Indian bonds slip on higher oil, hawkish RBI governor comments

Indian government bond yields climbed on Wednesday as traders cut positions, according to Business Recorder. The benchmark 6.94% 2036 bond yield stood at 7.3886% at 9:45 a.m. IST, up from a close of 7.3655% on Tuesday. Earlier in the session it reached 7.4112%, its highest level since March 2023.

The move followed a rise in Brent crude to around $107 per barrel, as supply risks grew amid fighting between Yemen's Houthis and Saudi Arabia. Higher energy prices weigh on India, which imports much of its oil, adding pressure to inflation and the rupee. Governor Sanjay Malhotra said in a Tuesday interview that monetary policy is not generally used to protect financial stability, though the two cannot be fully separated.

The Reserve Bank of India lifted its key policy rate to 5.50% last week and moved to calibrated tightening, signalling more hikes ahead. HSBC noted that a run of higher inflation readings could strengthen the case for more rate hikes, after September consumer inflation reached 5.54%. Traders were also waiting for United States inflation data to gauge the Federal Reserve's rate path after its recent hike.