Indian government bonds rose on Thursday as steady oil prices eased macroeconomic concerns and fading U.S. rate-hike bets supported sentiment, while investors waited for news on India's possible inclusion in Bloomberg's flagship bond index.
Investor confidence improved as Brent crude stayed below $85 a barrel in ?Asian trade, ?snapping ?a three-day rising streak even after hostilities in the Gulf continued.
"For bonds, crude remains the key variable because of its impact on fiscal deficit and government subsidies," said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank.
On Thursday, Indian government bonds experienced an upturn as oil prices stabilized alongside declining U.S. rate hike expectations, enhancing investor confidence. The market eagerly anticipates updates on India's possible inclusion in the Bloomberg index this month, a move that could significantly boost foreign investments in Indian debt markets. Bond yields have decreased for the second consecutive session, mirroring the trends of U.S. Treasury yields.
The benchmark 6.94% 2036 bond yield closed at 6.7478%, down ?2.5 basis points from Wednesday's close. ?Bond yields move ?inversely to prices.
Indian bond yields eased for a ?second straight ?session, tracking an overnight drop in U.S. Treasury ?yields after softer economic data reduced expectations of Federal Reserve ?rate hikes.
Several economists have also scaled back calls of a rate-hike by the Reserve Bank of India as inflation outlook improved.
Focus is now on Bloomberg's decision, expected this month, on adding Indian debt to its Global Aggregate Index.FAR-eligible Indian government bonds are already part of three emerging-market bond indices and the Bloomberg ?inclusion would mark their first entry into a global investment-grade debt benchmark.
Foreign investors have bought over $4.2 billion of ?FAR bonds since June ?1, supported by ?India's policy measures to boost dollar inflows and expectations of the index inclusion.
Traders will also watch demand at New Delhi's 320-billion-rupee ($3.32 billion) bond ?auction on Friday for further cues.
RATES
India's overnight index swaps eased as steady oil prices lifted broader market sentiment.
The 1-year dropped 4.25 bps at 5.89%, while the 2-year rate fell 5.5 bps to 6.0650%. The 5-year rate was down 4.5 bps at 6.3375%.