India bonds jump on Mideast peace proposal, 10-year yield slides most in 15 weeks

Indian bonds surged ​on Monday, with the 10-year ​yield falling the most in nearly 15 weeks, on ​hopes of an end to the Middle East war after the U.S. and Iran received the framework for a plan to end their five-week-old conflict.

U.S. President Donald ‌Trump had ⁠earlier threatened ⁠to unleash "hell" on Tehran unless it agrees by the end of Tuesday to a ​deal that would allow traffic to resume through the critical energy chokepoint. Iran ​has ruled out any immediate reopening of the Strait of Hormuz.

India's benchmark 6.48% 2035 bond yield eased about 9 basis points to 7.0458%, ​its biggest single-day drop since December 24.


The yield ⁠fell for ‌the first time after advancing for the previous 12 ​sessions. Bond ​yields move inversely to prices.

The market also cheered ⁠likely purchases by the Reserve Bank of India last week and a slimmer-than-expected state borrowing calendar.

Clearing house data ​showed a cohort of investors that includes the RBI and other long-term investors net bought 96 billion rupees ($1.03 billion) of bonds on Thursday.

States said they will sell about 2.54 trillion rupees of bonds in April-June, below market expectations of 3 trillion rupees.

Separately, traders pulled ‌overnight index swaps lower before the RBI policy decision on April 8.

"I am not expecting any changes in ​policy rates or ​stance," said Alok Singh, ⁠head of treasury at CSB Bank, adding that the RBI may raise its inflation forecast, while lowering its growth projections.

RATES

The one-year OIS rate fell ​19.25 bps to 6.18%, while the most liquid five-year rate eased 14.5 bps to 6.6950%, both logging their biggest declines in three years.

The two-year rate fell 14 bps to 6.64%, falling the most in more than 16 months.

($1 = 92.8950 Indian rupees)