On Wednesday, the rupee recorded significant gains, and government bond rates fell substantially as worries about rising domestic inflation and India’s trade imbalance were allayed by a strong drop in crude oil prices during the previous several days, according to traders. According to dealers, a drop in domestic headline retail inflation to a five-month low in July increased demand for bonds.
The yield on the benchmark 10-year 6.54 % 2032 paper was 7.21 percent at the last check, 8 basis points less than the previous closing. The movement of yields and bond prices is the opposite. A decrease of one basis point in the yield on the 10-year bond translates into an increase in the price of about 7 paise.
At 10:00 IST, the rupee was trading at 79.29 versus the US dollar, down from 79.66 at the previous closing. As markets were closed on Monday and Tuesday in observance of Independence Day and the Parsi New Year, respectively, bond and currency markets resumed trading on Wednesday following a lengthy weekend hiatus.
Concerns over slowing global economic development decreased demand for the commodity, causing the price of Brent oil futures to drop by almost 3% on Tuesday and reach 6-month lows. According to several other news sources, the most active Brent crude contract increased marginally on Wednesday, trading 0.1% higher at $92.47 per barrel by 00:35 GMT. Crude oil prices have decreased dramatically since reaching a 14-year high of almost $140 per barrel in March, which has relieved pressure on India’s import bill and inflation.
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