India bonds may firm at open as Trump’s comments push oil lower

MUMBAI: Indian government bonds are likely to rally in early deals on Tuesday, as a sharp pullback in crude oil prices from a more than three-year high eased investor concerns, after US President Donald Trump said the Middle East war could be over soon.

The benchmark 6.48% 2035 bond yield will likely hover between 6.67% and 6.72%, a private bank trader said.

The yield had ended at 6.7184% on Monday, after reaching a high of 6.7750% earlier in the day.

Bond yields move inversely to prices.

“The situation is shifting rapidly by the day, supporting bond prices for now, but traders should remain cautious as the risk of another spike in oil prices is still very much on the cards,” the trader said.

Oil prices plunged on Tuesday after hitting their highest since mid-2022 in the previous session, as Trump predicted the war could end soon, easing concerns about prolonged disruptions to global oil supplies.

The benchmark Brent crude contract was down more than 10% at $88.40 per barrel, after hitting a high of $119.50 per barrel on Monday.

Oil prices also retreated after Russian President Vladimir Putin held a call with Trump and shared proposals aimed at a quick settlement to the Iran war.

India is the third-largest importer of crude, and a spike in oil prices is detrimental for domestic inflation.

Help from the Reserve Bank of India will also be supportive of bond bulls, as the central bank is set to buy papers worth 500 billion rupees on Friday, after completing a similar operation on Monday.

However, gains may be capped as Indian states are scheduled to raise nearly 460 billion rupees ($5.01 billion) through bond sales.