Indian government bonds are likely to surrender some of the gains triggered by a plunge in
oil prices in the previous session amid doubts the two-week
U.S.-Iran ceasefire will hold and as the crucial Strait of
Hormuz remains restricted.
The benchmark 6.48% 2035 bond yield will
likely trade in the 6.90%-6.95% range on Thursday, a private
bank trader said, after ending at 6.8984% on Wednesday – its
biggest single-session decline in almost four years.
“Though we have seen the ceasefire, the actual
implementation and full resolution remains a major factor and
with no clarity on restoration of oil supply, investors are
still not fully confident,” the trader said.
The strait connects supply from the key Middle East
producing region, including Iraq, Saudi Arabia, Kuwait and
Qatar, to global markets and typically carries about 20% of oil
supply.
The benchmark Brent crude contract hovered at around $97 per
barrel after hitting a low of $90 on Wednesday. India, which
imports nearly 90% of its oil, is among the most vulnerable to a
prolonged supply disruption.
Back home, the Reserve Bank of India kept its policy rate
and stance unchanged, while flagging lower growth and higher
inflation due to the Middle East crisis.
HSBC expects the RBI to keep rates unchanged in 2026,
activating the flexible inflation targeting band of 2%-6%, even
if inflation comes in higher than the central bank’s 4% target.
“We think that if the energy shock lingers, it could weigh
more on growth than on inflation, looking more like the pandemic
than the 2022 oil price shock,” the foreign bank added.
RATES
India’s overnight index swap rates may rise, tracking bond
yields and after aggressive receiving in the previous session.
The one-year OIS rate plunged 30 basis
points to 5.85%, while the two-year plummeted
36 bps to 6.00%. The most liquid five-year
dropped 35 bps to end at 6.31%.
(Reporting by Dharamraj Dhutia; Editing by Sonia Cheema)
Published on April 9, 2026