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Global crude oil sends local yields higher

Global crude oil sends local yields higher

05 Oct 2021

MUMBAI: Indian bonds rose to a near six-month high reflecting fears that rising crude could force the central bank’s hand in tightening monetary conditions ahead of earlier expectations.

It rose to a high of 6.28 percent and is poised to rise more if the RBI hints at tapering liquidity in the policy on Friday. The benchmark finally yielded 6.26 percent Tuesday a tad higher than a day earlier, show data from ETIG.

“Global crude prices weighed on the local government bond raising inflation concerns,” said Naveen Singh, head of trading at ICICI Securities PD. “Investors may stay off the market ahead of monetary policy, expecting the central bank possibly change its stance on growth-inflation trade-off.”

Brent crude, in the international market, rose to $82 a barrel for the first time in three years. US oil benchmark West Texas Intermediate jumped 3 per cent to more than $78 a barrel for the first time since 2014 amid apprehension overproductions.

The Reserve Bank of India will announce its bi-monthly monetary policy on Friday.

India’s central bank may keep its benchmark rates unchanged at the bi-monthly monetary policy meeting Friday while laying down a roadmap for raising the reverse repo rate, mirroring the calibrated approach Mint Road’s counterparts either side of the Atlantic are taking to re-acclimatize their economies with normal liquidity flows.

An ET poll of 24 banks, funds and financial institutions showed that the monetary policy committee (MPC) at RBI would also evaluate inflation risks arising out of the global energy crisis and rising motor fuel prices, something that could potentially dent growth and upset India’s balance of payments.