By Dharamraj Dhutia
MUMBAI, April 3 (Reuters) - Indian government bond
yields are expected to rise in the first trading session of the
new financial year, tracking a spike in oil prices, while the
government's borrowing plans for April-September weigh on
sentiment.
The 10-year benchmark 7.26% 2032 bond yield is expected to be in a 7.33%-7.38% range on Monday, after
closing at 7.3180% on Friday.
The yield fell 14 basis points in March, its first monthly
fall since November, but rose 48 bps in fiscal 2023, and
recorded its third consecutive rise.
The sharp jump in oil prices would not go unnoticed, and
yields should continue their rising trend, a trader said. "The
borrowing programme is also marginally negative for duration,
which could accentuate the yield moves."
Oil prices jumped on Monday, jolted by a surprise
announcement by the Organization of the Petroleum Exporting
Countries and their allies including Russia, known as OPEC+, to
cut production further in an effort to support market stability.
The group, which was expected to maintain its earlier
decision to cut output by 2 million bpd until December,
announced production cuts of about 1.16 million bpd on Sunday.
The pledges bring the total volume of cuts by OPEC+ to 3.66
million bpd according to Reuters calculations, equal to 3.7% of
global demand.
The benchmark Brent crude futures rose to $86.44 per barrel,
their highest levels in nearly four weeks, and elevated oil
prices could impact India's inflation trajectory, as the nation
is one of the largest imports of the commodity.
Sentiment also weighed on the government's plans to borrow
8.88 trillion rupees ($107.81 billion) - slightly above
expectations - via bonds in April-September, which constitutes
about 57.6% of the total 15.43 trillion rupees.
Traders will majorly remained focused on the Reserve Bank of
India's (RBI) monetary policy decision due on April 6. The RBI
will raise the interest rate by 25 basis points and then pause
for the rest of the year, according to a Reuters poll of
economists, who said the central bank would still maintain its
tightening stance.
The central bank had raised the repo rate by 250 bps to
6.50% in the previous financial year.
KEY INDICATORS:
** Brent crude futures contract was up 5.8% at $84.25
per barrel after rising 0.6% in the previous session
** 10-year U.S. Treasury yield was at 3.5166% and
two-year note was at 4.1100%
($1 = 82.3640 Indian rupees)
(Reporting by Dharamraj Dhutia; Editing by Varun H K)
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