Indian bonds tick higher as US-Iran jitters ease, but hefty debt sales loom

Indian government bonds edged higher on Monday as geopolitical jitters ebbed ahead of a third round of U.S.-Iran nuclear talks, though heavy debt supply due this week capped gains.

The benchmark 6.48% 2035 bond yield settled at 6.6970%, down from 6.7215% on Friday, snapping a two-day ‌rise. Bond ⁠yields move ⁠inversely to prices.

Geopolitical worries had weighed on sentiment last week after U.S. President ​Donald Trump issued fresh


warnings

, urging Iran to strike a nuclear deal, setting ​a 10-15-day deadline. The standoff sent Brent crude futures to about six-month highs.

Higher crude prices are a key risk for net energy-importer India.

Indian traders ​cut risk on Friday ahead of ⁠the weekend on ‌fears of an escalation.

"No further escalation in the ​Middle East ​over the weekend led to some short covering," a ⁠private bank trader said.

Iran's comments that it was ​prepared to make concessions in talks

with the U.S. in exchange ​for sanctions relief and recognition of its right to enrich uranium helped ease concerns over potential conflict. Brent fell about 1% on Monday and was last at $71.28.

With the risk mood improving, some buying emerged at key technical levels. "There were buyers near 6.72-6.73% levels on the ‌10-year," said Alok Sharma, head of treasury at ICBC, Mumbai.

Attention now turns to supply. Indian states will raise 445.5 ​billion rupees ($4.91 ​billion) in their ⁠biggest weekly debt sale on Tuesday, while New Delhi will auction the benchmark 10-year note on Friday.

RATES

India's overnight index swap (OIS) rates eased as geopolitical concerns ​receded, with traders eyeing steepener positions between the short and long ends.

The one-year OIS rate fell 3 bps to 5.49%. The two-year was down 4 bps at 5.6050%, and the five-year fell 5.5 bps to 6.0375%.

($1 = 90.7475 Indian rupees)