India bonds to fall as oil spike fears heighten after US attacks Iran
MUMBAI: Indian government bond prices are expected to decline in opening deals at the start of the week as concerns over oil prices rose after US strikes on Iran spooked investors.
The yield on the benchmark 10-year bond is expected to move between 6.32% and 6.35%, traders at a private bank said, compared with the previous close of 6.3087%.
The five-year 6.75% 2029 bond ended at 6.0176%.
'There should be a gap-down opening for sure, but looking at how oil has reacted, we may not see a one-way selloff, and there should be some consolidation around key levels,' the trader said.
Oil prices jumped, with the benchmark Brent crude contract jumping above $80 per barrel for the first time in over five months in Asian hours on Monday, as the United States' weekend move to join Israel in attacking Iran's nuclear facilities stoked supply worries.
US President Donald Trump said he had 'obliterated' Iran's main nuclear sites, in what is seen as an escalation of conflict in the Middle East as Iran, the OPEC's third-largest producer, vowed to defend itself.
India imports a bulk of its crude oil needs, and higher prices could impact the nation's inflation outlook.
Further increases in oil prices could start to impact the policy space of the Indian central bank to a smaller extent, MUFG said in a note.
Earlier this month, the Reserve Bank of India reduced its inflation forecast for this year to 3.7% and cut its key lending rate by a steeper-than-expected 50 basis points.
A big rate cut would assure stakeholders of India's focus on economic growth and aid in faster transmission, members of the rate-setting panel said.
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