Indian government bonds could rally early as oil prices fall, but higher U.S. Treasury yields and government bond sales may limit gains. The benchmark 2036 bond yield was 7.1529% on Monday, and a trader expected it to range from 7.13% to 7.19%.
Indian government bonds could extend their rally in early trading on Wednesday as oil prices fall, though the move may reverse quickly as U.S. Treasury yields rise and the government continues selling the benchmark bond. A private-bank trader said the benchmark 6.94% 2036 bond yield was likely to range from 7.13% to 7.19%; it ended at 7.1529% on Monday.
Brent crude fell below $92 a barrel, more than 20% below its late-October highs, after U.S. officials downplayed the prospect of additional military action against Iran. New Delhi plans to sell 340 billion rupees ($3.62 billion) of benchmark 2036 bonds on Friday. U.S. Treasury yields rose after consumer prices increased 0.4% last month and core prices rose 0.3%; traders will also watch India's October inflation data due Thursday, with a Reuters poll putting the reading at 5.93%, up from 5.54% in September.
Overnight index swaps could consolidate after sharp declines this month. The one-year rate fell 5 basis points to 6.28%, the two-year rate dropped 4.5 basis points to 6.30%, and the five-year rate slid 8.5 basis points to 6.3950%.
