India's 10-Year Bond Yield Continues Upward Trend for Fourth Consecutive Session Amid Oil Price Increase

Indian Bond Yields Extend Gains as Oil Prices Rise

India's benchmark 10-year government bond yield opened marginally higher on May 12, marking the fourth consecutive session of gains. This increase came as oil prices climbed following the rejection of each other's peace proposals by the United States and Iran aimed at ending the ongoing conflict.

At 9:10 am, the benchmark 10-year bond yield was trading at 7.043 percent, up 1 basis point from its previous close of 7.032 percent. Market participants noted that the benchmark yield has been influenced by recent developments, including comments from Prime Minister Narendra Modi.

Markets have been cautious following recent comments from Prime Minister Narendra Modi, with traders speculating on possible measures that could be introduced to manage rising external pressures and foreign exchange concerns. Participants stated that the probability of a fuel price hike has increased following the completion of state elections, especially if international crude oil prices continue rising. Traders also expect inflationary pressures to intensify, which could eventually force the Reserve Bank of India to adopt a tighter monetary stance even if rates remain unchanged in June.

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According to market participants, persistent inflation risks and rupee depreciation pressures may require the RBI to raise interest rates at a faster pace later to contain price pressures. Meanwhile, banking system liquidity also moderated sharply. Banking liquidity, measured by a Bloomberg index, declined to Rs 1.9 trillion on Sunday from a peak of Rs 5.3 trillion recorded around a month ago.