In response to rising oil prices, the Indian rupee faces a record-low danger this week, and bond investors will be watching the central bank’s decision on debt sales. On Friday, Brent crude gained 5.7% as investors priced in the likelihood that the Middle East war could worsen as a result of Israel’s start of military assaults within the Gaza Strip.
The Reserve Bank of India’s action helped keep the rupee in a constrained 15-paisa range last week. Last Friday, the rupee finished at 83.2625, almost steady from the previous week and slightly above the 83.29 record low.
The U.S. retail sales print due on Tuesday and the housing statistics will take center stage this week after the U.S. inflation report. Additionally, this week will include a number of speeches from Fed officials.
After climbing over the previous two weeks, bond rates decreased last week, with the benchmark closing the week slightly lower. The benchmark 2033 bond yield of 7.18% concluded the week at 7.3166%, down two basis points (bps) from the previous two weeks’ high of 19 bps.
This week, market participants anticipate it to fluctuate widely between 7.27% and 7.40%, with a strong emphasis on the outcomes of the RBI’s open market operations (OMO). Since the central bank revealed its plan to sell bonds through auctions, bond rates have stayed high. The market anticipates sales of 500 billion rupees ($6.01 billion) and auctions held this quarter.
The RBI has also indicated it will maintain high rates and limited liquidity in order to keep inflation near to its 4% target and prevent yields from falling. As the Middle East war continues, traders will also continue to monitor U.S. yields and oil prices.
