Bond yields decline as oil prices touch a 7-month low

8 Sep 2022 , 12:53 PM

Early Thursday trading saw a reduction in Indian government bond yields as worries about inflation and more interest rate hikes were reduced by a strong decline in global oil prices.

The benchmark yield on a 10-year government bond was 7.1372%. On Wednesday, the yield had a final value of 7.1844%. After finishing at 7.1279% on Wednesday, the 10-year 7.26% 2032 bond yield was at 7.0814% on Thursday.

The benchmark Brent crude contract fell below levels last seen before Russia invaded Ukraine on Wednesday as disappointing Chinese trade data fuelled investor concerns about the possibility of a recession.

Wednesday saw the contract’s lowest price per barrel since January 25 at $87.40; however, Thursday saw a slight increase. As a big importer of the commodity, India may benefit from falling oil prices in terms of reducing inflation.

Retail inflation in India decreased to 6.71% in July, slowing for the third consecutive month, but still above the RBI’s target range for a seventh straight month. The data for August is due on Monday, and Barclays anticipates little change in the reading.

The 10-year U.S. Treasury yield, meanwhile, dropped to 3.25% earlier in the day after climbing to its highest levels in more than two months on Wednesday.

In anticipation of being included in international indices, foreign banks and investors have been piling up on local paper, driving up bond prices.

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