By Dharamraj Dhutia and Bhakti Tambe
MUMBAI (Reuters) -Indian government bond yields climbed on Thursday, with the benchmark yield posting its biggest single-session rise in 2023, triggered by a relentless rise in oil prices as well as Treasury yields, while debt supply further hurt.
The 10-year benchmark 7.18% 2033 bond yield ended at 7.2414% after ending at 7.1704% in the previous session. The yield posted its biggest single-session rise since Nov. 3, 2022.
"Elevated U.S. yields and oil prices and the threat of another U.S. government shutdown have weakened the overall market sentiment and the mood is bearish. However, we might see strong support at 7.25%," said Yogesh Kalinge, vice-president at AK Capital Services.
U.S. yields, especially at the longer end, continued their relentless upswing, with the 10-year yield nearing 4.65%, a fresh 16-year peak, boosted by expectations that the Federal Reserve will keep interest rates higher for longer.
The 10-year yield has already jumped by over 50 basis points in September and has been hurting bullish bets.
The benchmark Brent crude contract rose above $97.50 per barrel, its highest level since November 2022, as a slide in crude stocks in the U.S. added to worries about tight global supplies.
These factors have reversed the fall in bond yields propelled by bullishness from JPMorgan (NYSE:JPM)'s inclusion of India in its emerging market debt index.
The FTSE Russell, which has India on its watchlist for inclusion in the FTSE Emerging Markets Government Bond Index, will announce a decision on Thursday.
Additionally, New Delhi raised 390 billion rupees ($4.69 billion) through the sale of bonds at cutoff yields which were higher than estimates, indicating weak demand.
Meanwhile, India maintained its plan to borrow 6.55 trillion rupees through bond issues in the October-March period, while it will borrow a maximum of 1.45 trillion rupees through 10-year bonds, which is 22% of the overall borrowing, which is also hurting appetite for this paper.
($1 = 83.1850 Indian rupees)