Home / Economy / India bond yields jump to 3-month high as JPMorgan holds off on index inclusion

The yield on benchmark 10-year bonds surged as much as 12 basis points to 7.48%, the highest since June.  Indian bonds tumbled as JPMorgan Chase & Co. refrained from adding local government bonds to its emerging markets debt index. The rupee also edged lower. Higher US Treasury yields and oil prices also contributed to the move, according to traders. 

The Indian rupee fell to 81.8788 against US dollar in the spot market. 

Indian government bonds however remain on the radar for inclusion in JP Morgan's emerging market local currency debt index after a review on Tuesday, the bank said. Some investors had hoped the Wall Street bank include Indian bonds this year after Russia's exit from the GBI-EM benchmark, which is tracked by an estimated $240 billion of funds.

The announcement comes as a disappointment for traders, who were expecting index inclusion in this review amid expectations the move would lure billions of dollars of inflows. JPMorgan follows FTSE Russell in holding off on adding Indian bonds to its emerging market gauge, citing investment hurdles that still need to be resolved.

The constant rise in global oil prices is also hurting sentiment as India is one of the largest importers of the commodity and higher prices have a direct impact on inflation. Oil prices edged up after the Organization of Petroleum Exporting Countries and its allies, including Russia, agreed to slash oil production by about 2 million barrel per day, which would squeeze supplies in an already tight market.

The benchmark Brent crude contract is up by 6.4% so far this week and was last at $93.60 per barrel.

“Already, OPEC+ group continues to vastly underperform its collective oil production target. This could lead to further worsening of energy supply crunch that started post Russia invasion in Ukraine and threatens widespread   blackouts in the European Union this winter," Kotak Securities said in a note. 

“Commodities trade higher on steady dollar while Asian markets trade mixed on renewed bets of rate hike. WTI and Brent Crude extend gains as OPEC+ agreed to reduce 2 million bpd from November. Markets now cautiously await government payrolls report due tomorrow for confirmation of strength in US labor market," the brokerage added. (With Agency Inputs)

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