Indian rupee, bonds retreat as oil prices jump

Indian bond yields edged up on Monday while the rupee weakened as an uptick in crude oil prices fanned fears of imported inflation and higher trade and current account deficits.

Oil prices jumped more than $3 on the day, pushing global benchmark Brent to above $111 a barrel as European Union nations considered joining the United States in a Russian oil embargo, while a weekend attack on Saudi oil facilities caused jitters.

India imports more than 80% of its oil requirements and the rise in crude prices can push up the country`s trade deficit and weaken the rupee while also increasing imported inflation.

The benchmark 10-year bond yield was trading at 6.79, up 1 basis point, while the partially convertible rupee was weaker at 76.13/14 per dollar compared with its close of 75.7950 on Friday.

"Domestically we don`t have any triggers at the moment. The borrowing calendar will be the next key event ahead of the monetary policy review next month," a senior trader at a foreign bank said.

Traders said the 10-year yield was expected to move in a 6.75% to 6.85% range until the announcement of the borrowing calendar.

The government is scheduled to borrow a record $14.31 trillion rupees in the financial year starting April 1.

Broader emerging Asian currencies also weakened against the U.S. dollar and most stock markets in the region slipped, dragged down by worries about the economic fallout from an intensifying Russia-Ukraine conflict.

The greenback strength followed remarks on Friday from two of the Federal Reserve`s most hawkish policymakers calling for more aggressive steps to combat inflation.

Two other policymakers also said they would open to that – one of whom just six months ago envisioned a 2022 with no rate increases at all.

The focus will be on Fed Chair Jerome Powell`s speech overnight for near-term clues.