Foreign Inflows, Lower Crude Oil Prices Push Indian Government Bond Prices Higher

New Delhi, Jul 11 (KNN) Indian government bond prices rose in early trade on Friday, supported by overnight gains in the U.S. Treasuries, lower crude oil prices and continued foreign investor buying, although market participants remained cautious ahead of a Rs 32,000 crore government bond auction.

Foreign Inflows Support Bond Market
The benchmark 6.94 percent 2036 government bond yield declined 2 basis points to 6.7348 percent. Bond yields move inversely to prices.

Foreign institutional investors remained active buyers, purchasing a net Rs 1,500 crore worth of government securities on Thursday, reported Reuters.

Overseas inflows into Indian bonds have approached USD 4 billion since early June, driven by expectations that recent policy measures could support India's inclusion in Bloomberg's Global Aggregate Index.

Lower Oil, US Treasury Yields Lift Sentiment
Brent crude oil prices fell by more than 2 percent to around USD 76 per barrel, easing concerns over inflation and improving India's external sector outlook. 

Meanwhile, the yield on the 10-year U.S. Treasury note declined about 3 basis points overnight, providing additional support to emerging market debt.

Market participants said lower crude prices and softer U.S. Treasury yields have strengthened the appeal of Indian government securities by preserving their yield advantage for foreign investors.

Attention is now focused on the government's bond auction, where New Delhi plans to raise Rs 32,000 crore through the sale of five-year and 40-year government securities.

OIS Rates Decline Across Tenors
In the interest rate market, overnight index swap (OIS) rates declined across maturities as easing oil prices and a stable rupee improved the inflation outlook and reduced expectations of interest rate hikes. 

The one-year OIS fell to 5.78 percent, the two-year to 5.93 percent, and the five-year to 6.19 percent.

(KNN Bureau)