Benchmark bond yield falls on easing oil prices

The 10-year benchmark 6.10%-2031 bond yield ended at 6.1974%, marginally lower than 6.2039% on Friday. The most-traded 6.64%-2035 closed at 6.8076%, compared to 6.8122% yield on the previous trading session.

Yields on the new 10-year benchmark bonds ended down on Monday due to easing in Brent crude prices in the international market and the fall in US Treasury yields on Friday, dealers said.

“The sentiments in the market are positive as oil prices have eased, US Treasury yields have fallen, and also we are in the run-up to the policy this week. Basically, multiple factors are playing role in the market,” said Lakshmi Iyer, CIO – fixed income and head – products at Kotak Mahindra Asset Management Company.

The 10-year benchmark 6.10%-2031 bond yield ended at 6.1974%, marginally lower than 6.2039% on Friday. The most-traded 6.64%-2035 closed at 6.8076%, compared to 6.8122% yield on the previous trading session. However, 5.63%-2026 bonds inched up on Monday after partial devolvement by the Reserve Bank of India on primary dealers at the weekly bond auction on Friday. The bond ended at 5.7310%, against 5.7273% on Friday.

On Monday, Brent crude oil prices eased on worries that China’s factory activity growth slipped sharply in July, and concerns over higher supply of crude oil from OPEC+. Towards the end of market hours, Brent prices were trading at $74.37 a barrel, down $1.04 or 1.38%. Meanwhile, the US Treasury yields fell on Friday after softer-than-expected inflation data. The 10-year benchmark Treasury yield fell 4 basis points to 1.231%.

Most dealers expect that the yield on 10-year bond may remain in the range of 6.15-6.19% throughout the week due to the RBI policy announcement later this week. “The benchmark 10-year bond is likely to remain between 6.15% and 6.19% till the policy. The sharp movement can be seen once fresh supply comes to the market in the benchmark bond,” a dealer with a small finance bank said.