Yields on 10-year government bond declined nearly 3 basis points while rupee strengthened against US dollar on Friday due to continued fall in crude oil prices and Reserve Bank of India’s liquidity support via a series of open market operations.
This prompted FIIs to buy nearly $1.26 billion in domestic debt over the last nine trading sessions (between 24 October and 5 November), according to Bloomberg data. So far this year, FIIs have offloaded $7.76 billion in domestic bonds.
At 9.15 am, the 10-year government bond yield stood at 7.767%, down from its previous close of 7.799%. Bond yields and prices move in opposite directions. Rupee was trading at 72.67 a dollar, up 0.46% from its Tuesday’s close of 73.01. The currency opened at 72.71 a dollar.
RBI had earlier announced Rs 36,000 crore OMOs for October and Rs 40,000 crore for November. Fall in crude was due to record American production, expanded inventories and waivers granted to some countries for Iranian imports.
Brent crude oil, which crossed $86 a barrel in October for the first time in nearly four years, now trades at a near three-month low, just below $71. The international benchmark has lost nearly 20% in the past one month.
“The recent softness in crude oil prices and thaw in China-US trade issues have helped improve investment sentiment for EMs and the Indian market. However, India still has to contend with oil prices (the Iran-US sanctions issue is far from settled, in our view) and state elections (three important ones with fairly open outcomes),” said Kotak Institutional Equities in a 2 November note.
Overnight, the Fed left interest rates unchanged and stayed on course to hike in December despite recent jitters in financial markets and criticism from President Trump that it’s tightening too fast.
So far this year, the rupee has declined 12.5% while foreign investors have sold $5.65 billion in the equity markets.