Indian bonds draw buyers on RBI measures, softer oil

Indian government bonds drew fresh buying on Tuesday as lower oil prices and the Reserve Bank of India's measures to attract dollar inflows boosted sentiment and eased pressure on the rupee.

The benchmark 6.48% 2035 bond yield fell 3 basis points to 6.9265% by 11:15 a.m. IST. The 10-year ‌yield has declined ⁠7 basis ⁠points since the Reserve Bank of India's policy decision on Friday.

The RBI held rates steady and kept its neutral stance on Friday, choosing to defend a slumping rupee with fresh measures to lure foreign debt inflows rather than a policy hike.


The measures include offering concessional swaps through September 30 to offset hedging costs on state-run firms' overseas borrowing and three- to ⁠five-year FCNR ‌deposits, which banks are now allowed to leverage for clients.

Punjab National Bank expects the banking sector to raise $35 billion to $40 billion ⁠via foreign currency deposits under the scheme, a top executive told Reuters.

Government and RBI measures could bring in $70-$75 billion in inflows by the end of the second quarter of fiscal 2027, Emkay Global Financial Services wrote in a note, while HSBC said it now expects RBI measures to improve India's external balance by about $30 billion in FY27, compared with its earlier forecast of a deficit widening to about $65 ‌billion.

India posted an unexpected current account and balance of payments surplus in the January-March quarter, helped by strong services exports, higher remittances and RBI forex swaps.

Foreign ⁠investors have bought a net $800 million of Indian government bonds over the past two days.

Oil prices eased after Iran and Israel said on Monday they had halted attacks on each other after an appeal from U.S. President Donald Trump.

RATES

India's overnight index swap rates ease as lower oil boosts sentiment.

The one-year swap was at 6.01%, down 3.5 bps, while the two-year rate dropped 6.25 bps to 6.19%. The five-year rate fell 7.5 bps to 6.4650%.