Indian bonds rise after sharp drop in US yields spurs value buying
TLT•Indian government bonds rose after a flat open as falling US Treasury yields prompted value buying. The benchmark 2036 bond yield fell to 7.3551% from 7.3789%, while India's 10-year yield had risen for nine consecutive weeks, gaining 62 basis points overall.
1. Bonds recover from flat start
Indian government bonds turned higher on Monday as a sharp drop in US Treasury yields outweighed oil-related inflation concerns. The benchmark 6.94% 2036 bond yield was 7.3551% at 10:25 a.m., down from 7.3789% at the previous session's close. Indian debt markets were due to close Tuesday for a local holiday.
2. Inflation and rates outlook
India's 10-year benchmark yield had risen for a record nine consecutive weeks, climbing 62 basis points in total. The 10-year US yield fell last week and was around 5.05% as investors assessed economic data and bet the Federal Reserve's next rate hike would not come until December. India's September consumer inflation accelerated to 5.54%, and economists said it was on track to exceed the central bank's 6% upper tolerance limit in October. Indian overnight indexed swap rates also fell, with the one-year rate down 7 basis points to 6.48% and the two-year rate down 8 basis points to 6.54%.
