Indian bonds seen opening flat as oil holds below $115 and Fed decision looms
Indian government bonds are set to open little changed on Tuesday, with the benchmark 6.94% 2036 yield expected to trade between 7.46% and 7.49%, a trader at a primary dealership said, after closing the previous session at 7.4826%. With Treasuries and crude showing little movement, the trader said the market was in for another session of rangebound trading and shallow volumes, as there was hardly any change in factors.
The supply calendar offers little disruption. Indian states are due to raise 233 billion rupees ($2.45 billion) from bond sales later in the day, a quantum the trader said was not that large to cause any major trouble.
Oil is the variable that matters most for Indian assets. Brent held below $115 a barrel in Asian hours after gaining 6.2% last week, its biggest weekly rise since the week ended September 11. India imports nearly 90% of its oil needs, so sustained high prices feed into inflation, weigh on the rupee and strain government finances.
The rate backdrop is already tightening. The Reserve Bank of India raised the repo rate and shifted its stance earlier this month, hinting at further increases, and overnight indexed swaps now price in more than 100 basis points of hikes over the next 12 months.
All of that leaves Wednesday's Federal Reserve decision as the week's pivot. Markets expect a pause and will read the statement for any signal that further US rate hikes remain possible this year, a cue that would shape flows into Indian debt.
