Indian bonds could rally some more as fundamentals favour bulls
TLT•Indian government bonds could extend gains as lower oil prices and Treasury yields support sentiment, with the benchmark yield seen at 7.15%-7.20%. Investors are watching October inflation data due Thursday; inflation is expected to rise to 5.93% from 5.54%.
1. Bond rally outlook
Indian government bonds could rally further at the start of the week as benign oil prices and Treasury yields support investor sentiment. A private-bank trader said the benchmark 6.94% 2036 bond yield is likely to hover between 7.15% and 7.20%, after ending Friday at 7.1898% and falling 22 basis points for the week.
2. Oil and yields
The 10-year benchmark yield had its steepest weekly drop since October 2019. Oil prices fell more than 16% over the week, their sharpest slide since April 2020, while the trader said bond-market volatility remained a risk.
3. Inflation watch
Investors are focused on India's October inflation data, due Thursday, and its implications for the Reserve Bank of India's policy path. Inflation is expected to rise to 5.93% from September's 5.54%, nearing the upper end of the RBI's 2%-6% target range as food prices climbed. Overnight index swap rates could also decline marginally, tracking bond yields; the one-, two- and five-year rates fell 39, 40 and 38 basis points last week, respectively.
