MUMBAI: The government bond market also reacted to rising crude oil prices as a result of the war in Europe and benchmark yields on 10-year government securities.g sec) rose to 6.89% from 6.81% on Friday. Brent crude oil prices hit a multi-year high of $139 a barrel on Sunday night.
According to bond dealers, rising oil prices are bound to increase the prices of petro products like petrol, diesel etc. Controlling this would require the government to cut taxes and duties, which in turn could force the government to borrow more. This in turn will lead to higher yields. On the other hand, if the government allows an increase in the prices of petro-products, it may lead to higher inflation and hence higher rates. Either way the higher rates seem to have been given and hence there is panic among the bond market players, said one dealer.
In the medium term, factors influencing market sentiment may currently stunt growth and still lead to high inflation. “The potential stagflation brought about by geopolitical developments is something that one needs to take cognizance of,” said Rajeev Radhakrishnan, CIO – Fixed Income, SBI Mutual Fund. Top fund managers believe that investors should stay within their desired asset allocation. “Debt investors should ideally create conditions for changes in the interest rate cycle” radhakrishnan said.
For the next few weeks, the saving grace for the bond market is that there is no weekly bond auction and the additional cash the government needs by the end of the current fiscal has been diverted through two larger-than-planned borrowings. has gone. treasure Bill
According to bond dealers, rising oil prices are bound to increase the prices of petro products like petrol, diesel etc. Controlling this would require the government to cut taxes and duties, which in turn could force the government to borrow more. This in turn will lead to higher yields. On the other hand, if the government allows an increase in the prices of petro-products, it may lead to higher inflation and hence higher rates. Either way the higher rates seem to have been given and hence there is panic among the bond market players, said one dealer.
In the medium term, factors influencing market sentiment may currently stunt growth and still lead to high inflation. “The potential stagflation brought about by geopolitical developments is something that one needs to take cognizance of,” said Rajeev Radhakrishnan, CIO – Fixed Income, SBI Mutual Fund. Top fund managers believe that investors should stay within their desired asset allocation. “Debt investors should ideally create conditions for changes in the interest rate cycle” radhakrishnan said.
For the next few weeks, the saving grace for the bond market is that there is no weekly bond auction and the additional cash the government needs by the end of the current fiscal has been diverted through two larger-than-planned borrowings. has gone. treasure Bill