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Bond yields tad higher tracking US peers, oil prices

MUMBAI: Indian government bond yields were marginally higher on Monday – the beginning of the last week of 2022 – tracking a rise in US yields as well as oil prices.
The benchmark 10-year yield was at 7.3238% as of 10:00 a.m. IST after ending at 7.3179% on Friday.
The mood is cautiously bearish due to global factors turning unfavourable at the fag end of the calendar year, a trader with a primary dealership said.
US Treasury prices slumped, with the 10-year note’s yield rising to 3.75% for the first time in nearly four weeks, after data showed that personal income rose more than expected in November, while October inflation data was revised upwards.
The data also supported the view that the Federal Reserve will continue to hike rates to tame stubbornly high inflation pressures. The Fed has raised rates by 425 basis points in 2022.
Oil prices continue rising as Russia said it could cut crude output in response to the G7 price cap on Russian exports. The benchmark Brent crude contract has risen over 10% in the last two weeks to trade close to $84 per barrel levels.
Trading volumes are expected to remain muted for the third week in a row as the majority of market players stay on the sidelines ahead of the quarter- and calendar year-end.
Last week, bond yields rose after the Reserve Bank of India (RBI) said it cannot afford to prematurely pause its rate-tightening cycle, with inflation staying above the central bank’s tolerance limit and core inflation remaining sharply elevated.
The RBI has raised its key policy rate by 225 basis points in 2022 to 6.25%, while it is mandated to keep inflation within the target band of 2%-6%.

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