Bond yields softened on Monday following a sharp fall in crude oil prices, which also helped the rupee gain for the second straight day. The dollar also softened ahead of the US midterm polls scheduled for November 3.
The yield on the benchmark 10-year government bond dropped almost 10 basis points (bps) on Monday — the sharpest decline in seven months — to 7.32 per cent, tracking the drop in crude oil prices and short covering in the market ahead of the US midterm elections.
The 10-year yield declined 17 bps from its four-year high of 7.48 per cent on October 26, 2026.
“Bond yields have come down mainly because of two reason. One is that fall in crude oil prices and the other reason might be short covering. Few positions might have been covered here,” a dealer with a public sector bank said.
“If the levels of 7.30 breaks, the entire short will be covered pushing the yields towards 7.25 levels. There will be more clarity on yield direction post the results on US mid-term elections,” the dealer added.
Brent crude futures slid over 7 per cent to $108.46 per barrel on hopes for a deal to end the US-Iran conflict.
The January 2027 Brent contract had settled at approximately $113.43 on Friday, down 3.9 per cent to $109, as reports of continued diplomatic engagement between the US and Iran eased some immediate concerns about further escalation.
The benchmark 10-year government bond yield had risen 95 bps over the past year and 90 bps so far in the current calendar year.
The rupee, which opened at 94.89 against the dollar compared with the previous close of 94.96, strengthened to 94.70 intraday before giving up some gains to settle at 94.90 against the dollar.
“The Indian rupee appreciated, supported by lower crude oil prices and positive risk-on market sentiment. A softer greenback ahead of the U.S. midterm elections also provided a tailwind for the domestic currency. However, persistent geopolitical worries encouraged bargain buyers to step in at lower levels,” said Dilip Parmar, research analyst at HDFC Securities.
The Indian unit has gained almost 1 per cent since October on the back of regulatory measures aimed at curbing speculative bets. In 2026, the rupee has depreciated 5.3 per cent against the dollar.
