Bond supply may outweigh demand, push yields higher
Bond yields in India are anticipated to increase in the latter half of this fiscal year. This rise is primarily due to higher government borrowing and ongoing inflationary pressures. Analysts expect demand for government securities to fall significantly short of supply. The trajectory of bond yields will also be heavily influenced by oil prices, particularly if crude stays high.
On Tuesday, Indian government bonds rebounded, marking the end of a four-day downturn spurred by softer US Treasury yields and declining crude oil prices. Despite this rally, apprehensions linger over persistently high global yields and the risk of inflation. The Reserve Bank of India may soon increase rates, complicating the bond landscape further. Additionally, significant factors like banking system liquidity and debt supply continue to challenge the market.
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