Indian government bonds
clawed back losses on Tuesday, as oil eased sharply after U.S.
President Donald Trump hinted that the Iran war could “end
soon”, although renewed threats in the Middle East and looming
state debt supply kept traders cautious.
The benchmark Brent crude contract slipped more than 10% to
$88.40 per barrel, after hitting a high of $119.50 per barrel in
the previous session. It was last at $93.05.
The benchmark 6.48% 2035 bond yield hovered
around 6.6766% at 11:28 a.m. IST, compared with Monday’s close
of 6.7184%. Yields move inversely to bond prices.
It hit a high of 6.77% in the last session before easing
slightly in late trade, after the Reserve Bank of India
conducted a 500 billion-rupee ($5.43 billion) open market
operation, including liquid notes.
The RBI will buy a similar amount on Friday.
Tensions simmered in the Middle East on the day after Iran’s
Revolutionary Guards said they would not allow “one litre of
oil” to be shipped from the region if the U.S.-Israeli attacks
continued, prompting Trump to warn the U.S. would hit Iran much
harder if it attempted to it blocked exports.
At home, traders stayed on the sidelines ahead of a large
state debt supply.
Indian states will raise nearly ₹46,000 crore through
bond sales later in the day, with demand likely to be tepid in a
cautious market, traders said.
“This is still a highly volatile backdrop… It’s better to
keep positions light until there’s more clarity on where the
Middle East conflict is headed,” a private-bank trader said.
The Indian rupee also recovered, supported by a
drop in oil prices, with sentiment aided by expectations that
the RBI’s backstop for the rupee could offset some of the
liquidity injected through its debt purchases, traders said.
RATES
India’s overnight index swap (OIS) are poised to snap a
five-day paying streak, as traders grabbed the opportunity to
receive after oil prices eased.
The one-year OIS, two-year rate
and the five-year rate were
each down about 9 bps at 5.75%, 6.9350% and 6.3025%
respectively.