Bond Yield Rises 7 Basis Points Amid Ongoing Tensions in Iran

Indian Sovereign Bonds Plunge Amid Escalating West Asia War

Market Update

On March 9, Indian sovereign bonds experienced a significant decline, with yields rising 7 basis points. This increase in yields coincided with a surge in crude prices, which surpassed $110 a barrel. The escalating US-Israel and Iran war, now in its second week, has led to a disruption in fuel supplies, causing global businesses to become increasingly concerned about an impending oil shock.

Global Market Impact

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Brent crude has seen a substantial increase of over 25% since the beginning of the month, with a current price of $110 a barrel. This upward trend in energy prices has contributed to the rise in bond yields, which have consistently remained above the 6.7% threshold. The Reserve Bank of India (RBI) has reportedly intervened in the market to maintain yields below this threshold.

RBI Intervention

The RBI has announced plans to purchase Rs 50,000 crore worth of bonds in two tranches, on March 9 and March 13, to inject liquidity into the system. Market participants have suggested that the central bank has been actively buying bonds in the secondary market to cap the yield on the 10-year benchmark bond below 6.7%.

Currency Market Reaction

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The rupee has depreciated significantly, shedding 47 paise at the open and trading at Rs 92.21 against the dollar. This decline has brought the currency close to a record low of Rs 92.31, which was last seen last week. The RBI's intervention efforts have been unable to stem the downward trend in the rupee.