India Bond Yields Stay Up Tracking US Rates; Policy Decision Key

Tuesday,   07-Dec-2021   01:21 PM (IST)

Indian federal government bond yields were higher in the afternoon session tracking an uptick in U.S. yields and crude oil prices, while the major focus remains on the monetary policy decision due tomorrow. The benchmark 6.10% bond maturing in 2031 changed hands at 97.98 rupees, yielding 6.38%, the highest since Nov. 2, as of 1:00 p.m. in Mumbai, compared with 98.05 rupees, and a yield of 6.36%, yesterday. The rupee was at 75.34 to the dollar, from 75.42 on Monday. The yield on the 10-year U.S. Treasury note inched above 1.45%, after climbing seven basis points on Monday, on broader risk-off sentiment and amid bets that the new coronavirus variant may not hamper the global economic recovery. Benchmark Brent crude futures were trading 1.56% higher at $74.22 per barrel, after rising by 4.6% yesterday, on expectations that the new coronavirus strain would not hinder fuel demand and additional supplies from Iran may be delayed. India imports about 85% of its crude requirements and rising oil price pose inflationary pressure on the country. Broadly, investors are divided on whether India’s rate-setting panel will raise the reverse repo rate tomorrow. The central bank is likely to hike the reverse repo rate early next year, and may increase the repo rate the following quarter, according to a Reuters poll of economists, who were split on whether the latest Covid-19 variant risked delaying those moves. The Reserve Bank of India has left the benchmark repo rate unchanged at a record low of 4% since May, 2020, while keeping an accommodative stance to boost growth in India's pandemic-ravaged economy. The reverse repo rate has also been kept steady at 3.35% since May last year. India is slowly emerging from the pandemic and reported 6,822 fresh Covid cases yesterday, the lowest since May 28, 2020. The total active cases in the country fell to the lowest since June last year.