Bond Yields Hold Steady Pre-Debt Auction, Brent Crude in Spotlight

India's Bond Market Remains Cautious Ahead of State Debt Auction

The Indian benchmark 10-year bond yield has traded largely unchanged on April 21 morning, with traders closely monitoring the developments in the global crude market. The benchmark 10-year bond yield was trading at 6.8925 percent, a slight increase from the previous session's close of 6.8901 percent.

Several Indian states are scheduled to raise Rs 16,900 crore through a debt auction later in the day, with bond tenures spanning eight to 28 years. This comes on the heels of the government of India's plan to raise Rs 32,000 crore via an auction of dated securities today, with maturities spanning five to 30 years.

The global market is being cautious due to increased volatility in Brent crude prices amid uncertainty over peace talks between the United States and Iran. The situation took a turn for the worse over the weekend, with the US seizing an Iranian cargo ship that had attempted to bypass its naval blockade. Iran has warned of retaliation, which has led to heightened tensions in the region.

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Higher Brent crude prices are detrimental to the Indian market as they stoke up inflationary pressures and weigh on domestic bond yields. The rupee has opened 18 paise lower, trading at 93.31 against the dollar, after the Reserve Bank of India (RBI) partially rolled back some of the restrictions it had imposed on the offshore non-deliverable forwards (NDF) market. This move was announced in an after-market hour statement on April 20, in an effort to curb rupee volatility.