Foreign deposit flows to buoy India bonds; war worry may overshadow

MUMBAI: Indian government bonds are poised to open firmer on Tuesday, buoyed by data showing higher-than-expected inflows from the central bank’s overseas deposit push, though caution over the US-Iran war may cap gains.

The benchmark 6.94% 2036 bond yield is seen trading in a 6.76%-6.79% range, a trader at a private sector bank said, after ending Monday at 6.7770%.

Central bank data released on Monday showed the country attracted about $17.4 billion through the Reserve Bank of India’s special deposit programme, higher than the roughly $10 billion reported earlier by Reuters.

The RBI had announced a zero-cost foreign-exchange swap facility at its June 5 policy meeting for deposits raised from non-resident Indians, along with measures to encourage overseas borrowing by state-run companies.

In total the measures have mobilised $20.7 billion, the data showed.

“The FCNR numbers were better than initially expected, raising expectations of further inflows and higher liquidity, and may support bonds at the open,” a trader at a primary dealership said.

“We could see some profit booking later in the day, and traders will watch whether oil reacts to the latest Gulf developments.”

Yemen’s Iran-aligned Houthis said on Monday they would impose a naval blockade on Saudi Arabia, potentially opening a new front against the United States in its war with Iran and raising risks to global energy supplies and trade.

Brent crude was last rangebound at $88.65 per barrel. Separately, traders await an update on possible Indian bond inclusion in the Global Aggregate Index, after the index provider indicated one could come by mid-2026.

Foreign investors have bought $4.30 billion of bonds since June 1, driven by New

 Delhi’s tax breaks and index-inclusion expectations.