Indian bond yields fall amid global risk aversion; Rupee at two-month low

Traders said a favorable supportive sentiment is expected for Reserve Bank of India bonds despite a rise in global crude oil prices, which could lead to a rise in domestic inflation.

India’s benchmark 10-year bond yield ended at 6.67%, down 3 basis points from its previous close and below its session high of 6.72%.

Rahul Bajoria, an economist at Barclays, wrote, “While the RBI may choose to normalize the policy corridor over the next six months, we now expect the repo rate hike to start in Q3 22 (August policy meeting), delaying the delay.” would be at risk.” A Comment.

RBI Governor Shaktikanta Das said India’s central bank remains committed to its inflation mandate and there should be no panic over the prospect of January inflation moving towards the upper end of its target band.

Das reiterated that his inflation forecast for 2022/23 was strong at 4.5% and was made taking into account various crude oil levels and scenarios. January inflation figures are due at 1200 GMT.

The RBI left key rates unchanged and retained its policy stance last week, as it sought to ensure a more broad-based recovery and mitigate risks from inflation.

Oil prices were stable in the seasaw trade, after hitting a more than seven-year high on fears that a possible invasion of Ukraine by Russia could trigger US and European sanctions from one of the world’s top producers. will hinder exports.

Traders said the possibility of cancellation of the remaining two auctions in the current financial year after the government’s decision to cancel last week’s auction is also helping.

The partially convertible rupee closed at 75.6050/6150 per dollar, after touching 75.64, its lowest level since December 22. It had ended at 75.38 on Friday. Stock indexes each dropped more than 3%.

A senior fixed income trader at a private bank said, “Crude oil is causing global risk, but RBI is looking for growth and ignoring inflation till the end of the year.”

“Bond yields should remain range bound for now and dance to the news flow, but reality will hit after the second half of March when supply is in focus,” he added.