India bonds to decline on elevated oil, hawkish RBI

Indian government bonds faced a weaker outlook for Monday, 19 October, as oil-related inflation concerns added to expectations of tighter monetary policy. Business Recorder reported that the benchmark 6.94% 2036 bond yield was forecast to trade at 7.37% to 7.42%, compared with its previous close of 7.3789%; higher yields correspond to lower bond prices.

Brent crude fell $1.94, or 1.77%, to $107.92 a barrel by 0227 GMT, after reaching its highest level since May 19 on Friday. The report said Middle East tensions continued to underpin oil, while September inflation in India rose to 5.54%; economists surveyed by Reuters expected it to exceed the central bank’s 6% upper tolerance limit in October. The Reserve Bank of India was also expected to tighten financial conditions to counter capital outflows and make rupee short-selling more expensive.