INDIA BONDS-India bond yields in narrow range as traders eye cues from oil, Fed

By Dharamraj Dhutia

MUMBAI, June 16 (Reuters) - Indian bond yields hunted for direction on Monday, as traders tracked oil price moves amid geopolitical tensions and awaited cues from the U.S. Federal Reserve's policy decision.

The yield on the benchmark 10-year bond IN063335G=CC was at 6.2944%, as of 9:45 a.m. IST, compared with its previous close of 6.2996%. The benchmark rose 6 basis points last week, the most since week ended December 20.

"If Brent oil moves further over $75 per barrel, we could see test of upside resistance levels," trader with a primary dealership said.

Oil prices extended Friday's rise as renewed strikes by Israel and Iran over the weekend increased concerns that the battle could widen across the region and significantly disrupt oil exports from the Middle East.

There were also concerns about disruptions to the Strait of Hormuz, which sees passage of around a fifth of the world's total oil consumption.

India imports a bulk of its crude oil needs and higher prices could affect the nation's inflation outlook.

Bond yields have been witnessing an uptrend after the Reserve Bank of India on June 6 surprised markets with a shift in policy stance to "neutral", signalling limited scope for more cuts.

This was followed by an announcement to stop daily repos, which were ongoing since January, and led to fears that the central bank may not be comfortable with overnight rates below the policy rate.

RATES

Indian overnight index swap (OIS) rates were little changed in early deals, after risning in the previous week.

The one-year INR1YMIBROIS=CC OIS rate rose was at 5.54%, while the two-year OIS rate INR2YMIBROIS=CC was at 5.53%. The liquid five-year INR5YMIBROIS=CC OIS rate was at 5.77%. OIS rates had jumped 7-9 bps last week.