Indian government bonds gained in early trade on Thursday, shrugging off a jump in US Treasury yields, supported by easing oil prices and growing foreign appetite in anticipation of their potential inclusion in a Bloomberg bond index.
The benchmark 6.94 per cent 2036 bond yield traded at 6.7207 per cent by 11:15 a.m. IST, down from its 6.7563 per cent close on Wednesday. Bond yields move inversely to prices.
Foreign investors have net bought ₹32,400 crore ($3.40 billion) of bonds since June, driven by tax relief measures, a steadier rupee and hopes of India’s inclusion in Bloomberg’s Global Aggregate Index.
Analysts at Goldman Sachs see foreign flows to Indian government bonds rising by $10 billion in 2026, according to a Wednesday note.
Market participants expect Bloomberg Index Services to announce its decision this month.
Sustained demand from foreign investors helped Indian bonds withstand pressure from a selloff in US Treasuries before key jobs data, traders said.
The US 10-year yield was up 1.5 bps at 4.49 per cent in Asian trade, after gaining over 5 bps in the previous session.
Brent crude hovered near $70 per barrel in Asian trade after the US and Iran concluded a round of peace talks in Doha, easing inflation concerns for oil importing India.
Central Bank Governor Sanjay Malhotra said at an event in Russia on Wednesday that India is unlikely to raise its official inflation target and that there may be a case for lowering it over the long term.
Separately, New Delhi is set to sell ₹34,000 crore of the 10-year note on Friday.
“Underlying demand is strong, but traders could look to book profits before the large supply of the 10-year note,” a private-bank trader said.
RATES
India’s overnight index swap rates eased on an improving inflation outlook and foreign demand.
The one-year rate fell 1.5 bps to 5.7725 per cent, while the two-year swap dropped 1.75 bps to 5.91 per cent. The five-year rate pared 1.5 bps to 6.19 per cent.