India bonds pummelled after Treasury rout, traders raise rate hike bets

Business Recorder reported that Indian government bonds fell in early trade on Thursday, tracking a jump in US Treasury yields and firmer oil prices. The 2036 benchmark bond yield rose to 7.0914% by 10:15 a.m. IST, compared with 7.0447% at Wednesday's close, and briefly touched 7.0994%, its highest since September 15.

US Treasury yields climbed to their highest since July 2007 on Wednesday, following a strong purchasing managers' report that revived concerns about persistent inflation. In Asian trade, Brent crude eased as Iran indicated it was still willing to pursue diplomacy to end the US-Iran war, yet prices remained high after a rise of about 4% in the previous session.

India meets about 90% of its crude needs through imports, which leaves it vulnerable to shifts in international crude prices. Retail inflation came in at 4.82% for August, and the Federal Reserve raised rates by 25 basis points last week, its first increase since 2023. The Reserve Bank of India is scheduled to decide on monetary policy on October 7, and most market participants expect a repo rate increase, according to DBS, which said the RBI's inflation mandate was adding pressure to drain surplus liquidity.