Mumbai, March 23 The benchmark bond yield in India rose to a 14-month high on Monday, possibly due to the surge in Brent crude oil prices amid escalating conflict in the Middle East.
The yield on the 10-year government bond was trading at 6.8173 per cent around 11 am on Monday, compared to Friday's close of 6.737 per cent. According to data compiled from market participants, this is the highest yield since January 14, 2025.
"Bond yields are rising in response to crude oil prices climbing above USD 110 amid escalating tensions between the US, Israel, and Iran. Foreign institutional investors who were net buyers of government bonds in January and February have also turned net sellers in March," said Mataprasad Pandey, Vice President at Arete Capital (Choice Group).
He added that higher crude prices are not only fueling inflation concerns but also putting pressure on India's trade and current account balances, which is a significant negative for the already depreciating rupee, which is moving towards 94.
"These factors not only dampen expectations of a rate cut but also raise the possibility of a rate hike if geopolitical tensions persist for a long time. As a result, increased supply relative to demand is weighing negatively on bond prices," he added.
The conflict in the Middle East has entered its fourth week, which has led to a sharp surge in Brent crude oil prices in the international market, which has stoked fears of higher inflationary pressure.
Oil prices rose sharply after Iran said it would strike the energy and water systems of its Gulf neighbors if US President Donald Trump followed through on a threat to hit Iran's electricity grid in 48 hours.
Brent crude oil prices are trading at USD 112.66 per barrel. They have risen nearly 50 percent since the conflict started late in February.
Higher crude oil prices have also put pressure on the rupee, which has dampened the sentiment of traders and investors in the market.
The rupee is trading at 93.9075 against the US dollar, which has increased by 20 paise since the previous close.
