Indian bond yields at 2-week low as oil drops

Indian bond yields at 2-week low as oil drops
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First Published: Mon, Aug 25 2008. 11 23 AM IST
Updated: Mon, Aug 25 2008. 11 23 AM IST
Reuters
Mumbai: Indian federal bond yields fell to their lowest in two weeks on Monday on expectations a sharp drop in oil prices could ease pressure on the government to raise state—set fuel prices.
The yield on the 10—year benchmark bond was at 8.98%, compared with Friday’s close of 9.06%. In early trade, it hit 8.94%, its lowest since 12 August.
“Bonds will largely follow movement in crude prices,” a dealer with a state-run bank said.
“Investors will closely follow where inflation is headed in the coming weeks and that would determine bond prices,” he said.
US light crude for October delivery was trading below $115 a barrel, now down more than 20% since its peak of above $147 struck in mid—July.
The government raised prices of petrol, diesel and cooking gas in early June, when crude prices were hovering above $120 a barrel, and that pushed the wholesale prices index into double digits.
Annual inflation was at 12.63% on 9 August, its highest since annual numbers in the current series became available in 1995, and analysts have said it could rise to as high as 14%.
The data for 16 August is due on Thursday.
In order to quell inflation pressures, the central bank has aggressively tightened its monetary policy since June.
In its last review at the end of July, it raised the repo rate, at which it lends cash to banks, by 50 basis points, and also said it was raising the cash reserve ratio by 25 basis points from 30 August.
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First Published: Mon, Aug 25 2008. 11 23 AM IST
More Topics: Markets | India | Money | Bond | Oil |