Commodities● Neutral
Indian Bonds Rally After Oil Tumbles on US-Iran Pause
Indian bonds rallied Monday, with the benchmark yield falling 5 bps to 6.78%, after Brent crude slid below $93 on a US-Iran strike pause. The five-year swap rate dropped 11 bps.
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Indian government bonds rallied Monday, erasing the previous week's losses after crude oil prices tumbled following a weekend pause in U.S.-Iran strikes. The benchmark 6.94% 2036 bond yield fell to 6.7767% by 10:15 a.m., down from Friday's close of 6.8253%.
The rally could prove short-lived given the recent pattern of oil price volatility, a trader with a primary dealership said. Brent crude fell 4% in Asian trade to below $93 a barrel, extending a similar drop from the previous session. The United States and Iran halted strikes after two weeks of hostilities, raising hopes that shipping through the Strait of Hormuz could gradually return to normal.
Oil had surged in recent days, with Brent hitting $102 last week. Traders priced in the risk of supply disruptions from the tit-for-tat between the two countries. The reversal offers direct relief to India, the world's third-largest oil consumer and a major importer. Higher energy costs would expand the import bill and worsen the current-account balance, pushing up odds of monetary tightening. The benchmark yield reversed two weeks of gains.