Indian government bonds gained on Thursday, helped by a rally in US Treasuries and softer oil prices, though a large debt sale and a weaker rupee kept the rise in check, Reuters reported.
The yield on the benchmark 6.94% 2036 bond fell 3 basis points to 7.4091% by noon. Bond yields move in the opposite direction to prices. The yield briefly slipped below the closely watched 7.40% level in early trade before climbing back, as investors waited for the government's ₹33,000-crore bond sale on Friday.
What drove the move
The 10-year US Treasury yield, a benchmark for global borrowing costs, fell 5 basis points to 4.99% in Asian trade. Brent crude slipped 1% to $114 a barrel as hopes of peace talks eased worries about supply.
The US Federal Reserve held rates on Wednesday, as expected, but signalled that inflation remained high, keeping expectations of a December rate rise alive.
Why it matters
The rupee weakened 0.15% to 95.36 to the dollar, which revived worries about inflation and further rate rises at home. The Reserve Bank of India raised the repo rate and tightened its policy stance earlier this month.
In a note, Emkay Global Financial Services said high US interest rates, costly oil and weak dollar inflows argue for a higher risk premium on Indian bonds, which limits how far the RBI can ignore tightening abroad. It said this makes the case for measured rate rises ahead.
This week the 10-year yield has moved between 7.41% and 7.49%, with traders covering positions after it failed to break above 7.5%.
This article reports market moves and analysts' views and is not investment advice.