India bond selloff to continue as RBI policy minutes hint at more rate hikes

Indian government debt could face more pressure on Thursday after Reserve Bank of India policy minutes suggested further monetary tightening might be required to contain inflation, Business Recorder reported. The 2036 benchmark bond yield was forecast by a primary-dealership trader to move within 7.40% to 7.47%, following a previous-session close of 7.4427%. Earlier in October, the RBI raised its policy rate by 25 basis points to 5.50% and replaced its neutral stance with “calibrated tightening.”

Higher oil costs and weak monsoon rainfall have added to food-price and inflation concerns, while September data showed broader price pressures. Markets have factored in just over 100 basis points of rate increases over the coming year; Yes Bank analysts see a further 50 basis points, split between December and February. Brent remained above $110 per barrel amid Houthi attacks on Saudi Arabia and a US move to withdraw some personnel from missions there. India imports nearly 90% of its energy needs, leaving elevated oil prices a concern for inflation, the rupee and public finances.