India’s benchmark 10-year government bond yield fell nearly 10 basis points to 7.31%, the sharpest decline since early April, according to a report in the Economic Times. The fall followed a drop in oil prices.
What happened
A bond yield is the return an investor earns from holding a bond until it matures. It moves opposite to the bond’s price: when prices rise, yields fall. A basis point is one-hundredth of a percentage point, so 10 basis points equals 0.10 percentage point.
Oil prices fell nearly 5%, pulling back from a six-month high reached last week, the report said. India imports much of its oil, so lower crude prices are generally seen as easing pressure on the economy, and that is the link the report draws to the yield move.
Traders are also staying on the sidelines. According to the report, they are avoiding fresh positions while they wait for the US midterm elections.
What it means for you
The 10-year yield is a reference point for borrowing costs across the economy, including rates on some corporate bonds and loans. A single-day move does not by itself change what banks charge on a home loan or pay on a fixed deposit. If you want to see how a change in rates affects a loan, you can try the EMI Calculator.
Holders of bond funds may notice price effects when yields move, since bond prices rise as yields fall. The sources do not say how funds or other markets reacted.
Background
The 7.31% level follows a week in which oil touched a six-month peak. The benchmark yield had not dropped as sharply since early April, per the report. For other market moves the same day, see our coverage of the rupee in early trade.
