The news of temporary agreement between America and Iran has also started appearing in the Indian markets. Buying in Indian government bonds increased after the fall in crude oil prices and the 10-year bond yield reached its lowest level in 12 weeks. This is expected to provide relief to the economy. The yield of 6.94% 2036 government bond in the market decreased by 3.2 basis points to 6.8637%. This is the lowest intraday level since March 25. However, it still remains about 20 basis points above the level before the conflict started.
US and Iran officials informed about the initial agreement towards reducing tension in the Middle East and reopening the Strait of Hormuz. After this, a sharp decline was recorded in the prices of crude oil in the international market. The price of Brent crude fell 4.5% to $ 83.40 per barrel, which is the lowest level since March 10. Earlier, during the escalation of the conflict, oil prices had reached $ 120 per barrel.
India is the third largest crude oil importer in the world. In such a situation, reduction in oil prices may reduce the pressure on the country's import bill. Apart from this, it can also help in controlling inflation, strengthening the rupee and reducing current account deficit. The effect of this positive environment was also seen in the currency market. The Indian rupee reached the level of 94.5750 against the dollar, which is considered to be the highest level in about five weeks.
Market experts believe that better global signals and softening of crude oil prices may prove favorable for the Indian bond market. According to Dhaval Dalal, President and CIO (Fixed Income), Edelweiss Mutual Fund, due to increase in foreign investment in government bonds, the 10-year yield may come in the range of 6.75% to 6.80% in the near future.
At the same time, investors are also eyeing the possible inclusion of India in the Bloomberg Global Aggregate Index. In the last six trading sessions, foreign portfolio investors (FPIs) have invested more than $1.6 billion in Indian bonds, which has strengthened market confidence.
