India Bond Yields Stay Up Tracking Rise In US Treasury Yields

Wednesday,   20-Oct-2021   02:11 PM (IST)

Indian federal government bond yields were higher in the afternoon session tracking an uptick in U.S. Treasury yields. The benchmark 6.10% bond maturing in 2031 changed hands at 97.84 rupees, yielding 6.40%, the highest since Apr. 17, 2020, at 1:00 p.m. in Mumbai against 97.93 rupees and 6.39% on Monday. The rupee was at 74.91 to the dollar against 75.34 in the previous session. The U.S. 10-year Treasury yield hit a five-month high of 1.6730% amid inflation concerns and as investors brace for tapering of the Federal Reserve’s massive bond purchases from as soon as early next month. The U.S. yield has risen 16 basis points so far this month. The minutes of the MPC’s latest meeting as well as a 240-billion-rupee debt sale are due on Friday. India’s rate-setting panel earlier this month kept the key repo rate unchanged at a record low of 4% and said it will keep policy accommodative as long as needed to aid the pandemic-hit economy. However, the central bank has discontinued its outright bond purchases under its quantitative easing programme. The RBI will also increase absorption of liquidity through 14-day reverse repos to six trillion rupees in a phased manner through early December. Market participants see it as a start of policy normalization, and this has prompted some bearishness in the market. India estimates goods and services tax revenue to average 1.2 trillion rupees in the next two-to-three months on the back of a rebound in economic activities, festive demand and greater compliance, a senior government official said. Meanwhile, the benchmark Brent crude oil contract was down 0.65% at $84.53 per barrel as data pointed to an increase in U.S. crude oil inventories. India imports nearly 85% of its crude oil requirements.