Indian bonds open steady; traders eye oil prices, US FOMC decision

Higher oil prices will have a trickle-down effect on inflationary pressures, which will in turn affect domestic bond yields.

Indian bonds opened steady on March 18, as traders stayed on the sidelines ahead of a key interest rate decision from the United States, while they were cautious about elevated Brent crude prices.

The benchmark 10-year bond yield was trading at 6.7076 percent, compared with 6.7143 percent in the previous trading session.

Brent crude prices remained above $100 per barrel, as the Strait of Hormuz continued to be closed, with no end to the war in West Asia in sight. Since the start of the month, oil prices have jumped more than 40 percent, stoking fears of price pressures.

Higher oil prices will have a trickle-down effect on inflationary pressures, which will in turn affect domestic bond yields. The RBI has been seen buying government securities and conducting open market operations (OMO) purchases of bonds, to bring the yields below the 6.70 percent mark.

Globally, market participants are awaiting the US Federal Open Market Committee meeting, where economists expect the central bank to keep rates on hold until market conditions improve. Investors have pared back their expectations of another rate cut.