Indian bond yields climb as traders panic sell on widening border conflict
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Indian government bond yields rose in early trade on Friday as traders nervously trimmed positions after Pakistani forces launched multiple attacks along India's western border.The benchmark 10-year yield was at 6.4303% as of 10:40 a.m. IST, compared with previous close of 6.3976%.It hit a high of 6.4416% in initial trading."There's the India-Pakistan conflict situation, U.S. yields are higher and crude oil has also gone up, so bonds will remain subdued," said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank "We may see 10 basis points upward move during the day, since 6.40% levels were broken."The Indian rupee, stocks and bonds fell after Pakistan's armed forces launched several attacks using drones and other munitions along India's western border on Thursday night and early Friday.Meanwhile, New Delhi is set to borrow 320 billion rupees ($3.7 billion) via bonds maturing in November 2039 and April 2065 later in the day.The jitters around the conflict will likely impact the demand for the auction, after the cutoff on the underwriting fee was unusually high.The debt market is closed on Monday due to a local holiday, which is further making traders wary and they may avoid taking positions before a long weekend.The Reserve Bank of India is set to buy bonds worth 250 billion rupees in the day, which is likely to provide some comfort to the traders.India's overnight index swap rates rose early Friday, as investors leaned towards paying positions amid escalating India-Pakistan conflict that is clouding prospects for rate cuts, traders said.The one-year OIS rate was up 2 basis points at 5.68%, while the two-year OIS rate was up 3 bps at 5.58%, and the most liquid five-year OIS rate was up 3 bps at 5.71%. ($1 = 85.7700 Indian rupees)
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