On Monday crude, 10-year bond rates hit 7.5 percent for the first time in nearly three-and-a-half years, as surging petroleum prices fueled inflation fears. Traders are also anticipating the Reserve Bank of India’s bi-monthly policy announcement and commentary on inflation and growth later this week.
The bond yield reached 7.5 percent, up 5 basis points from its previous close of 7.457 on January 11, 2019, while prices moved in opposing directions.
Saudi Arabia increased crude oil prices in Asia’s largest market by more than expected, as major Asian nations loosened Covid restrictions, boosting demand. Crude oil increased its gains to a three-month high.
The Reserve Bank of India (RBI) will publish its policy on June 8. Analysts predict the repo rate to rise 50 basis points (bps) to 4.9 percent this week and 25bps in August to reach the pre-pandemic level of 5.15 percent. To reduce the liquidity surplus and aid transmission, more CRR hikes are expected.
“Aside from the rate change, economic estimates are expected to be revised, resulting in higher inflation and tempered growth expectations. While noting the government’s slew of relief measures, crude analysts are likely to emphasise the need for continued monitoring on the inflation trend as dangers move from fuel to food “Radhika Rao, a DBS Bank economist, agreed.
our To combat inflation, the government has implemented a number of fiscal measures in recent weeks, including export limits, custom duty reductions, and fuel excise duty reductions. However, economists do not expect these measures to derail rate hikes.
“Inflation has been stubbornly high over the last three years, despite shifting causes such as supply constraints, commodities, and market pressures.Nonetheless, given the uncertainties about the way ahead, the terminal policy rate is likely to remain data-dependent, withprediction for a level of about 6–6.15 percent by m “d-2023,” added Rao. Traders are also looking forward to the US Federal Reserve meeting in the middle of this month. Friday’s US job report revealed a slowdown in hiring, giving the Federal Reserve more leeway in raising interest rates as it tries to keep inflation under control.