Yields on the benchmark government securities ended higher on Friday due to a sharp rise in Brent crude oil prices and US Treasury yields. The benchmark 6.10%-2031 bond yield ended almost 4 basis points up to 6.1810%, against 6.1397% in the previous trading session.
On September 14, the benchmark bond yield had ended at 6.1982%, and since then it was trading lower due to positive sentiments in the market. “The 10-year G-Sec jumped 4 basis points to 6.18%, the most since July 9 on the back of rising crude oil prices, tracking a spike in US Treasury yields and investors awaiting the borrowing plan for the fiscal second half. The borrowing plan for H2 will determine the market’s big move,” said Kunal Sodhani, AVP, Global Trading Center, Shinhan Bank India.
On Friday, the market was extended twice by 30 minutes till 4:30 pm as the result of the weekly bond auction was announced late. The central bank accepted the full amount through bond sales. The cut-off on all the bonds was in line with market expectations.
By the closing of the market hours, Brent crude oil was trading at $77.32 a barrel, up 0.09% for the November maturity. Dealers with state-owned banks expect that the rising prices will put pressure on inflation and the central bank will be left with no room to focus on growth.
The US Treasury yields rose by 10 basis points to two-month high on Thursday after the Federal Reserve said tapering of its bond-buying programme could start by November and end by mid-2022. The 10-year US Treasury notes were at 1.4% on Thursday. Usually, whenever the yields on US Treasury yields rise, investors tend to pull money from emerging markets.
Bond dealers expect yields to open flat to up on Monday due to a lack of major triggers. “Any overnight movement in crude oil prices over the weekend will impact yields on Monday,” a dealer said.