India bonds stuck in narrow range, all eyes on US-Iran details

MUMBAI: Indian government bonds struggled for a firm direction on Tuesday, after a bout of consolidation following the recent rally, on concerns about the lack of details in the preliminary Iran-US peace deal and incoming debt supply from Indian states.

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.