Crude Oil Surge, Bond Yields Rise: RBI Rate Hike Ahead?

CRUDE BOUNCES; RBI RATE HIKES LOOK LIKELY

The oil prices fell sharply at the start of the week after Trump announced that the US and Iran had agreed to a ceasefire. However, with Iran denying any such talks, markets were disappointed and oil again went above $100/bbl. Iran is look at two guarantees for cessation of hostilities. Firstly, it wants to collect a toll from ships passing through the Straits of Hormuz, and secondly, it wants all US bases in the GCC and West Asia dismantled.

The other big story in the week was the spike in bond yields. This was visible across the US and Indian bond markets. The spike in bond yields was in response to indications that central banks may be impelled to raise rates in the coming months due to higher inflation. In fact, brokerages are already pegging CPI inflation for FY27 at 4.5% or higher. While that may give some relief to the rupee, it would impact equity valuations in FY27.

US BOND YIELDS MOVE UP BY 5 BPS FOR THE WEEK

Data Source: Bloomberg

Key takeaways on US bond yields data:

1. The week saw US bond yields rise from 4.392% to 4.440%; up 31 bps in 3 weeks
2. This is due to higher inflation assumptions amid rising oil and gas prices.
3. Markets are interpreting the recent Fed pause as the first step to a rate hike

For the week; US 10-year bond yields scaled a high of 4.484% and a low of 4.305%.

US DOLLAR INDEX (DXY) CLOSES THE WEEK ABOVE 100

Data Source: Bloomberg

Key takeaways on US Dollar Index data:

1. DXY closed just above 100, after hovering in a range through the week
2. Markets are building in a Fed rate hike and risk-off flows into the US
3. Fiscal deficit at 7% of GDP and debt at $39 trillion will limit DXY upsides

For the week, US dollar index (DXY) touched a high of 100.21 and a low of 98.88.

INDIA BOND YIELDS SPIKE ON RATE HIKE CONCERNS

Key takeaways on India Bond Yields data:

1. RBI rate hike possibilities spiked bond yields by 34 bps in March 2026
2. Goldman Sachs is pegging minimum 2 rate hikes of 25 bps each in FY27
3. With oil and gas to remain at a higher normal, imported inflation will be an issue
4. FPI bond selling of $1 billion in March also played a part in spiking yields

For the week, India Bond Yields touched a high of 6.962% and a low of 6.737%.

RUPEE (USDINR) GETS CLOSER TO ₹95/$

Data Source: RBI

Key takeaways on USDINR data:

1. The Indian rupee again fell sharply ₹93.692/$ to ₹94.782/$ for the week
2. FPIs have sold equities worth $12.3 billion in March 2026 till date
3. Higher crude prices and limited RBI intervention also weakened the rupee
4. Rupee can expect some respite in FY27 from a likely 50 bps rate hike

For the week, the USDINR touched a high of ₹92.911/$ and low of ₹94.988/$.

CRUDE OIL – PREPARING FOR A HIGHER NEW NORMAL

Data Source: Bloomberg

Key takeaways on Brent Crude Prices:

1. Brent Crude spiked in the last 2 days from $97.26/bbl to $105.32/bbl
2. With chances of US-Iran peace talks fading, oil may stay above $100/bbl
3. Crude oil is up 54% in the last 1 month and 86% in the last 70 days
4. With big output cuts in GCC, oil may find a new normal at $80-$100/bbl

For the volatile week, Brent Crude touched a high of $109.78/bbl and a low of $91.70/bbl.

SPOT GOLD CLOSES FLAT, BUT PRESSURE VISIBLE

Data Source: Bloomberg

Key takeaways on spot gold (XAU) price data:

1. After the 10% crash last week, gold closed flat for this week
2. Rising bond yields are impacting the opportunity cost of holding gold
3. Gold is now down nearly 20% from its late January peak of $5,595/oz
4. India spot gold is currently trading at ₹1,48,340 / 10 grams
5. Gold is likely to consolidate after the sharp volatility in recent months

For the week, spot gold touched a high of $4,602.64/oz and low of $4,098.87/oz.

SPOT SILVER STRUGGLES TO CROSS ABOVE $70/OZ

Data Source: Bloomberg

Key takeaways on spot silver (XAG) prices:

1. The week saw silver gaining from $67.7881/oz to $69.7850/oz
2. It looked more like a dead cat bounce after a sharp fall in previous week
3. Spot Silver is still down -42.6% from its late January peak of $121.67/oz
4. India spot silver is currently trading at ₹2,33,917 / Kilogram
5. The Gold-Silver Ratio of 64.38X has stabilized in a narrow range.

For the week, spot silver touched a high of $74.66/oz and low of $60.97/oz.