Oil slide, Treasury strength boost Indian bonds
TLT•Indian government bonds rose as falling crude prices and softer U.S. Treasury yields supported demand. The benchmark 2036 bond yield fell 4 basis points to 7.2594%, while the one-year overnight indexed swap rate dropped 9 basis points to 6.54%.
1. Bond yields fall
Indian government bonds climbed on Wednesday as crude's recent decline encouraged traders to add positions. The benchmark 6.94% 2036 bond yield was down 4 basis points at 7.2594% at 11:30 a.m. IST, extending a decline of more than 11 basis points over the previous two sessions.
2. Oil and rates
The U.S. 10-year Treasury yield fell 1 basis point to 4.94%, after touching 4.89% earlier. Brent crude, which briefly tested $100 per barrel on Tuesday, edged up to $103 in Asian trading. India's overnight indexed swap rates fell, with the one-year rate down 9 basis points to 6.54%, the two-year down 7 basis points to 6.57%, and the five-year down 5.25 basis points to 6.68%.
3. Inflation concerns
A private-bank trader said the focus was on how Treasuries and oil react and how they reshape the domestic macroeconomic backdrop. Traders had increased bets on interest-rate hikes as higher oil prices raised inflation risks; softer oil eased those concerns.
