Oil prices scorch Indian bonds; rising Treasury yields add to pressure
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The benchmark 6.94% 2036 bond yield was at 6.8180% as of 10:05 a.m. IST, after closing at 6.8012% on Wednesday. "Indian bonds are starting to look vulnerable as higher oil prices threaten to revive inflation pressures and weaken the rupee. Unless crude cools meaningfully, yields may have more upside," trader with a state-run bank said. Indian government bonds declined early Thursday as Middle East tensions escalated. Crude oil prices neared $100 a barrel, and U.S. Treasury yields also rose. Higher oil prices threaten to revive inflation pressures and weaken the Indian rupee. This situation could significantly impact energy-intensive industries and economies. India imports nearly ninety percent of its crude oil requirements. Brent crude futures were higher for the fifth consecutive session on Thursday, and crossed $96 per barrel in Asian hours, their highest in more than six weeks. Oil prices extended their rise as the United States launched a new round of strikes on Iran, marking its 12th consecutive night of attacks. Yemen's Houthis, in retaliation targeted oil tankers in the Red Sea. The rising attacks could further disrupt energy supplies, threatening to deepen the shortfall in global markets triggered by the closure of the Strait of Hormuz, which used to transit nearly a fifth of global supply before the war. India imports almost 90% of its crude oil requirement and is vulnerable to any supply shock as higher crude prices can swell its import bill, push up inflation and pressure the rupee. "Should oil prices remain elevated and concerns over fuel shortages persist, the spillover effects could be significant, particularly for energy-intensive industries and economies with large external energy needs," MUFG said in a note. RATES India's overnight index swap (OIS) rates moved 4-5 basis points higher absorbing the impact of oil and Treasury yields.The one-year swap rate was at 6.04%, while the two-year rate was at 6.21%. The most liquid five-year rate was at 6.52%. (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price (What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price
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