Indian bonds seen opening flat with focus on oil moves, Fed decision

What happened

Indian government bonds are set to open little changed on Tuesday, with the 6.94% 2036 bond yield expected to trade between 7.46% and 7.49%, after closing at 7.4826% previously. Indian states will raise 233 billion rupees by selling bonds later in the day.

Confirmed

Global impact / market context

Higher oil prices raise India's import bill because the country buys nearly 90% of its oil abroad. That can lift inflation, weaken the rupee and strain government finances, which affects bond yields and the cost of borrowed money for companies and states.

Analyst inference

The Reserve Bank of India recently raised its repo rate, which is the rate it charges banks, and hinted at more increases. Markets price over 100 bps of hikes in the next 12 months, according to overnight indexed swaps, a tool for betting on future rates.

Analyst inference

What to watch

1. Watch Brent crude oil prices, which traded below $115 per barrel in Asian hours after gaining 6.2% last week, the biggest rise since the week ended September 11. Confirmed
2. Watch the US Federal Reserve's monetary policy decision due a day later, which the article says is a focus for Indian bond traders. Confirmed
3. Watch whether Indian states' 233 billion rupee bond sale later in the day absorbs cash available in the banking system and pushes yields above the expected 7.46% to 7.49% range. Analyst inference

Evidence

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