Bonds slip 3 bps as crude cools after, traders cautious

Reserve Bank of India

Indian sovereign bond yields fell 3 basis points to 6.68 percent on March 10, as crude prices eased overnight on hopes that the end of the US-Israel war with Iran was in sight.

The benchmark yield retreated from multi-month high of 6.77 before paring gains to end at 6.71 percent in the previous session, reflecting investor optimism on lower energy costs and cooling inflation.

Early in the day, US President Donald Trump signalled that the war in Iran could soon end but warned of more supply-related risks should a ship passing through the Strait of Hormuz be disrupted. India imports nearly 40 percent of its crude through narrow passage.

The benchmark Brent crude was trading close to $87 a barrel after hitting $120 in the previous. Energy markets have been on edge ever since the war broke out between US-Israel and Iran, which has since ensnared the wider Gulf region.

On March 9, the Reserve Bank of India (RBI) infused Rs 50,000 crore into the system through open market operation (OMO) bond purchases. A repeat auction scheduled for March 13 is expected to further bolster liquidity and temper rising yields.

Traders will also be tracking Rs 45,960 crore state development loan (SDL) auction during the day for further cues on bond yields.