India Bond Yields Rise Ahead Of RBI Policy As Oil Prices Surge

India’s government bond market came under pressure on Monday as rising oil prices and growing geopolitical tensions in West Asia raised concerns ahead of the Reserve Bank of India’s policy decision this week.

The benchmark 10-year government bond yield (6.48% GS 2035) ended at 7.0181%, up from 7.0037% on Friday.

What Is This A Concern?

Bond yields move inversely to prices, which means bond prices fell during the session. Higher bond yields can impact banking stocks, borrowing costs and market valuations. Investors are closely watching whether the RBI remains on hold or turns more hawkish as oil-driven inflation risks rise.

The RBI is scheduled to announce its monetary policy decision on Friday, and markets are increasingly worried that persistent oil-price pressures could complicate the central bank’s inflation outlook.

Why Oil Is Suddenly Driving The Market Again

The biggest trigger was crude oil.

Brent crude futures rose 2.25% to $94.12 per barrel, extending gains after fresh military strikes between the United States and Iran raised fears that tensions could disrupt energy supplies further. Oil prices are now nearly 30% higher than pre-war levels, according to Reuters data.

The conflict has become a major concern for India because the country imports around 90% of its crude oil requirements.

RBI Rate Decision Now In Sharper Focus

While most market participants still expect the RBI to keep the repo rate unchanged at 5.25%, concerns are growing that inflation risks may force a more cautious stance. The falling Rupee (4.5% drop) and increasing inflation have added to this concern.

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Interestingly, several global institutions are now expecting tighter policy. According to The Economic Times, Standard Chartered, Capital Economics, ANZ, MUFG and OCBC have all called for a 25-basis-point rate hike, even though broader markets are still largely pricing in a pause.

Source:

The Economic Times