Indian bonds rise ahead of RBI debt purchase; steady oil aids

Indian government bonds ended higher on Wednesday before a note purchase by the central bank later this week, while Brent crude stabilising around the $90 per barrel helped market sentiment.

Bonds had fallen sharply earlier this week as the Iran war pushed crude near ‌the $120-per-barrel mark, ⁠worsening ⁠the inflation outlook for India, the world's third-largest oil importer.

However, crude has come off since then on hopes of a de-escalation in the Middle East conflict. The International Energy Agency is also said to recommend the release of 400 million barrels of oil, the largest such move in IEA history.


The U.S. and Israel continue exchanging air ⁠strikes with Iran ‌across the Middle East.

Bond market participants say that purchases by the Reserve Bank of India have been a ⁠crucial support are betting that the central bank may include the benchmark bond in a scheduled 500 billion rupee ($5.44 billion) open-market purchase on Friday.

The benchmark 6% 2035 bond yield closed at 6.63% versus 6.67% in the previous session. Bond prices move inversely to yields.

"I would expect the RBI to remain an active presence in the bond market through the rest ‌of this financial year," said Nikhil Aggarwal, founder and group CEO of Grip Invest.

Traders await India's inflation data for February, due on Thursday, with ⁠a Reuters poll pegging the print at 3.10%.

RATES

India's overnight index swap rates reversed course in the second half of the session to ended higher. Economists say that swaps are overestimating the expected policy rate hikes.

The one-year OIS ended at 5.7375%, while the two-year rate ended at 5.9325%.

The liquid five-year rate rose 7 basis points to close at 6.3450%.

($1 = 91.8730 Indian rupees)