Indian bond yields spike to six-week high as crude oil price rally jolts markets

The yield on India’s benchmark 6.48% 2035 government bond jumped 7.5 basis points to 7.1427% on Monday, its highest level in six weeks, as Brent crude surged past $88 a barrel and global bond markets sold off, according to livemint.com.

The spike began in overnight trading after fresh attacks in the Gulf pushed Brent crude up 3.4% and the 10-year US Treasury yield to a 15-month high of 4.6310%, traders told livemint.com. Domestic dealers followed suit, dumping duration across the curve; the five-year bond yield rose 8 bps and the 15-year by 6 bps. RBI’s debt management office stayed on the sidelines, letting the market clear.

The move matters because sovereign yields set the floor for corporate and mortgage borrowing costs. At 7.14%, the 10-year is now 55 bps above the RBI’s 6.50% repo rate, the widest gap since October 2023, data from livemint.com show. With the Centre set to borrow a record ₹14.1 trn this fiscal and oil accounting for 21% of India’s import bill, every $10 rise in crude adds roughly 0.3 percentage points to headline CPI, according to economists cited by the same source.

Watch for the RBI’s next policy review on 6 June; swaps now price in a 40% chance of a 25 bps hike, up from 10% last week, livemint.com reports. Traders will also eye the 24 May auction of ₹35,000 cr in new 10-year stock and the finance ministry’s mid-June borrowing calendar update for cues on whether the selloff deepens.