Mumbai: Indian federal bond yields rose to their highest in nearly two weeks on Monday, as oil prices jumped to above $105 a barrel raising inflation concerns and tight cash conditions lowered appetite for debt.
At 10am (0430 GMT), the 10-year benchmark bond yield was at 8.41%, off an early peak of 8.47%, its highest since 9 September, according to Reuters data. It ended at 8.39% on Friday.
Volume was a normal Rs770 crore ($170 million) on the RBI’s trading platform.
“Sentiment is wary about oil prices climbing further,” a senior trader with a primary dealership said.
Oil rallied on hopes the US government’s $700 billion rescue plan would restore stability in the financial system and support global energy demand.
India imports 70% of its oil and rising prices could put upward pressure on inflation.
A severe shortage of funds in the money market, due to cash outflows this month for quarterly tax payments by companies and the central bank’s buying of rupees in the currency market, also dampened demand for bonds.
Overnight call money rates traded at 15.0-15.5%, higher than the previous close of 12.25-12.5%, and well above 6% when cash is ample.