India’s benchmark 10-year bond yield hit a three-week high at the start of trading as global crude oil prices rose further, raising concerns over the need for the bank central government to tighten its monetary policy to contain inflation.
India’s benchmark 10-year bond yield hit a three-week high in early trading on Tuesday as global crude oil prices rose further, raising concerns about the need for the bank central government to aggressively tighten monetary policy to contain inflation.
The benchmark bond yield traded at 7.46% at 0606 GMT, its highest level since May 9.
Oil prices extended their gains after the EU agreed to drastically cut oil imports from Russia, fueling concerns of a tighter market already stretched for supplies amid rising demand ahead of the peak of the summer driving season in the United States and Europe.
“Crude is holding above $120 a barrel. It is likely to keep upward pressure on domestic inflation, so expectations of the onset of an inflation slowdown may not necessarily materialize. “said a senior trader at a foreign bank.
India imports almost 85% of its oil needs and the high level of crude is driving up imported inflation. Traders will be watching GDP data due at 12:00 GMT for near-term clues.
Asia’s third-largest economy likely grew 4.0% in the January-March quarter from a year earlier, a Reuters poll showed last week. That would be the slowest pace in a year, after growth of 5.4% in the previous quarter.
The latest Reuters poll after the 40 basis point rate hike at the start of May showed that more than a quarter of economists, 14 out of 53, expect the RBI to rise by 35 basis points. 4.75% in June, while 20 expect a larger move ranging from 40 to 75 basis points, including 10 who expect a 50 basis point hike.
The monetary policy committee is due to announce its next policy decision on June 8.
The RBI’s main objective is to bring inflation closer to target, but it cannot ignore concerns about growth, Governor Shaktikanta Das told the Economic Times newspaper in an interview last week.
“The MPC next week will be the main trigger now. Based on today’s GDP data, we have to see if they stick with a potential 50bps rate hike or opt for something. smaller to protect growth,” said a senior broker at a private bank. .
(Reporting by Swati Bhat; Editing by Rashmi Aich)
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