India bonds seen little changed; state debt sale, US-Iran talks in focus

MUMBAI: Indian government bonds are seen largely unchanged in early deals on Tuesday ahead of fresh state debt supply, while major focus remains on the future peace talks between the United States and Iran as the end of a two-week ceasefire approaches.

India’s benchmark 6.48% 2035 bond yield is expected to drift in a 6.87%-6.91% range, a private-bank trader said.

It settled at 6.8901% on Monday.

Indian states are set to raise 169 billion rupees ($1.82 billion) through sale of bonds maturing in seven to 30 years later in the day.

“The only trigger for bond market traders for the next couple of days is the direction of oil prices, and the future of the ceasefire between the US and Iran,” the trader said.

Oil prices were marginally lower on expectations that peace talks between the US and Iran will take place this week and allow more supply to flow from the key Middle East producing region.

Brent crude rose 5.6% on Monday after Iran again shut the Strait of Hormuz, a key oil transport artery, and the US seized an Iranian cargo ship as part of its blockade of the country’s ports.

Still, investors are focusing on the likelihood that talks this week will result in the extension of the existing ceasefire or a final agreement.

Higher oil prices are detrimental to India, which relies heavily on imports to meet its energy needs.

Crude oil imports constitute around one-fourth of India’s total imports, making the country vulnerable to global oil price shocks.