India bonds stall along with US-Iran talks

NEW DELHI: Indian government bonds closed little changed after coming under pressure during the trading session on Monday after U.S. President Donald Trump cancelled a visit by his envoys to Islamabad for peace talks, sending crude oil prices higher and dimming hopes of a diplomatic breakthrough.

India’s benchmark 6.48% 2035 bond yield settled at 6.9418%, compared with its close at 6.9365% on Friday. Bond yields move inversely to prices.

Work has not halted to bridge gaps between the United States and Iran, according to sources in Pakistan, which is acting as a mediator, despite the failure of face-to-face diplomacy.

Brent Crude was up a sixth day to $107 a barrel, a persistent concern for India, which imports nearly 90% of its crude needs.

“On the government securities front, we are being driven largely by geopolitics. Traders are taking risk-on, risk-off bets, preferring not to buy unless there is strong evidence to support buying,” said Sandeep Yadav, fixed income head at DSP Mutual Fund, which sees value in the short-end of the government bond yield curve.

Large US-based fund manager stays bullish on India debt, says rate-hike fears overblown

A host of central bank policy decisions and commentary will also be in focus this week. The U.S. Federal Reserve is expected to keep rates unchanged on Wednesday, with rate holds expected from the Bank of Japan, Bank of England and European Central Bank as well.

The Indian rupee held steady at 94.19 per dollar while local stocks advanced on positive domestic cues.

Rates

India’s overnight index swap rates eased around one basis point each on Monday, tracking a dip in U.S. Treasury yields before the Fed’s rate decision.

The one-year OIS rate stood at 5.8775%, while the two-year swap rate was at 6.12%. The liquid five-year OIS rate was at 6.49%.