India bonds down on oil, muted demand likely at auction

The Hindu
January 25, 2018

India government bonds fell on Thursday as higher global oil prices added to the cautious mood ahead of a debt auction later in the day. The most-traded 6.68% 2031 bond yield was up at 7.60% from 7.55% on Wednesday

Rise in oil prices will add to upside pressure on inflation as well as potentially widen the fiscal deficit, traders say. Bond markets already skittish about the RBI turning more hawkish after CPI hit 5.21% in December, above the 4% target.

Global oil prices breached the psychologically key $70-mark on Thursday, their highest since December 2014 on a weaker dollar and decline in U.S. crude inventories. The government will issue 110 billion rupees ($1.73 billion) of bonds later in the day which is expected to be fully sold though at about 3-4 basis points higher than current market levels, two traders say.

Demand from state banks to remain muted after RBI Deputy Governor Viral Acharya warned them of increased interest rate risks due to over-exposure to government bonds.

http://www.thehindu.com/business/Economy/india-bonds-down-on-oil-muted-demand-likely-at-auction/article22519012.ece

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