Benchmark bond yield sinks to one-year low on crude slide, dip in US Treasuries

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The yield on the benchmark bond hit near one-year low in the afternoon trade on May 3, tracking a fall in Bent crude oil prices and US Treasury yields, dealers said.

Further, some dealers expect that after the rate hike by the US Federal Reserve in today’s policy, they might pause in the upcoming policies. This improved sentiments of traders in the domestic as well as international bond market, which led to sharp fall in yields.

The 10-year benchmark 7.26 percent 2033 bond yield was trading at 7.0199 percent during afternoon trade, as compared to 7.09 percent close on the previous trading session.

According to the Bloomberg data, last time the benchmark yield was down below 7.03 percent was on April 7, 2022, trading at around 6.915 percent. At that time, we had a benchmark bond of 6.54 percent 2032.

“Today market was more of a reaction to fall is US Treasury yields and crude oil price. It seems traders were light in position and yesterday number shows foreign bank were net seller,” said Umesh Kumar Tulsyan, Managing Director of Sovereign Global Markets, a New Delhi-based fund house.

“Investors globally are again shifting to government bonds as a measure of risk-off due to the collapse of First Republic as they still fear that the banking crisis is not yet over. In India too, the government benchmark yields went down south sharply across the curve,” said Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincorp.

On May 2, the 10-year US treasury yield fell by 15 basis points to 3.44 percent, from 3.59 percent on the previous trading session.

The Brent crude oil prices have seen a sharp fall this week, slumping over 5 percent. In the start of this week, Brent crude oil prices were trading at $79.31 per barrel, has now fallen to $75.21 per barrel

Going ahead, dealers are of view that the government bond yield at these level are sustainable with good buying support.

The benchmark bond yield moved from 7.50 percent to 7.25 percent, and now finally to the 7.03 percent. Dealers also expect it to further move to below 7 percent in the coming days.