as elevated oil prices stoke inflation worries and reinforce expectations of a hawkish central bank. The benchmark 2036 bond yield may trade between 7.37% and 7.42%, after closing at 7.3789%.
1. Bond yield outlook
A trader at a primary dealership said the benchmark 6.94% 2036 bond yield may trade between 7.37% and 7.42% on Monday, after closing at 7.3789% in the previous session. The trader said rising oil prices could keep the central bank hawkish for longer and put upward pressure on yields.
2. Inflation and rates
Brent crude fell 1.77% to $107.92 a barrel after settling at its highest since May 19 on Friday. India's September consumer inflation accelerated to 5.54%, and a majority of economists polled expected it to cross the central bank's 6% upper tolerance limit in October. One-year overnight indexed swap rates rose 32 basis points last week to 6.56%, while two-year and five-year rates closed at 6.6225% and 6.7875%, respectively.
