Bond Yields Fall 0.12 Pc To Below 7 Pc On Iran-US Ceasefire, RBI Status Quo

Indian bond yields eased around 0.12% on Wednesday following the conditional two-week ceasefire between the US and Iran, while the Reserve Bank of India (RBI)kept policy rates unchanged.

The yield on the 10-year benchmark bond, 6.48% GS 2035, eased to 6.92% during the morning trade, from 7.04%, according to the Clearing Corporation of India.

Bond market sentiment improved after the ceasefire in the Middle East between the US and Iran, which led to a sharp correction in Brent crude oil prices in the international market reducing the risk of imported inflation for India.

Currently, Brent crude oil prices are trading at $94.94 per barrel, down from over $100 for the last few days.

The ceasefire in the Middle East conflict is conditional for a two-week ceasefire, during which shipping traffic will be allowed through the Strait of Hormuz.

This came after more than a month after the US and Israel launched coordinated attacks on Iran, and hours after Donald Trump threatened to wipe out an entire civilisation due to Iran's defiant posturing.

Bond yield received further support after the central bank in April monetary policy kept the repo rate unchanged at 5.25%.

The policy decision comes as a month and a-half-long West Asia conflict has disrupted energy supplies, shot up crude oil prices and created fiscal and inflationary pressures for import-dependent nations like India.

This is the first monetary policy review after the government announced a fresh inflation target for the RBI last month. The government has asked the RBI to maintain retail inflation at 4% with a margin of 2% on either side for another five years ending March 2031.

Since the onset of the conflict in the Middle East, bond yields have hardened by about 0.33 percent. Since then, the bond yields have been trading above 7% mark, reflecting sustained selling pressure in the bond market across investor base.