India bonds extend weekly slide; struggle to shake off RBI hike, hawkish stance
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Indian government bonds have faced a downturn for the eighth consecutive week, primarily influenced by soaring oil prices and a more aggressive stance from the central bank. The yield on benchmark bonds has surged, signaling a drop in investor confidence. Additionally, the Reserve Bank of India raised the repo rate to 5.50%, with economists anticipating further increments that may take it to at least 6.00%.
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Loading...×Indian government bonds fell for an eighth straight week as elevated oil prices and a hawkish shift by the central bank dampened investor appetite, pushing the benchmark 10-year yield higher.The benchmark 6.94% 2036 bond ended at 7.2994% on Friday, up from 7.2868% on Thursday. The yield rose 9 basis points this week, adding to a cumulative 45-basis-point rise over the previous seven weeks since August 17.
The Reserve Bank of India raised its repo rate by 25 basis points to 5.50% this week and shifted its policy stance to "calibrated tightening" from neutral, signalling the possibility of further rate hikes.
Bonds Corner Powered By Treasury rally could lift India bonds at open, but caution prevails
Indian government bonds are expected to draw investor interest early Thursday as US Treasury yields retreat. The Reserve Bank of India's recent hawkish outlook on interest rates continues to create a cautious market environment. The 6.94% 2036 bond yield is projected to stabilize after closing at 7.3999%. Furthermore, predictions suggest that September's consumer inflation may breach 6%, influencing the central bank's decisions, with further interest rate increases anticipated.
India bonds sink deeper on RBI commentary, inflation concernsIndian bonds slip on higher oil, hawkish RBI governor commentsIndia's benchmark bond breaks 4-day falling streak as value investors returnIndia bonds rise as investors see value after 10-year yield nears 7.40% Browse all Bonds News with"Our long-held view is that RBI would turn hawkish as inflationary pressures start to build hence this shift is within our expectations. We have another 25 bps hike in our forecast profile through March 2027, with the risk skewed towards more rather less hikes," said Lavanya Venkateswaran, executive director and senior ASEAN and India economist at OCBC Bank.
Most economists now expect India's terminal repo rate to reach at least 6.00%, while Standard Chartered Bank and Goldman Sachs forecast the same at 6.25%.
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Brent crude climbed above $105 a barrel this week as attacks on vessels intensified, before easing slightly after U.S. President Donald Trump said Washington was holding productive talks with Iran.
Higher oil prices pose risks to energy importer India, threatening government finances and potentially pushing up headline inflation beyond the direct impact of fuel costs.
RATES
India's overnight indexed swap rates were broadly unchanged for the week, as easing US yields offset the impact of policy stance change.
The one-year OIS rate ended at 6.24%, the two-year rate closed at 6.44%, while the liquid five-year rate settled at 6.7250%.
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Figures reflect the source report and its stated period. This article is for information and is not investment advice.
