India bonds on edge with focus on US-Iran talks

Indian government bonds held steady in early deals on Tuesday, but traders retained a bullish bias as marginally lower oil prices offered support, while focus stayed on the U.S.-Iran peace talks.

India's benchmark 6.48% 2035 bond ‌yield was at ⁠6.8842%, as ⁠of 10:05 a.m. IST. It settled at 6.8901% on Monday. Bond yields move inversely to prices.

"Lower oil prices are lending support to government bonds and keeping sentiment constructive, though traders remain wary that any reversal in crude could cloud the outlook," a trader with a primary dealership said.


Oil ⁠prices were ‌marginally lower on expectations that peace talks between the U.S. and Iran will take place ⁠this week and allow more supply to flow from the key Middle East producing region.

Investors are focusing on the likelihood that talks will result in the extension of the existing ceasefire or a final agreement.

Higher oil prices are detrimental to India, which relies heavily on imports to meet its energy needs. Crude oil ‌imports constitute around one-fourth of India's total imports, making the country vulnerable to global oil price shocks.

Meanwhile, Indian states are set ⁠to raise 169 billion rupees ($1.81 billion) through the sale of bonds maturing in seven to 30 years, later in the day.

RATES

India's overnight index swap rates inched lower, but volumes remained shallow.

The one-year OIS rate was at 5.77%, while the two-year swap rate was at 5.97%. The liquid five-year traded at 6.35%.

($1 = 93.3000 Indian rupees)