Indian government bonds are
expected to start the week on a cautious note, as a mild
optimism after a lower-than-scheduled quantum for state debt was
overpowered by global geopolitical tensions as well as a
deepening feud between the U.S. Federal Reserve and President
Donald Trump.
The benchmark 10-year 6.48% 2035 bond yield
is likely to be in the range of 6.63% to 6.67%, a trader with a
private bank said. It ended at 6.6401% on Friday.
Bond yields move inversely to prices.
“The recent developments globally have triggered a fresh
bout of jitters among bond market participants, and have dashed
hopes of even a mild rally,” the trader said.
The Trump administration has threatened to indict Fed Chair
Jerome Powell over Congressional testimony he gave last summer
about a Fed building project, an action Powell called a
“pretext” to gain more influence over the central bank and
monetary policy.
Oil prices rose due to worsening tensions in the Middle East
as investors eyed potential supply disruptions from OPEC
producer Iran amid intensifying protests.
The unrest in Iran has killed more than 500 people, a rights
group said on Sunday, as Tehran threatened to target U.S.
military bases if Trump carries out his renewed threats to
intervene on behalf of protesters.
Back home, Indian states will raise 268.15 billion rupees
($2.97 billion) via a debt sale on Tuesday, lower than the
scheduled 362 billion rupees, providing some short-lived relief.
Investors have been concerned about the appetite to absorb
the record amount of debt sales in the last quarter of fiscal
2026, as the centre and states are set to raise a record 8
trillion rupees through bond sales.
RATES
India’s overnight index swap rates may see marginal paying
pressure amid escalating global worries.
The one-year OIS ended at 5.49% on Friday,
while the two-year OIS rate ended at 5.5850%. The liquid
five-year OIS rate rose 3 bps to end at
5.5975%
KEY INDICATORS:
** Benchmark Brent crude futures was down 0.2% at
$62.40 per barrel after rising 2.2% on Friday
** Two-year U.S. Treasury yield was at 3.5383%,
10-year U.S. Treasury yield at 4.1673%
** RBI to buy bonds worth 500 billion rupees