India Bonds: Indian bond yields up on worries over oil prices; debt supply awaited

Jana Small Finance Bank

19/06/2025 12:39

By Dharamraj Dhutia

MUMBAI, June 19 (Reuters) -
Indian government bond yields jumped on Thursday as rising oil prices due to escalating geopolitical tensions weighed on sentiment, while traders trimmed positions ahead of Friday’s debt auction.

The yield on the benchmark 10-year bond IN063335G=CC ended at 6.3095%, compared with the previous close of 6.2615%. The five-year 6.75% 2029 bond IN067529G=CC yield ended at 6.0236% after ending at 5.9434% the previous day.

New Delhi will sell bonds worth 270 billion rupees ($3.11 billion) on Friday, which includes 150 billion rupees of the liquid five-year bond. The yield on this note is up nearly 18 basis points in last two weeks.

"Movement in oil prices will decide the trajectory of financial markets in near term, while demand for tomorrow's auction will also be crucial," said Gopal Tripathi, head of treasury and capital markets at Jana Small Finance Bank.

The benchmark Brent crude contract was hovering around $77 per barrel, and has gained over 10% in the last five sessions on worries that the Iran-Israel conflict could disrupt supplies.

India imports a bulk of its crude oil needs and higher prices could impact the nation's inflation outlook.

Earlier this month, the Reserve Bank of India reduced its inflation forecast for the current year to 3.7%, while cutting its key lending rate by a steeper-than-expected 50 basis points.

It, however, reverted to a "neutral" stance from "accommodative", prompting analysts to forecast the end of the easing cycle.

The minutes of this meeting are due after market hours on Friday, and will provide clarity on the central bank's thinking on interest rate trajectory.

RATES

Indian overnight index swap (OIS) rates witnessed witnessing paying pressure across the curve tracking upward pressure on bond yields.

The one-year INR1YMIBROIS=CC OIS rate ended at 5.525%, while the two-year OIS rate INR2YMIBROIS=CC ended at 5.53% and the liquid five-year INR5YMIBROIS=CC OIS rate rose nearly 7 bps to 5.75%

($1 = 86.7300 Indian rupees)

 (Reporting by Dharamraj Dhutia)

 ((Dharamraj.dhutia@tr.com))