India bonds set for weak start on fading US-Iran peace hopes

MUMBAI: Indian government bonds may begin the week on a weaker footing after hopes of a diplomatic breakthrough between the United States and Iran faded following Washington’s abrupt cancellation ofplanned talks.

India’s benchmark 6.48% 2035 bond yield is expected to drift in a 6.92%-6.97% range, a private-bank trader said.

It ended Friday at 6.9365%.

Bond yields move inversely to prices.

“Till the time we do not see any firm resolution in the US-Iran war issue, oil will continues to remain under selling pressure, thus increasing volatility in bonds,” the trader said.

Oil pricesrose in Asian trading on Monday after US President Donald Trump said on Sunday Iran could telephone if it wants to negotiate an end to the war, while stressing Tehran can never have nuclear weapons.

Hopes of reviving peace talks receded over the weekend after Trump scrapped a scheduled visit to Islamabad by his envoys Steve Witkoff and Jared Kushner.

Iranian Foreign Minister Abbas Araqchi travelled between mediators Pakistan and Oman on Sunday. Tehran has largely shut the Strait of Hormuz, which handles nearly a fifth of the world’s oil supplies, while Washington has imposed a blockade of Iran’s ports.

Brent crude prices have risen nearly 50% since the US-Iran war began eight weeks ago on February 28.

Elevated oil prices pose a risk for India, which imports nearly 90% of its crude requirements, as they could inflate the country’s import bill and impact inflation and fiscal deficit.

Meanwhile, major central banks, including the Bank of Japan, Bank of England, European Central Bank and the Federal Reserve, are due to announce policy decisions this week.