Bond yields spike 5 bps as Brent crude surges past $100

Reserve Bank of India

Sovereign bond yields spiked 5 basis points at the open on March 12, after Iran’s attack on ships near the Strait of Hormuz send crude zooming past $100 a barrel again over intensified fears of supply disruption.

The benchmark 10-year bond yield climbed to 6.68 percent from its previous close of 6.63 percent.

The yields had cooled in the previous session, as the Reserve Bank of India (RBI) likely intervened in the market, according to traders.

Oil continue to be volatile, even though the International Energy Agency (IEA) on March 11 said its 32 members would release 400 million barrels of crude from strategic reserves.

The benchmark Brent crude was trading at $100.80, zooming around 9 percentage points overnight after Iran’s explosive-laden boats reportedly hit two ​fuel tankers. Iran, which has hardened its stand on Hormuz, hit at least three ships the previous day close to the vital but now virtually blocked route, fuelling fears that prices will remain elevated in the foreseeable future.

On the domestic front, traders will track the RBI’s Rs 50,000 crore open market operation (OMO) bond purchase scheduled for March 13.

“The move aims to ensure enough cash is available and markets functioning smoothly, by purchasing specific government bonds to manage liquidity levels and influence borrowing costs,” Kunal Sodhani, Head of Treasury at Shinhan Bank said.

The rupee, too, started the day weaker, opening nearly 30 paise lower, hovering near record low over crude worries. The rupee was trading at Rs 92.34 after ending the previous session at Rs 92.04.