India Bond Yields Increase Amid Rising Oil Prices Ahead of RBI Monetary Policy Decision

Indian Government Bond Yields Open Higher Amid Crude Oil Price Surge

Indian government bond yields opened higher on June 1 as crude oil prices firmed up over the weekend following fresh Israeli strikes in Lebanon despite an existing ceasefire arrangement. The benchmark 10-year bond yield was trading at 7.0208 percent, compared with 7.0037 percent in the previous session. This uptick in yields comes as a result of bond yields and prices moving inversely.

The surge in crude oil prices over the weekend was driven by Brent crude prices edging higher to trade slightly above $93 per barrel amid renewed tensions in West Asia. This escalation in the Israel-Lebanon conflict weakened expectations of any near-term breakthrough in efforts to stabilise the region. Markets are also watching the status of ceasefire negotiations involving the United States and Iran, with progress on a broader US-Iran peace deal remaining limited.

Back home, focus has shifted to the Reserve Bank of India's monetary policy committee (MPC) meeting scheduled for June 5. While a majority of market participants expect the RBI to keep the repo rate unchanged at 5.25 percent, a smaller section of economists and traders continue to expect a 25 basis point rate hike to address inflation risks stemming from elevated crude prices and external uncertainties.

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The RBI is also expected to reassess its FY27 inflation and growth projections against the backdrop of higher oil prices and broader macroeconomic volatility.