India bonds little changed; traders track oil moves in run-up to RBI decision

Indian government bonds traded in a tight band on Wednesday morning, as cheaper crude was neutralised by selling pressure, according to Business Recorder. The benchmark 6.94% 2036 bond yielded 7.0052% at 10:15 a.m. IST, slightly below the 7.0106% close on Tuesday. The 10-year yield, hovering near 7%, has dropped six basis points from its 7.0686% close on Friday.

Crude prices have slid for six straight sessions, aided by renewed flows through the East-West pipeline and vessels moving through the Strait of Hormuz. Brent has fallen close to 10%, to $98 a barrel, after rising to around $110 last week. India buys roughly 90% of its crude from abroad, leaving it especially exposed to swings in global prices.

Rong Ren Goh of Eastspring Investments told the Reuters Global Markets Forum that Indian debt has held up better than US Treasuries through the recent worldwide sell-off, offering higher absolute yields and strong risk-adjusted returns. Higher-than-forecast August inflation, a weak monsoon and elevated oil prices have raised worries about price pressures. Traders now largely expect the RBI to raise its repo rate at the October 7 policy meeting, a view that has strengthened following the Federal Reserve's recent policy decision.