What happened: bond prices fell after RBI policy minutes were read as hawkish
Investors reduced exposure to Indian government bonds after Reserve Bank of India (RBI) policy minutes adopted a hawkish tone. The hawkish tone added to pressure from rising oil prices and led to a fall in Indian government bond prices (price drop). This price drop pushed yields higher, and the benchmark liquid 10-year yield moved to a reported two-month low.
Reported yield movement on a specific bond:
6.94% 2036 bond yield rose by about 5 basis points to around 6.8709%.The 6.94% 2036 bond yield was reported as the highest since mid-June.
Background and earlier position: oil-price pressure and bond-market sensitivity to rate expectations
Indian government bond prices and yields react to expectations of future interest-rate settings. Rising oil prices can raise inflation concerns and increase uncertainty about future monetary policy, which can affect bond pricing through interest-rate expectations.