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Indian bond yields stabilised after rising to a near two-year high in early trade as a retreat in global crude oil prices helped calm investor nerves, according to analysts. India’s benchmark 10-year bond yield was trading steady at 6.52%, after earlier rising to 6.54%, its highest level since January 31, 2020, according to Reuters.
Global oil prices were steady having gained in the previous session. Brent crude futures were flat at $79.99 a barrel.
“Domestically, there has been growing expectations that RBI will not hike the reverse repo rate in the upcoming policy meet and tighten liquidity measures as the rise of Omicron cases could affect business activity. This could be one of the reasons for the rupee to weaken against the dollar in the near term. Besides, consistently widening trade deficit and oil prices supported by the OPEC decision will likely keep the rupee under pressure,” said Amit Pabari, MD of CR Forex Advisors.
On the data front, Fed’s December meeting minutes and the release of US non-farm payrolls data will be keenly watched for the momentum in the dollar this week.
Yields are likely to stay high unless the Reserve Bank of India steps in to support markets, say analysts.
“States have revised up their Q4 borrowing, inflation is high, U.S. yields inching higher, crude prices holding up and the weekly bond sale. All factors together are likely to keep pressure on yields unless the RBI steps in with some support measures,” a senior trader with a private bank told Reuters.
The Indian rupee appreciated by 10 paise to 74.48 against the US dollar in opening trade on Wednesday, tracking gains in domestic equity markets.
At the interbank foreign exchange, the rupee opened strong at 74.54 against the American dollar, then inched higher to 74.48, registering a rise of 10 paise from the last close. In the previous session, the rupee tumbled 30 paise to close at 74.58 against the US dollar. (With Agency Inputs)
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