INDIA BONDS-Oil-led global bond rout pushes India 10-year yield to 7-week high

India’s 10-year bond yield jumped to a nearly seven-week high on Monday, tracking a global debt selloff as markets braced for higher interest rates and weighed the economic fallout from an extended U.S.-Iran war and rising oil prices.

The benchmark 6.48% 2035 bond yield jumped to its highest ‌level since ⁠April 2 ⁠to settle at 7.1313% versus Friday’s close of 7.0644%.

Brent crude futures surged to ​a two-week high of $112 a barrel in Asian trade, their highest level since May ​5, driven by bleak prospects for peace in the Middle East after a drone attack on a nuclear power plant in the United Arab ​Emirates.

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India bonds reverse gains as report RBI mulling rate hike outweighs external support

Indian government bonds reversed early gains as reports emerged that the central bank is considering a rate hike to curb the rupee’s sharp decline. The benchmark bond yield surged following the news, overshadowing positive global cues like falling oil prices and progress in US-Iran negotiations. Overnight index swap rates also jumped on the rate hike speculation.

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Rising oil prices triggered a rout in ⁠global debt ‌markets. The yield on the 10-year U.S. Treasury climbed ​to its ​highest level in a year at 4.6310% in Asian ⁠trade.

Indian bonds have increasingly tracked U.S. Treasury moves in recent ​years, as higher U.S. yields narrow the return ​premium on emerging-market debt, spur foreign outflows and pressure the rupee.

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The rupee also hit yet another all-time low of 96.3875 to a dollar on Monday, ending 0.4% lower, which added to the pain for Indian bond investors.

Bond yields are now already factoring in a rise in ‌policy rates, Puneet Pal, Head-Fixed Income, PGIM India Mutual Fund said, adding that he expects policy rates to rise by ​50-75 bps by the ​end of calendar ⁠year 2026.

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