On Thursday, September 28, Indian government bond yields witnessed a significant surge, marking their most substantial single-session rise in 2023. This increase was attributed to several factors, including the relentless climb in oil prices, rising US Treasury yields, and concerns surrounding the possibility of another US government shutdown, according to a report by Reuters.
The 10-year benchmark 7.18 percent 2033 bond yield closed at 7.2414 percent, a notable uptick from the previous session’s 7.1704 percent. This marked the most significant single-session rise since November 3, 2022.
Market analysts have noted that the elevated US yields and soaring oil prices, combined with the looming threat of another US government shutdown, have collectively weakened overall market sentiment, creating a bearish mood. Yogesh Kalinge, Vice President at AK Capital Services, expressed the possibility of strong support emerging at the 7.25 percent yield level, as reported by Reuters.
The consistent upward trend in US yields, particularly at the longer end, has been a contributing factor. The 10-year US yield has approached 4.65 percent, reaching a 16-year peak, driven by expectations that the US Federal Reserve will maintain higher interest rates for an extended period.
September has witnessed the 10-year yield in India climbing by more than 50 basis points, impacting bullish bets and contributing to the shift in market sentiment. Additionally, the benchmark Brent crude oil contract has risen above $97.50 per barrel, marking its highest level since November 2022. This increase can be attributed to concerns about tight global oil supplies, exacerbated by a decrease in crude stocks in the United States. Analysts have pointed out that increased betting by market participants has kept crude oil prices higher in futures trading.
These factors have effectively reversed the decline in bond yields that resulted from the bullish sentiment following JPMorgan’s recent inclusion of India in its emerging market debt index.
Despite the challenges, India has maintained its plan to raise ₹6.55 trillion through bond issues in the October-March period. A maximum of ₹1.45 trillion will be raised through 10-year bonds, constituting 22 percent of the total borrowing, according to the report. This borrowing strategy aims to address India’s financial needs while navigating the evolving global economic landscape.
