India 10-year yield ends at 7.2% in biggest single session rise of 2023 on high crude oil prices

Indian government bond yields climbed on Thursday, September 28, with the benchmark yield posting its biggest single-session rise in 2023, triggered by a relentless rise in oil prices as well as Treasury yields, while debt supply further hurt, according to a report by news agency Reuters.

The 10-year benchmark 7.18 per cent 2033 bond yield ended at 7.2414 per cent after ending at 7.1704 per cent in the previous session. The yield posted its biggest single-session rise since November 3, 2022.

Market analysts say that elevated US yields and oil prices, along with the threat of another US government shutdown have weakened the overall market sentiment and the mood is bearish. ‘’However, we might see strong support at 7.25 per cent," said Yogesh Kalinge, vice-president at AK Capital Services told Reuters. 

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US yields, especially at the longer end, continued their consistent uptrend, with the 10-year yield nearing 4.65 per cent, a fresh 16-year peak, boosted by expectations that the US Federal Reserve will keep interest rates higher for longer.

The 10-year yield has already climbed by over 50 basis points in September and has been hurting bullish bets, according to Reuters. The benchmark Brent crude oil contract rose above $97.50 per barrel - its highest level since November 2022, as a slide in crude stocks in the US added to worries about tight global supplies. Analysts said raising of bets by participants kept crude oil prices higher in futures trade.

These factors have reversed the fall in bond yields propelled by bullishness from JPMorgan's recent inclusion of India in its emerging market debt index.

Meanwhile, India maintained its plan to borrow ₹6.55 trillion through bond issues in the October-March period, while it will borrow a maximum of ₹1.45 trillion through 10-year bonds, which is 22 per cent of the overall borrowing, according to the report.