Government bond yields fell sharply and the rupee notched up hefty gains on Wednesday as a steep decline in crude oil prices over the last few days eased concerns over high domestic inflation and India’s trade deficit, dealers said.
A decline in domestic headline retail inflation to a five-month low in July also bolstered the appetite for bonds, dealers said.
Yield on the 10-year benchmark 6.54 per cent 2032 paper was last at 7.21 per cent, 8 basis points lower than previous close.
Bond prices and yields move inversely. A decline of one basis point on the 10-year bond yield corresponds to a rise in price of around 7 paise.
At 10:00 am IST, the rupee was at 79.29 per US dollar as against 79.66 at previous close.
Bond and currency markets resumed trading on Wednesday after an extended weekend break as markets were shut on Monday and Tuesday for Independence Day and Parsi New Year, respectively.
Brent crude futures plummeted around 3 per cent on Tuesday, dropping to 6-month lows, as concerns over slowing global economic growth reduced demand for the commodity.
The most active Brent crude contract rose marginally on Wednesday, trading 0.1 per cent higher at $92.47 per barrel by 0035 GMT, Reuters reported.
From a 14-year high of around $140 per barrel in March, crude oil prices have cooled significantly, easing the pressure on India’s import bill and inflation.
“Rupee has opened on a stronger note today following a more than 5 percent decline in crude oil prices over the long weekend and the current risk on sentiment leading to a rally in US and Indian equities but expect some pressure on rupee from a weakening yuan,” Mecklai Financial Services wrote.