Bond yield up 7 bps; crude blows past $100 on worsening Iran war

Reserve Bank of India

Indian sovereign bonds plunged on March 9, with yields spiking 7 basis points as crude prices surged past $110 a barrel amid escalating West Asia war.

The benchmark 10-year bond yield was trading at 6.7518 percent after ending the previous session at 6.6898 percent.

The US-Israel and Iran war is now in its second week, with no signs of breakthrough, choking fuel supplies. The intensifying conflict has rattled global businesses and energy prices have been jumping almost every day, leading to fears of an oil shock.

Brent crude has jumped more than 25 percent since the beginning of month and is now trading at $110 a barrel.

At home, yields have remained stubbornly high, breaching the 6.7 percent threshold. The Reserve Bank of India (RBI) was said to have intervened in the market to keep the yield below 6.7 percent, according to market participants.

“The central bank bought bonds heavily in the secondary market during the week, which kept the yield on the 10-year benchmark bond capped below 6.7 percent,” Kunal Sodhani, Head of Treasury at Shinhan Bank, said.

The RBI said on March 6 the central bank would purchase bonds worth Rs 50,000 crore in two tranches each on March 9 and March 13, to infuse more liquidity in the system.

The rupee tanked 47 paise at the open, just shy of a record low, as oil prices jumped overnight to trade at more than $110 a barrel. The currency was trading at Rs 92.21 against dollar after ending the previous session at Rs 91.74. The rupee was hovering close to record low of Rs 92.31, which it plunged to last week.