India 10-Year Bond Yield Near One-Week Low as Oil Off Highs

By Shikhar Balwani

 

India’s 10-year sovereign bond yield was near the lowest level in a week as Brent crude prices that are 1.5 percent below a nine-month high eased inflation concern.

Iraq’s oil minister said yesterday that the nation’s crude exports will accelerate next month, adding to signs that violence in the country’s north isn’t affecting the oil-rich south. Brent was little changed at $113.94 per barrel after climbing to $115.71 on June 19, the highest since September. India imports about 80 percent of its energy needs.

The yield on the 8.83 percent notes due November 2023 was at 8.71 percent as of 10:42 a.m. in Mumbai, compared with 8.70 percent yesterday, the lowest level since June 19, according to prices from the central bank’s trading system. The rupee was steady at 60.1375 per dollar, data from local banks compiled by Bloomberg show.

“The decline in oil has helped” India’s bond market, said N.S. Venkatesh, head of treasury at IDBI Bank Ltd. in Mumbai. “The Iraq situation and its impact on oil prices was having a bearing on our bond markets of late.”

He predicts 10-year yields will range from 8.6 percent to 8.7 percent in the run-up to the nation’s first budget under Prime Minister Narendra Modi. The government will present the federal budget on July 10, an official said in New Delhi on June 23, asking not to be named citing policy directives.

India will sell 150 billion rupees ($2.5 billion) of bonds at a weekly auction tomorrow.

One-month implied volatility in the rupee, a gauge of expected moves in the exchange rate used to price options, dropped seven basis points to 7.53 percent, according to data compiled by Bloomberg. Three-month offshore non-deliverable forwards rose 0.1 percent to 61.04 per dollar, according to data compiled by Bloomberg.

Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the U.S. currency.

One-year interest-rate swaps, derivative contracts used to guard against swings in funding costs, fell three basis points to 8.38 percent, data compiled by Bloomberg show.

Culled from http://www.bloomberg.com/