India bonds fall as oil prices stay sticky at over $100 per barrel
- Benchmark 6.48% 2035 yield rose 3 bps to end at 6.8681%
MUMBAI: Indian government bonds ended marginally lower on Tuesday, as oil prices came off recent peaks on bets that the U.S. and Iran would soon indulge in peace talks but remained over above $100 per barrel amid lingering uncertainty.
The benchmark 6.48% 2035 yield rose 3 bps to end at 6.8681%. Bond yields move inversely to prices.
On Monday, the yield ended at 6.8379%, its highest level since January 2025. It jumped 10 basis points, its biggest single-session spike since October 2023, as oil prices and U.S. yields stayed elevated for most of the session.
“In light of an immediate reprieve, bond yields might cool off slightly, with 10-year yield to settle within 6.70%-6.78%,” Radhika Rao, senior economist at DBS Bank said.
“As markets whiplash, a durable improvement in sentiment will require indications that a reopening of the Strait of Hormuz is imminent, which will help energy prices stabilise, in the absence of which gains could be tentative.”
The benchmark Brent crude contract hovered around $101 per barrel on Tuesday, down from the day’s high of around $104, after U.S. President Donald Trump ordered a five-day delay to attacks on Iran’s power plants, saying the U.S. had talks with unnamed Iranian officials that produced “major points of agreement,” even as Iran contradicted any such development.
The conflict has kept oil prices elevated amid supply disruptions. Higher prices are negative for India, the world’s third-largest crude importer, as they threaten to worsen inflation and widen the current account deficit.
Meanwhile, Indian states raised 548.34 billion rupees ($5.84 billion) through bond sales, which has pushed state debt issuance to a record 12.31 trillion rupees for the current financial year.
Rates
India’s overnight index swap rates dropped from day’s highs to end lower on Tuesday as declining oil prices led to receiving.
The one-year OIS rate ended at 5.945% and the two-year OIS rate closed at 6.135%.
The five-year swap rate settled at 6.495%.
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