Indian Bonds Firm on Weakening Crude Prices, Traders Cautious

Indian Bonds Recover Losses as Brent Crude Prices Ease

Indian bonds opened three basis points higher on May 19, after experiencing losses in previous trading sessions. The recovery is attributed to a slight decrease in Brent crude prices, which remained near $110 per barrel. Meanwhile, yields in India took cues from their US counterparts.

The benchmark 10-year bond yield was trading at 7.1040 percent, a decrease from 7.1313 percent in the previous trading session. Bond prices and yields move inversely. This shift in yield is significant, as it indicates a slight decrease in investor demand for Indian bonds.

Brent Crude Prices Ease Amidst Uncertainty

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Brent crude prices had eased slightly to about $109 per barrel, following US President Donald Trump's announcement that he would pause a potential attack on Iran to allow negotiations for the war in West Asia to come to an end. Although Trump indicated that there is a good chance of both the US and Iran reaching an agreement, traders remained cautious for further cues.

US Treasury Yields Retreat

In the US, the benchmark 10-year Treasury yield also eased marginally to below 4.60 percent, retreating from the highest level in a year. However, market participants were wary of a broader market selloff due to dampened investor sentiment.

Fuel Price Hike and Rupee Decline

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Back home, the Indian government decided to raise fuel prices by about 90 paise, for the second time in the last seven days, for both petrol and diesel. Meanwhile, the rupee opened two paise lower on May 19 at 96.37 against the dollar, after ending the previous session at 96.35. It had fallen to a new low of 96.39 in intraday trade on May 18.

The rupee is on a seven-day losing streak, shedding 2.2 percent and hitting new lows. It has fallen more than 5.5 percent since the US and Israel attacked Iran on February 28.