India's 10-year bond yield hits 3-month low: What's the reason?
What's the story
India's benchmark 10-year government bond yield fell to its lowest level since March 25 today. The decline was mainly due to a sharp fall in crude oil prices after a reported peace deal between the United States and Iran. The development also raised hopes of increased foreign inflows into Indian assets, further boosting investor sentiment.
Market performance
Yield expected to stay within 6.85%-6.95% range this week
The benchmark 10-year bond yield ended at 6.8957% on Friday, June 12, down seven basis points for the week and marking its third consecutive weekly decline. Traders expect the yield to stay between 6.85% and 6.95% this week, with oil prices and US Federal Reserve's policy decision being major factors influencing it.
Global impact
US-Iran peace deal boosts investor sentiment, eases energy supply fears
The peace deal between US and Iran has improved investor sentiment. They agreed to end hostilities and reopen the Strait of Hormuz, easing fears over global energy supplies. This development led to sharp fall in Brent crude prices, easing pressure on oil-importing economies like India.
Market confidence
RBI's measures to attract dollar inflows support Indian bonds
The Reserve Bank of India's (RBI) recent measures to attract dollar inflows have also supported Indian bonds. These include detailed guidelines on hedging benefits for banks raising non-resident deposits and state-run companies seeking overseas funding. Following these policy measures, foreign investors have stepped up their purchases of Indian debt, further boosting market confidence.