India’s benchmark 6.48% 2035 bond yield was at 6.9534% as of 10:00 a.m. IST, after ending at 6.9365% on Friday. Bond yields move inversely to prices.
“The spike in oil reflects supply anxiety more than fundamentals right now. As long as tensions remain high, import-sensitive markets like India will stay vulnerable,” a trader with a primary dealership said.
Indian government bonds experienced a dip early Monday as hopes for a US-Iran diplomatic breakthrough faded. This geopolitical uncertainty, coupled with rising oil prices due to supply anxieties, is impacting import-sensitive markets like India. Investors are also closely watching global monetary policy decisions this week, while domestic swap rates remained steady.
Oil prices rose in Asian trade on Monday after U.S. President Donald Trump said Iran could still reach out if it wanted to negotiate an end to the conflict, while reiterating that Tehran would never be allowed to possess nuclear weapons.
Any optimism around renewed peace efforts weakened after Trump scrapped a planned Islamabad visit by his envoys at the last minute.
Iranian Foreign Minister Abbas Araqchi, meanwhile, travelled between Pakistan and Oman on Sunday as diplomatic efforts continued via intermediaries.
Iran has effectively shut the Strait of Hormuz – a critical chokepoint for nearly a fifth of global oil supply – while Washington has tightened pressure by blockading Iranian ports. The sharp rise in oil prices is a particular concern for India, which imports nearly 90% of its crude needs, as higher energy costs could inflate the import bill and add pressure to inflation and fiscal deficit.
Investors are also tracking a busy week for global monetary policy, with interest rate decisions due from the Bank of Japan, Bank of England, European Central Bank and the U.S. Federal Reserve.
RATES
India’s overnight index swap rates were mostly steady in thin early trade as traders awaited strong cues on interest rates.
The one-year OIS rate stood at 5.88%, while the two-year swap rate was at 6.11%. The liquid five-year OIS rate was at 6.49%.
Swap rates rose 7-9 bps last week.
