Bond yields drop 12 basis points as crude oil prices fall

The benchmark bond yield dropped about 12 basis points after Brent crude oil prices dropped 7 per cent in the past five trading sessions lowering India’s import bill. The gauge closed at 7.43 per cent Monday versus 7.53 per cent on Friday.

"Falling crude oil coupled with an expectation of recession-like situation in the medium term had pulled long term rates lower," said Naveen Singh, head of trading at ICICI Securities PD. "While inflation worries are likely to keep short duration yields elevated, the long-term bond market yields may see some buying interest at these levels," he said.

Concerns of global growth slowdown aggravated with US industrial production print remaining weak in May’ this year. This is in addition to other macro indicators such as retail sales, housing starts also registering a significant slowdown currently.


Thus, a sell-off in the equity market was seen, currencies depreciated and demand for sovereign bonds increased.
Crude prices also fell to its lowest since 23 May 2022 at US$ 113/bbl, on account of demand concerns.