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India benchmark yield sees biggest monthly rise in 4 years in April
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MUMBAI - India's benchmark 10-year bond yield saw its biggest monthly rise in four years in April on the back of a rise in U.S. yields ahead of an expected rate increase by the U.S. Federal Reserve next week while the rupee declined for a fourth straight month.
The fall in the rupee was in line with other Asian and emerging market currencies, which fell on the back of the impact or the Russia-Ukraine crisis.
India's benchmark 10-year bond yield ended 2 basis points lower on the day at 7.14% but it rose 30 basis points in April, its biggest monthly rise since April 2018.
The 10-year yield has now risen for five straight months by a total of 81 basis points.
"Foreign investors have continued to offload domestic bonds ahead of the U.S. Federal Reserve policy," analysts at Emkay Global said in a note.
Foreign investors have sold a total $1.23 billion worth of debt since the start of this year while total sales in the equity markets stand at $16.91 billion.
The partially convertible rupee ended trade at 76.4250 per dollar compared to its close of 76.48 on Thursday but the unit declined 0.8% on the month, its fourth straight monthly fall.
The MSCI's index for EM currencies rose 0.5% for the first time in 10 days, but headed for a monthly fall of 2.8% - its worst performance since March 2020 on worries of impending rate hikes by the Federal Reserve.
"The dollar has been rallying on expectations that the Federal Reserve will hike rates faster than peers. Although a 50 basis points hike in interest rates is already priced into the markets, investors will be keenly watching out for the guidance post the rate announcement," Emkay Global note said.
They said a further hawkishness in the policy statement will be negative for global markets.
Traders will also watch out for flows towards India's biggest-ever initial public offering of the Life Insurance Corp due to come in next week which could help the rupee, while movement in global crude oil prices will also be key.
India imports more than two-thirds of its oil requirements and the rise in prices can severely impact the country's trade and current account deficits while also pushing up inflation.
