Oil shock hammers India bonds before policy minutes, 10-year yield at over 3-year high

Indian government bond prices fell on Wednesday as investors reacted to costly oil and awaited minutes from the Reserve Bank of India’s latest policy meeting, Business Recorder reported. The 6.94% 2036 bond yield finished at 7.4427%, compared with 7.3920% on Monday, and was close to a level last seen in March 2023. Markets were closed on Tuesday for a local holiday.

Brent crude remained above $110 a barrel after approaching $112 the previous day, while concerns over shipping in the Red Sea and Saudi oil infrastructure added to supply worries. India imports nearly 90% of its crude, and economists expect September inflation of 5.54% to move above the central bank’s tolerance ceiling in October. Traders were looking to the policy minutes for signals on the RBI’s view of oil-related inflation; swap markets reflected expectations of about 100 basis points in rate increases over the coming 12 months.