Indian Bonds Dip 2 Basis Points Amid Crude Price Concerns

Indian Bonds Fall Amid Rising Oil Prices

Indian bonds fell by 2 basis points (bps) on April 22, as Brent crude prices edged closer to the $100 per barrel mark despite United States President Donald Trump extending a ceasefire with Iran indefinitely.

The benchmark 10-year bond yield was trading at 6.9078 percent, a slight increase from the 6.8894 percent recorded in the previous trading session. It is worth noting that bond yields and prices trade inversely.

Brent crude had marginally retreated to $98 per barrel, after gaining more than 8 percent in the last two sessions. The extension of the ceasefire, announced by President Trump, seemed unilateral, as neither Iran nor US ally Israel has yet agreed to extend the peace deal.

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The Strait of Hormuz Remains Closed

The Strait of Hormuz, a critical waterway for oil shipments, remains closed, while the US seized an Iranian cargo ship when it attempted to bypass a blockade led by the former.

Higher oil prices are likely to have a detrimental impact on India, as they will increase inflationary pressures, which in turn will weigh on domestic bond yields.

Market Expectations

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Markets continue to factor in a degree of policy tightening, with elevated swap rates indicating expectations of a 'higher-for-longer' interest-rate environment. This suggests that bond yields are expected to remain high for an extended period.

| Comparison of Bond Yields | | --- | --- | | Previous trading session | 6.8894% | | Current trading session | 6.9078% | | Change | 2 basis points |