The yield on the benchmark 6.94% 2036 note is likely to move between 6.81% and 6.86%, according to a trader with a private bank.

It closed at 6.8387% on Thursday. Yields move inversely to bond prices.

New Delhi is looking to raise 320 billion rupees ($3.39 billion) through the sale of three-year and seven-year papers.

US Treasury yields were lower on Thursday, a day after investors adopted a hawkish view of Federal Reserve Chair Kevin Warsh’s first meeting and sent short-term yields to their highest level in 16 months.

“Though nothing on rates was expected, the tone of the new governor was particularly very hawkish, which was not anticipated, and which led to a strong reaction in the shorter end of the Treasury yield curve,” the private-bank trader said.

As a comfort to the Indian economy, the benchmark Brent crude stayed below $80 a barrel on the prospect of more supply returning to the market after oil tankers began moving through the Strait of Hormuz.

India imports nearly 90% of its crude oil requirement, and a sustained fall could ease inflationary pressure and support the rupee, helping the central bank’s efforts to attract dollar inflows.

Foreign investors have injected more than $2.2 billion into domestic bonds over the last 10 sessions since the RBI announced measures to attract dollar inflows on June 5.

The Indian rupee is seen opening flat to marginally higher on Friday, after settling at 94.3325 per dollar in the previous session.

The currency has climbed 0.8% this week, hitting its highest level in six weeks. Daily flows have turned more constructive for the rupee in recent days, bankers said.

They pointed to a surge in inflows into Indian bonds, a moderation in foreign equity outflows, and more two-way activity from importers and exporters, though activity still tilts more towards hedging by importers.

This marks a shift from the one-way dollar demand, driven largely by importer buying and sustained foreign outflows that had kept the rupee under pressure for several weeks.

India’s steps to attract dollar inflows, alongside a plunge in crude oil prices after the US-Iran peace deal, have helped rebalance flows. A trader at a private bank said that positioning in interbank trade has changed, with a previous focus on buying dips on dollar/rupee being replacedwith being “more opportunistic”, with a willingness to go short. 

Upbeat dollar

The rupee’s rally faces a test from a resurgent dollar after the Fed’s hawkish tilt spurred bets on rate hikes and sentthe dollar index to a one-year high.

Updated interest rate projections showed nearly half of policymakers now expect a hike this year due toconcerns around inflation.

The dollar index hit 100.92 on Thursday and is up 1% this week.

The dollar could draw support from the Fed story, analysts at ING Bank said, with upside risks to US data likely to nudge it higher, while noting that “this is not 2022, and any tightening should be seen as a recalibration, not a cycle.”

Oil prices fell again after the United States and Iran released the text of an interim agreement aimed at ending the war, raising expectations that the Strait of Hormuz could reopen.

Brent crude futures fell 0.1% in Asian trade to $78.50 per barrel. The contract is now only about $6 above pre-war levels.

The yield on the benchmark 6.94% 2036 bond fell 2.4 basis points to 6.8387% on Thursday, down over 10 basis points in six sessions.

The bond rally showed investors were putting more weight on lower oil prices than on the Fed’s hawkish signal, with cheaper crude improving India’s inflation and fiscal outlook.

“Indian markets are responding positively to U.S.-Iran deal prospects, which have led to a sharp drop in crude oil prices, further aided by recent RBI measures to attract foreign flows,” said Amit Modani, senior fixed income manager at Shriram AMC.

Indian bonds and the rupee had come under pressure in early trade after the Fed delivered a surprise hawkish tilt in its policy outlook, even as it kept rates unchanged. Nine of the 18 Fed policymakers pencilled in a rate hike, far more than analysts expected.

Traders also pointed to foreign buying, which helped reverse early losses. New Delhi’s tax cuts and RBI reforms have drawn overseas investors to Indian debt, with foreign investors pouring more than $2.2 billion into government bonds this month.

Rates

India’s overnight index swap rates showed caution, pricing in the risk of a hawkish Fed and a fragile U.S.-Iran truce.

The one-year swap rate was at 5.89%, while the two-year rate was at 6.0450%. The five-year rate was at 6.3225%. The rates rose 1.25-2.75 bps on the day.

The yield on the benchmark 6.94% 2036 bond rose to 6.8639% by 10:20 a.m. IST from its previous close of 6.8626%. Yields move inversely to prices.

“Bulls will take a backseat for now, as the current levels are bound to react more to negatives, with all positives priced in,” trader with a primary dealership said.

The Federal Reserve held rates steady but adopted a more hawkish stance, with policymakers signalling higher borrowing costs could be needed later this year as inflation risks persist.

The central bank also removed language suggesting further rate cuts, reflecting waning confidence in the disinflation trend.

The two-year Treasury yield, which is particularly sensitive to rate expectations jumped to four-month high, with futures pointing out a hike as early as September.

Meanwhile, oil prices remained relatively contained, with the benchmark Brent crude contract below $80 per barrel during Asian hours.

Investors awaited further clarity on the reported US-Iran peace deal and the possible reopening of the Strait of Hormuz, a key global energy transit route that Iran has effectively blocked since the war started on February 28.

Underlying sentiment has turned stronger with foreign investors pouring in over $2.2 billion into Indian government bonds this month, largely after the central bank announced measures to attract dollar inflows.

The yield on the benchmark 6.94% 2036 note settled at 6.8626%, versus 6.8651% on Tuesday. The 10-year yield has eased 8 basis points in a week and hovered at a 12-week low.

Brent crude futures fell below $80 a barrel for the first time since early March, but edged higher in Asian trade at $79.28 per barrel.

U.S President Donald Trump said on Wednesday that the memorandum of understanding on Iran was not final, and that he could resume a bombing campaign if he did not like it, making traders cautious.

The interim deal would end the Iran war, lead to reopening of the Strait of Hormuz and the US removing its naval blockade of Iran.

India imports about 90% of its oil needs and is highly vulnerable to oil swings.

STCI Primary Dealership said in a note that prolonged supply disruptions could prompt rate hikes from Q3 FY2026-27, depending on macro conditions.

Traders now await the Fed decision under new chair Kevin Warsh. While no rate move is expected, hawkish guidance could widen U.S.-India differentials, dampening foreign investment in Indian bonds.

Indian policymakers have announced a slew of measures to boost foreign inflows into Indian debt and equities.

Consequently, overseas investors have poured more than $2 billion into domestic bonds over the past eight sessions, already surpassing the year-to-date inflows recorded before the measures were announced.

Rates

India’s overnight index swap rates continued to ease, although at a slower pace.

The one-year swap rate, the two-year rate and the five-year rate each pared 1 basis point to 5.88%, 6.04% and 6.2950% respectively.

The yield on the benchmark 6.94% 2036 note was at 6.8563% as of 10:30 a.m. IST, after closing at 6.8651% on Tuesday.

Yields move inversely to bond prices.

“There is no sufficient conviction for yields to drop further sharply, and hence profit taking at current levels is keeping bonds range-bound,” trader with a private bank said. Bonds rallied after the benchmark Brent crude contract fell 5% for a second consecutive session on Tuesday, as details of the interim peace dealbegan to emerge.

The US will allow Iran to sell oil, and the deal would also extend a ceasefire announced in April by another 60 days and reopen the Strait of Hormuz, which Iran had effectively blocked since the war began on February 28.

The contract has wiped out the bulk of its gains seen after the war and is now just around 10% higher than pre-war levels.

India imports about 90% of its crude oil requirements, and a sustained fall in prices could ease pressure on inflation, the rupee, and the country’s trade deficit, supporting the central bank’s efforts to attract foreign inflows.

Foreign investors have bought domestic bonds worth more than $2 billion over the last eight sessions since the Reserve Bank of India announced measures on June 5.

Meanwhile, the Federal Reserve is due to announce its first policy decision under the new chair, Kevin Warsh, after Indian market hours.

A rate action is unlikely, but traders will eye commentary to get a sense of rate hikes in 2026.

The yield on the benchmark 6.94% 2036 note ended at 6.8651% versus 6.8704% on Monday. Yields move inversely to bond prices.

“A lot of the rally happened in the last few sessions, so bonds are consolidating,” a fixed-income trader at an asset manager said.

While U.S. President Donald Trump declared the U.S.-Iran interim deal to end the war in the Middle East was “done” and entering a second stage, the lack of public details and the absence of a permanent truce kept traders wary.

The benchmark Brent Crude contract was last at $80.99 a barrel in Asian trade, hovering at its lowest levels seen over three months ago.

“The U.S.-Iran deal and the imminent reopening of the Strait of Hormuz has led to Brent plummeting below $85 barrel.

However, there is a material risk of continued physical market imbalances causing prices to move toward and beyond $90/bbl in coming weeks,“ Emkay Global Financial Services said in a note.

India is the world’s third largest oil importer and consumer, making it highly vulnerable to oil swings. Earlier this month, the RBI raised its inflation forecast for the fiscal year to 5.1% from 4.6%, though it kept interest rates on hold to monitor the second-round effects of supply-driven price pressures.

Liquidity also remained muted due to advance tax outflows this week, with the average bank liquidity surplus slipping below 1% of deposits for a third fortnight.

Rates

India’s overnight index swap rates fell, tracking the oil slump.

The one-year swap rate fell 3.25 bps to 5.8925% and the two-year rate was down 2 bps at 6.05%. The five-year rate eased slightly to 6.3125%.

The yield on the benchmark 6.94% 2036 note was at 6.8665% as of 10:40 a.m. IST, after closing at 6.8704% on Monday.

Yields move inversely to bond prices. Indian states are set to raise 216 billion rupees ($2.28 billion) through the sale of bonds later in the day.

“It was just a matter of when the peace deal coming through, and it will definitely add to the positive momentum that has built up since the central bank’s policy decision,” the trader said.

The benchmark Brent crude contract inched higher in Asian hours on concerns about the lack of details in the peace agreement and the resumption of supply through the Strait of Hormuz.

On Monday, crude oil prices fell nearly 5%, marking their lowest close since March 4, after US President Donald Trump said a memorandum of understanding had been signed to end the war and reopen the Strait, a critical transit route for roughly one-fifth of global oil and liquefied natural gas flows.

The move is significant for India as it imports close to 90% of its crude oil requirements, making global oil prices one of the most important external variables for the economy.

A sustained decline in crude prices would help reduce the oil import bill, narrow the trade deficit and ease pressure on the current account.

It could also soften fuel-linked inflation impulses, giving policymakers more room to manage growth and price stability, and also complement the Reserve Bank of India’s efforts to attract dollar inflows.

Germany’s 10-year bond yield, the benchmark for the euro zone, fell 4 basis points (bps) to 2.957%, its lowest since 2 June.

The German two-year yield, which is sensitive to European Central Bank interest rate expectations, also fell 4 bps to a two-week low of 2.571%.

US and Iranian officials said they have reached an agreement to end the war in a preliminary pact that will lift the US blockade of Iran and crucially open the Strait of Hormuz, through which 20% of global energy typically flows.

Oil prices fell sharply, reducing the pressure on central banks to raise interest rates to tame inflation and helping bond yields fall around the world.

Brent crude oil, the global benchmark, was down 4% to $83.80, around its lowest since early March.

Money markets were pricing in around 32 bps of further monetary tightening from the ECB this year, down from over 40 bps after the central bank raised interest rates last Thursday.

“Details of the deal are not yet clear,” said Mohit Kumar, chief European economist at Jefferies, including whether the passage through the Strait would be free and the timeline over which sanctions would be lifted on Iran.

“But what the market cares is whether the Strait of Hormuz will be open and oil can start moving towards pre-war levels.”

Italy’s 10-year bond yield fell 4 bps to 3.693%.

Two-year gilt yields dropped more than 6 basis points from Friday’s close to 4.174% at 0715 GMT, according to LSEG data, their lowest since April 20, while 10-year yields fell close to 7 bps to 4.773%, the lowest since April 17.

Euro zone government bond yields were down by around 1-2 bps less.

Interest rate futures priced in 27 basis points of tightening by the Bank of England by the end of the year, with a quarter-point rate increase not fully priced in until December.

The yield on the benchmark 6.94% 2036 note is likely to move in the 6.85%-6.89% range, according to a private bank trader.

It closed at 6.8957% on Friday, with the yield dropping 7 basis points for the week. Yields move inversely to bond prices.

“It was just a matter of when and not why about the peace deal coming through, and it will definitely add to the positive momentum that has built up since the central bank policy decision,” the trader said.

The benchmark Brent crude contract was down 4% in Asian hours, dropping to its lowest level in three months, after US President Donald Trump and Iran’s deputy foreign minister said they had reached an initial deal to end the war.

The US and Iran will sign a memorandum of understanding in Switzerland on Friday, said the prime minister of Pakistan, whose country has served as a mediator.

Trump said on Sunday that the Strait of Hormuz would be open “toll-free” and that a US naval blockade of Iranian ports would also end.

The strait, a critical chokepoint for a fifth of the world’s oil and liquefied natural gas supply, has remained largely closed since the war started on February 28.

India imports about 90% of its crude oil, leaving the economy vulnerable to oil price swings.

Local sentiment remains supportive after the central bank announced measures to attract foreign inflows, support the rupee and strengthen external balances.

Foreign investors have poured in over $1.6 billion in the last six sessions.

BTr awards 89.6 billion Philippine pesos ($1.48 billion), just below the total offering of 90 billion pesos, of which:

BTr awards 39.6 billion pesos worth of cash management bills, below 40 billion pesos programme:

• BTr awards 20 billion pesos worth of 35-day bills at an average rate of 4.611%
• BTr awards 19.6 billion pesos worth of 63-day bills at an average rate of 4.942%
• Tenders for cash management bills total 56.21 billion pesos for cash management bills
• “They are for our liquidity management,” National Treasurer Sharon Almanza said in a message when asked about the additional tenors, adding it was not the first such issue

BTR awards 50 billion pesos worth of T-bills, within programme: 

• Tenders total 92.12 billion pesos
• BTr awards 20 billion pesos of 91-day T-bills at avg rate of 5.171% versus previous auction avg of 5.188%
• BTr awards 20 billion pesos of 182-day T-bills at avg rate of 5.694% versus previous auction avg of 5.679%
• BTr awards 10 billion pesos of 364-day T-bills at avg rate of 6.124% versus previous auction avg of 6.267%‑Reuters

Focus would also be on fresh debt supply, with New Delhi set to raise 320 billion rupees ($3.34 billion) through a bond sale.

The yield on the benchmark 6.94% 2036 note is seen in the 6.88%-6.94% range, according to a private bank trader.

It closed at 6.9240% on Thursday.

Yields move inversely to bond prices.

“Bulls have got a fresh lease of life as the war finally seems to be moving closer to its end,” the trader said.

Oil prices fell more than 1% in Asian hours, extending losses from the previous session, after US President Donald Trump cancelled plans to strike Iran.

Trump, in a social media post, said he called off strikes because discussions had advanced to the highest levels of Iran’s leadership and a broad coalition of regional powers, without describing details.

The benchmark Brent crude contract has moved below $90 per barrel to its lowest level in two months.

India imports about 90% of its crude oil, leaving the economy vulnerable to oil price swings. Sentiment in the Indian bond market remains supportive after the central bank announced measures last week to attract foreign inflows, support the rupee and strengthen external balances.

The Reserve Bank of India allowed lenders to raise foreign currency deposits from non-residents and agreed to absorb the hedging costs.

It also offered state-run companies a 150-basis-point discount on hedging costs to support overseas fundraising.

The yield on the benchmark 6.94% 2036 note may trade in the 6.92% to 6.98% range, a private bank trader said.

It closed at 6.9431% on Wednesday.

Yields move inversely to bond prices.

“It was difficult for the momentum to sustain, the moment geopolitical tensions arose,” the trader said, adding that “we could see some more selloff today.”

Oil prices climbed, extending Wednesday’s gains to trade around $95 per barrel, as Iran declared the critical energy chokepoint, the Strait of Hormuz, fully closed after the US launched additional strikes.

Iran’s top joint military command said any vessel attempting passage will be shot at, marking a shift from recent weeks, in which Iran has facilitated the transit of some ships from friendly countries, sometimes for a fee.

The US military said no US warships have been struck in the strait, after Iran’s state media reported they were targeted by missiles and drones.

Before the war started on February 28, a fifth of global crude and liquefied natural gas supply passed through the strait. India imports about 90% of its crude oil, leaving the economy vulnerable to high oil prices.

Bond traders are still hopeful of a medium-term decline in yields after the Reserve Bank of India announced a mechanism for state-run companies to raise external commercial borrowing and for lenders to raise non-resident deposits.

These form a part of a larger set of measures to boost foreign investment in government securities and attract dollar inflows.

Foreign investors have already net bought $1.1 billion worth of bonds in the last four trading sessions.

 Here are a few details:

The benchmark 10-year JGB yield fell 0.5 basis points (bps) to 2.675%, after briefly rising 1 bp earlier to 2.690% earlier in the session.

The five-year yield fell 0.5 bps to 1.93%, reversing an earlier 0.5 bps rise to 1.940%.

Yields move inversely to bond prices. Market sentiment improved after the US military’s Central Command announced that its strikes in Iran had concluded.

This development helped calm investor nerves, according to Takahiro Otsuka, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities. Meanwhile, the Bank of Japan said Governor Kazuo Ueda has been hospitalised for medical treatment and will miss the June 15-16 policy meeting.

While analysts expect a highly anticipated rate hike to proceed as planned next week, Ueda’s absence has raised concerns on how the central bank will communicate its future policy outlook.

“There is some concern over what message the BOJ will send at its June meeting without the governor, and the implications this could have for its communication with markets,” Keisuke Tsuruta, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, said in a note.

Overnight, US consumer inflation in May accelerated at its fastest pace in three years, boosted by surging prices for energy products amid the Middle East conflict, and giving more ammunition for the US Federal Reserve to keep interest rates unchanged into 2027.

US Treasury yields also ended higher on Wednesday on rising US-Iran tensions.

At the long end, Japan’s 30-year yield rose 1 bp to 3.860%.

The Ministry of Finance sold about 600 billion yen ($3.74 billion) of 30-year JGBs on Wednesday.

The auction’s bid-to-cover ratio, a measure of demand, declined to the lowest in a year.

The 20-year JGB yield climbed 1 bp to 3.565%. ‑Reuters

The yield on the benchmark 6.94% 2036 note may trade in the 6.90% to 6.95% range, a private bank trader said. It closed at 6.9163% on Tuesday, easing 10 basis points over the last four sessions.

Yields move inversely to bond prices.

“Fundamentally things are the same and overall sentiment is supportive, so the positive momentum should persist, though gains may be limited after the recent 10 bps 10 basis points decline,” the trader said.

Oil prices rose marginally in Asian hours, with the benchmark crude at around $92 per barrel, after the U.S.

military launched new strikes against Iran and as data showed another large draw in U.S. crude stocks.

U.S. strikes on Iran followed President Donald Trump’s vow to respond to the downing of a U.S. Apache attack helicopter, escalating tensions and threatening a fragile ceasefire between Washington and Tehran.

India imports about 90% of its crude oil, leaving the economy highly vulnerable to swings in oil prices.

Locally, bond traders remain hopeful of a further decline in yields after the Reserve Bank of India announced a mechanism for state-run companies to raise external commercial borrowing and for lenders to raise non-resident deposits.

These form a part of a larger set of measures to boost foreign participation in government securities and attract large dollar inflows announced on Friday, when the RBI also kept its policy rate unchanged.

The benchmark 6.48% 2035 bond yield fell 4.5 basis points to 6.9082%, its lowest level since April 21, extending its decline into a fourth straight session. Bond yields and prices move inversely.

Oil prices eased after Iran and Israel said they had halted attacks following an appeal from U.S. President Donald Trump. Brent crude futures were last down 1.93% at $92.41 a barrel in Asian trade.

Still, some traders worried the positives would support sentiment only in the “short-term”, unless India mitigates the rising costs from the U.S.-Israeli war with Iran war.

India imports about 90% of its oil, leaving its economy highly exposed to the war, including the effective blockade of the Strait of Hormuz.

Steps taken by the Reserve Bank of India last week to encourage dollar inflows and make it easier to invest in Indian bonds have seen foreign investors ramp up purchases of the country’s debt by a net $800 million over the past two days.

The central bank expects inflation to average 5.1% in the year to March 2027, up from 3.48% in April, while growth is seen slowing to 6.6% from 7.7% last year.

On the fiscal front, the government has set a fiscal deficit target of 4.3% of GDP for this financial year, but a Reuters poll sees it widening to 4.7%.

The Reserve Bank of India’s measures are creating some confidence, but rising U.S. yields and money going into U.S. equities along with the persistent war risks are still overwhelming for the market, said Alok Singh, head of treasury at CSB Bank.

Rates

India’s overnight index swap rates eased as lower oil boosted sentiment.

The one-year swap ended at 5.99%, down 5.5 bps, while the two-year rate INR2YMIBROIS=CCdropped 8.25 bps to 6.17%. The five-year rate 11 bps to 6.43%.

The yield on the benchmark 6.48% 2035 note fell 2.4 bps to 6.9532% on Monday, its lowest in a month.

The session marked an extension of gains from Friday when the RBI held its key policy rate and announced a raft of measures to draw large foreign inflows to government securities.

The central bank said it will offer cheaper currency swaps for overseas borrowing by public-sector companies and lenders, and provided full hedging cover for banks raising three- to five-year foreign currency deposits from non-resident Indians.

“We believe the FNCR (B) scheme alone could potentially attract deposits worth 1% of GDP, which places the amount at a sizeable $40 billion,” analysts at Nomura said in a note.

New Delhi also scrapped taxes on interest income and capital gains from sales of government bonds last Friday.

India’s 10-year bond yield fell for a third day on Monday even as higher U.S. Treasury yields and oil prices capped gains.

Brent crude jumped 4% to $96.34 a barrel in Asian trading after Israel struck Lebanon on Sunday, eroding hopes for an end to the wider conflict and a full resumption of shipping flows through the Strait of Hormuz. The U.S. 10-year Treasury yield rose 2 basis points in Asian trading to 4.55%.

India imports about 90% of its crude oil, leaving the economy highly vulnerable to swings in oil prices.

Rates

Overnight index swaps edged higher on oil-driven caution. The one-year swap was slightly up at 6.0475%, while the two-year rate rose marginally to 6.24%. The five-year rate was flat at 6.5375%.

The benchmark 10-year JGB yield fell 1 basis point (bp) to 2.660%.

Yields move inversely to bond prices.

The two-year yield, the one most sensitive to Bank of Japan policy rates, eased 1 bp to 1.405%, still poised for a 4-bp rise for the week. The five-year yield slid 1 bp to 1.920%.

A speech by Bank of Japan Governor Kazuo Ueda on Wednesday indicated he was ready to raise the bank’s key interest rate, with markets now reflecting an 80% probability of a hike at the June 15-16 policy meeting.

Recent remarks from BOJ officials highlighted the risk that energy shocks caused by the Iran war could become persistent through wages and expectations.

“A rate hike at the June meeting is now largely priced in,” Sony Financial Group senior economist Takayuki Miyajima said in a note.

“Market attention has shifted to the pace of future rate hikes, and uncertainty surrounding monetary policy is perceived as a source of upward pressure on long-term interest rates.”

Japan’s real wages climbed 1.9% year-on-year in April, data showed on Friday, marking a fourth consecutive monthly gain.

Over the past month, JGB yields have surged to multi-decade highs on inflation worries and fiscal concerns.

The yield on the 20-year JGB held steady at 3.575%.

The yield on the 30-year JGB added 1 bp to 3.890%, marking its third consecutive daily gain. The yield on the 40-year JGB, Japan’s longest tenor, was unchanged at 3.750%. ‑Reuters

The yield on the benchmark 6.48% 2035 note may trade in the 6.97% to 7.01% range till the policy decision at 10:00 a.m. IST, a private bank trader said.

It closed Thursday trade at 6.9931%.

Bond prices move inversely to yields. “This would be a make or break policy, and we are having such a tough call after long time, where literally multiple options are on the table,” the trader said.

“We are in for one of the most volatile days in recent past.”

Nearly 80% of economists in Reuters’ poll expect the policy repo rate to remain unchanged.

A growing minority thoughexpects a 25 basis point rate hike, including Standard Chartered, Capital Economics, ANZ and MUFG.

The Reserve Bank of India faces one of its most challenging interest rate calls in recent history, as the Middle East energy shock, a slumping currency and a weak monsoon risk crimping growth along with stoking inflation.

The rupee has tumbled to record lows since the Iran war broke out at the end of February, as a sustained spike in crude oil prices delivered a severe blow to Asia’s third-largest economy.

A hike in the policy repo rate from the current 5.25% could support the currency, while also riling the rates market, which sees scope for the central bank to stand pat, as inflation remains below target.

The RBI is expected to hold rates, but a weakening rupee could compel earlier action than markets currently anticipate,

 according to Avnish Jain, CIO for fixed income at Canara Robeco Mutual Fund.

Additionally, a super El Niño prediction adds further uncertainty to the food price outlook, he said. Meanwhile, the benchmark Brent crude contract stayed around $96 per barrel in early Asian trading hours.

The yield on the benchmark 6.48% 2035 note is expected to trade in the 6.99% to 7.05% range, a private bank trader said.

It had ended at 7.0240% on Wednesday.

Bond prices move inversely to yields.

According to a report in The Economic Times, the government’s plan is part of efforts to draw capital flows into India, amid pressure on the South Asian nation’s currency.

Foreign investors currently pay 12.5% long-term capital gains tax on listed shares and bonds held for more than 12 months.

They also pay 20% withholding tax on interest earned in government bonds.

This may also be removed, the report said.

“On the face of it, this seems to be a decently positive move, but how much additional inflows this could attract remains a larger question,” the private bank trader said.

The development comes on the eve of the Reserve Bank of India’s monetary policy decision due on Friday.

Nearly 80% of economists in Reuters’ poll expect the policy repo rate to remain unchanged. Still, a growing minority is not ruling out the chance of a 25 basis point rate hike, includingprominent names such as Standard Chartered, Capital Economics and MUFG.

Meanwhile, the benchmark Brent crude contract stayed above $95 per barrel in early Asian trading hours, but eased from the previous session as Israel and Lebanon’s ceasefire agreement boosted hopes for a broader deal to end the US-Iran war.

Indian assets are highly exposed to swings in oil prices, with the country importing 90% of its crude needs.

Here are a few details:

The benchmark 10-year JGB yield climbed 6 basis points (bps) to 2.625%. Yields move inversely to bond prices.

Ryutaro Kimura, a senior fixed income strategist at BNP Paribas Asset Management, said Wednesday’s rise in the benchmark yield reflected selling into a rebound, after a stronger-than-expected auction of those maturities drove an 11-basis-point drop on Tuesday.

“From a fundamentals perspective, it’s not as if the risk of higher interest rates had disappeared. But in terms of levels, we interpreted the move as having gone a bit too far in the short term,” he said.

US Treasury and euro zone yields have remained elevated in recent weeks on persistent inflation concerns and shifting expectations for major central banks. Markets are awaiting a speech by BOJ Governor Kazuo Ueda later on Wednesday for further policy clues after recent hawkish signals and inflationary risks tied to the Iran war-driven energy shock.

Finance Minister Satsuki Katayama said on Wednesday that she is largely in alignment with Ueda on various aspects.

The two-year yield, the one most sensitive to BOJ policy rates, advanced 3 bps to 1.405%, while the five-year yield gained 5 bps to 1.905%.

Kimura of BNP Paribas Asset Management said the rise in yields on short-dated maturities reflected expectations for interest-rate hikes, or at least caution over potentially hawkish messaging.

“That said, it is still unclear how far (Ueda) will go in making such remarks,” he said.

The yield on the 40-year JGB, Japan’s longest tenor, increased 2 bps to 3.765%, while the 30-year yield added 1 bp to 3.855%.

The 20-year yield advanced 1 bp to 3.51%. ‑Reuters

The yield on the benchmark 6.48% 2035 note is expected to trade in the 7.00% to 7.06% range, a private bank trader said. It had ended at 7.0129% on Tuesday.

Bond prices move inversely to yields.

Crude oil prices jumped on Tuesday and extended those gains by climbing 1%in early Asian trading hours on Wednesday as hostilities in the Middle East erupted anew with Iran firing missiles at Kuwait and Bahrain, while diplomatic talks between Iran and the US made little progress.

Indian assets are highly exposed to swings in oil prices, with the country importing 90% of its crude needs.

“Escalation in US-Iran tensions and such a major reaction in oil prices is exactly what bond traders were fearing,” the trader said. Meanwhile, nearly 80% of economists in Reuters’ May 22-29 poll expect India’spolicy repo rate to remain unchanged when the Reserve Bank of India’s monetary policy decision is unveiled on Friday.

Bonds have remained under selling pressure as a spike in oil prices and a weakening local currency raised the odds of an earlier-than-expected rate hike.

There is clamour from a minority of economists and analysts for a rate hike, including Standard Chartered, Capital Economics, ANZ, MUFG and OCBC.

The yield on the benchmark 6.48% 2035 note was at 7.0171% as of 10:00 a.m. IST, after ending at 7.0181% on Monday.

Bond prices move inversely to yields.

Indian states aim to raise 241 billion rupees ($2.54 billion) through sale of bonds later in the day, which would be followed by sale of new 10-year 6.94% 2036 bond by New Delhi on Friday for 340 billion rupees.

“Traders are neither interested in aggressive trimming of positions, and definitely not in favour of adding longs, hence the move is sideways with shallow volumes,” trader with a small finance bank said.

The Reserve Bank of India’s policy decision is due on Friday, with nearly 80% of economists in a Reuters poll conducted in May expecting the repo rate to remain unchanged.

Still, a minority of economists, including those at Standard Chartered, Capital Economics, ANZ, MUFG and OCBC, expect a rate hike.

Capital Economics has not ruled out a 50-basis-points increase if Middle East tensions escalate.

The RBI is also expected to update its inflation and growth forecasts for the fiscal year ending March 2027 to reflect the fallout from the US-Iran war.

Bonds have remained under pressure as a spike in crude oil prices and a weakening local currency raised the odds of an earlier-than-expected rate hike.

Indian assets are highly exposed to swings in oil prices because the country imports 90% of its crude needs.

Yields on 10-year JGB rose 3.5 basis points to 2.69%, after falling to as low as 2.635% on Friday for the first time since May 14.

Ten-year JGB futures fell 0.27 yen to 128.62 yen; yields rise when bond prices fall.

The energy shock from the Iran war has fanned inflation worries, lifting bond yields worldwide.

“Considering that JGB yields fell last week on expectations for the US and Iran to reach an agreement, there is room for yields to rise following reports that President (Donald) Trump has postponed making a decision,” said Mizuho analyst Yuhi Kawano -Yields on 20-year JGBs rose 2.5 bps to 3.595% on Monday; 30-year yields rose 1.5 bps to 3.93%.

Five-year JGB yields rose 3.5 bps to 1.92%; two-year yields rose 1 bp to 1.4%.

The Ministry of Finance will auction around 2.6 trillion yen ($16.3 billion) of 10-year JGBs on Tuesday .

Japanese companies’ pace of annual spending on plant and equipment stalled in the first quarter, data showed on Monday -Bank of Japan policymakers are considering pausing the central bank’s quantitative tightening programme.

Traders see a 70% chance of the BOJ raising rates by a quarter point at its next policy meeting on June 15-16, according to LSEG data.

Yield on the benchmark 6.48% 2035 note is expected to trade in the 6.97% to 7.02% range, a private bank trader said. It had ended at 7.0037% on Friday, down 6 basis points in its biggest weekly drop in seven. Bond prices move inversely to yields.

“If we do not see any major moves in global factors, the action will be dominated by the expectations that get built up in the run up to the monetary policy,” the trader said.

Nearly 80% of economists in the May 22-29 Reuters poll expect the repo rate to remain unchanged at the Reserve Bank of India’s monetary policy decision on June 5, despite a rising clamour from some quarters for a rate hike.

Standard Chartered, Capital Economics, ANZ, MUFG and OCBC are among the minoritycalling for an interest rate increase. The central bank is also expected to update its inflation and growth forecasts for the fiscal year ending March 2027, amid spillover impact from thewar in the Middle East.

Though they gained last week, Indian government bonds have remained under selling pressure as a spike in crude oil prices and a weakening local currency raised the odds of an earlier-than-expected rate hike.

The Strait of Hormuz, which usually handles about a fifth of global oil and liquefied natural gas flows, has remained largely shut since February 28, pushing up benchmark Brent crude price more than 30%.

Elevated oil prices impact India’s inflation and current account deficit, ultimately adding pressure on the central bank to hike interest rates.

The benchmark 6.48% 2035 note is expected to trade in the 6.96% to 7.02% range, a private bank trader said.

It had ended at 6.9960% on Wednesday. Indian markets were closed on Thursday for a holiday.

Bond prices move inversely to yields.

New Delhi will raise 280 billion rupees ($2.93 billion) through sale of bonds later in the day.

“There could be some movement towards the better side of 7% today, but it will again boil down to demand at auction, which will be a major factor to track,” the trader said.

Oil prices fell on hopes for a potential deal to extend the US-Iran ceasefire, although remarks from Vice President JD Vance that the countries were “close” to reaching a deal but “not there yet” kept a floor under prices.

Brent crude prices have fallen 10% this week to around $93 per barrel, but have remained volatile in recent sessions on conflicting signals over a potential re-opening of the Strait of Hormuz - a key transit route that handles roughly a fifth of the world’s oil and liquefied natural gas supplies.

Elevated oil prices impact India’s inflation and current account deficit and the government’s fiscal maths, while adding pressure on the central bank to hike interest rates.

Focus is now on the Reserve Bank of India’s policy decision next week, with four foreign lenders - Standard Chartered, ANZ, MUFG and OCBC - expecting a rate hike.

The caution was reflected in Wednesday’s treasury bill sale, where 364-day yield topped 6% for first time in nearly 14 months.

The benchmark 10-year JGB yield, which touched a 29-year high of 2.8% last week, slid 5 basis points to 2.710%.

The 30-year yield, which recently hit a record 4.2%, dropped 5.5 bps to 3.955%.

Yields move inversely to bond prices.

Japan’s dependence on imported energy has made its economy and inflation picture vulnerable to a surge in oil prices caused by the nearly three-month conflict.

JGBs came under added pressure last week after reports of a supplementary budget from Prime Minister Sanae Takaichi fuelled fresh fiscal concerns.

US President Donald Trump said over the weekend that Washington and Iran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz shipping lane for petroleum. He later said he had told his representatives not to rush into any deal.

“Market participants are really unsure about Prime Minister Takaichi’s commitment to maintain fiscal discipline,” said Yunosuke Ikeda, the head of macro research at Nomura Securities.

“Many investors say it’s not the right timing to buy Japanese bonds, even though they believe rates are attractive and that they won’t climb much higher from here,” he added.

“Prime Minister Takaichi is well aware of the market’s concerns, and I think there will be positive surprises for investors in the next two months.”

The two-year yield, which is most sensitive to Bank of Japan policy rates, was not yet traded. The five-year JGB yield eased 3 bps to 1.970%.

The benchmark 6.48% 2035 bond yield is expected to move in the 7.05%-7.10% range on Monday, a private bank trader said.

It had ended at 7.0917% on Friday.

Bond yields move inversely to prices.

“There should be some more relief in sight today, as the latest fall in oil prices has further eased fears of a rate-hike cycle starting from as early as early next month,” the trader said.

On Saturday, US President Donald Trump said that Washington and Iran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz, which before the conflict carried one-fifth of global oil and liquefied natural gas shipments.

However, the two sides remain at odds on several issues, with Trump saying on Sunday he had told his representatives not to rush into any deal with Iran.

Even if a deal is struck, analysts expect that it will take months for oil flows through the strait to return to normal and for damaged oil and gas facilities to be repaired.

The benchmark Brent contract was around $99 per barrel.

Elevated oil prices impact India’s inflation, current account deficit as well as the government’s fiscal math.

Economists at Standard Chartered said the RBI is likely to start hiking rates as early as June 5, citing increasing inflation risks from elevated crude prices.

They expect 25 basis-point hikes each in June and August.

The benchmark 6.48% 2035 bond yield is expected to move in the 7.07%-7.14% range, a private bank trader said.

It had ended at 7.1134% on Thursday. Bond prices move inversely to yields.

New Delhi will aim to raise 320 billion rupees ($3.33 billion) through the sale of three-year, seven-year and 30-year bonds later in the day.

“We are in for another push-and-pull trading session for bonds, as traders are expected to take conflicting positions amid contrasting news flow,” the trader said.

Bond yields surged on Thursday after Bloomberg News reported that the Reserve Bank of India is considering all available options to stabilize the rupee, including raising interest rates.

Economists at Standard Chartered said the RBI is likely to start hiking rates as early as June, citing increasing inflation risks from elevated crude prices triggered by the Middle East war.

They expect 25 basis-point hikes each in June and August.

Meanwhile, oil prices and Treasury yields remained largely unchanged on Friday, with the benchmark Brent crude contract at $105 per barrel and the 10-year yield around 4.57%.

Investors doubted the prospects of a breakthrough in US-Iran peace talks, with the two sides still at loggerheads on Tehran’s uranium stockpile and control of the Strait of Hormuz.

The major focus for the day remains on the RBI’s surplus transfer, likely to hit yet another record.

A Reuters poll predicted a dividend of 2.9 trillion rupees to 3.2 trillion rupees, which could provide significant fiscal support to the government.