Indian bonds slump to more than 3-week low as selloff continues after index snub

MUMBAI: Indian government bonds slid on Wednesday, with the benchmark 10-year falling to the lowest in more than three weeks, on lingering disappointment over Indian debt not being added to Bloomberg’s Global Aggregate Index.

The benchmark 10-year bond yield ended at 6.6498%, the highest since December 22, versus Tuesday’s close of 6.6277%. Bond yields move inversely to prices.

The 10-year yield has risen 4.5 bps since Bloomberg Index Services deferred adding Indian bonds to its flagship Global Aggregate Index on Tuesday.

The index provider will issue another update by mid-year 2026, it said in a statement.

Most market participants sold bonds after the announcement, except the “others” category of investors, which includes the Reserve Bank of India, corporates and insurers.

Investors from this category have net bought bonds worth 124 billion rupees ($1.4 billion) in the last three sessions.

Traders said this indicates the central bank may be buying actively in the secondary market after the redemption of a security on Friday.

“In the absence of the inclusion, the 10-year yield may gravitate towards the 6.65%-6.70% band, which becomes a good range to buy,” said Alok Sharma, head of treasury at ICBC, Mumbai.

“The only threat to buying in this range is if the Middle East tensions blow out of proportions.”

Traders are closely watching developments in the Middle East as oil prices continued to rise, with the benchmark Brent crude contract touching a more than two-month peak on Tuesday.

RATES

India’s overnight index swap rates rose as sentiment remained sour.

The one-year OIS ended steady at 5.5050%. The two-year swap rates rose 1.25 bps to end at 5.5975% and the five-year OIS rate closed up 2.5 bps at 5.9850%.