India bonds under pressure before debt supply; hot inflation prints pinch further
TLT•Indian government bond yields rose ahead of a 340 billion rupee sale of benchmark 2036 bonds, as inflation above the Reserve Bank of India's target and elevated US inflation clouded the rate outlook. The benchmark yield reached 7.3113%, up from 7.2467% on Thursday.
1. Bond yields climb
Indian government bonds came under heavy selling pressure ahead of the government’s planned 340 billion rupee sale of benchmark 2036 bonds. The benchmark bond yield was 7.3113% at 10:00 a.m. IST, up from 7.2467% on Thursday, and had risen more than 16 basis points over three sessions.
2. Inflation raises concerns
India’s annual retail inflation accelerated to 6.09% in October from 5.54% in September, exceeding the 5.93% forecast and the Reserve Bank of India’s 4% medium-term target. The data reinforced expectations of another rate increase in early December, following the central bank’s October hike, its first in nearly four years.
3. US yields add pressure
Elevated US inflation and rising Treasury yields also weighed on the outlook. The 10-year Treasury yield moved above 5% on Thursday, while traders priced in a 15% chance of a 50-basis-point Federal Reserve move on December 9, up from zero a week earlier. Indian overnight index swap rates rose, with the five-year rate up 8 basis points to 6.61%.
