India bonds seen declining as oil surges, states squeeze in another mega debt sale

MUMBAI: Indian government bonds are set to decline in the penultimate trading session of the financial year on Friday, as Brent crude climbs decisively above $100 a barrel and states pile on with another massive debt sale.

The benchmark 6.48% 2035 bond yield will likely hover between 6.84% and 6.90% on Friday, a private bank trader said, after ending at 6.8750% in the previous session. Bond yields move inversely to prices.

“Things have been back-and-forth over the week, and there is no sanctity left in any piece of information that comes in, which is making it difficult to gauge the direction for yields,” the trader said.

The markets will remain closed on March 31 for a local holiday.

The benchmark Brent crude contract was hovering around $105 per barrel as hopes for a swift end to the war in the Middle East faded.

US Special Envoy Steve Witkoff confirmed that the United States sent a “15-point action list” to Iran for negotiations to end the war, but a senior Iranian official told Reuters that the proposal was “one-sided and unfair.”

“The US diplomacy appears more tactical than substantive, likely aimed at buying time to prepare a larger strategy against Iran,” Vikrant Chaturvedi, associate director - research at Brickwork Ratings, said.

The war has halted shipments of oil and liquefied natural gas through the Strait of Hormuz, which carries about one-fifth of the world’s oil and liquefied natural gas.

Elevated oil prices are detrimental for India, the world’s third-largest crude importer, threatening to worsen domestic inflation and widen the current account deficit.

Meanwhile, Indian states will raise 429.4 billion Indian rupees ($4.56 billion) through bond sales later in the day, after already raising a record 12.31 trillion rupees this financial year.