Indian bonds sell off on oil shock ahead of RBI policy minutes

Indian government bond prices fell on Wednesday as costly oil heightened inflation worries before the Reserve Bank of India releases minutes from its latest policy meeting, Business Recorder reported. The 6.94% 2036 benchmark yield reached 7.4352% by 10 a.m. IST, compared with Monday’s close of 7.3920%; it had earlier touched 7.4397, its highest since March 9, 2023.

Brent crude approached $112 a barrel on Tuesday, a five-month peak, with Red Sea shipping risks and threats to Saudi oil infrastructure among the issues traders were assessing. India obtains nearly 90% of its crude from abroad, and sustained energy costs could add to inflation, pressure the rupee and strain public finances; September inflation was 5.54% and economists expect it to exceed the RBI’s tolerance ceiling in October. After raising its policy rate and adopting a “calibrated tightening” stance earlier this month, the RBI is expected to offer guidance in Wednesday’s minutes, while swap markets imply about 100 basis points of increases over the coming year, including a possible 50-bp December move.