Indian bonds are anticipated to continue their upward trajectory in early trading on Tuesday, primarily due to Brent crude remaining below $100 per barrel and a dip in Treasury yields. However, the increasing tensions between the U.S. and Iran pose a risk to demand, which could impact market sentiment.
The benchmark 6.48% bond maturing in 2035 is expected to trade within the 7.00% to 7.06% range today, according to a trader at a private bank. The bond yield had closed at 7.0270% on Monday.
Bond prices typically move inversely to yields. An analyst noted, “There could be some early gains as bulls will try to push yields further down, but we may see some selling pressure emerging, as oil has seen an uptick after news of fresh attacks.”
Oil prices have risen, with Brent crude increasing over 2% during Asian trading hours following U.S. military strikes in southern Iran that were described as defensive actions. These developments have heightened market anxiety as negotiations for a peace deal remain unresolved.
This situation follows comments from U.S. President Donald Trump, who stated over the weekend that a memorandum of understanding regarding a peace agreement had largely been negotiated, which would lead to the reopening of the Strait of Hormuz.
Experts have warned that, even if a deal is finalized, it is unlikely that energy flows will recover quickly, and normalizing shipping operations could take months.
Rising oil prices have implications for India’s inflation rates, its current account deficit, and the government’s fiscal strategy, which in turn exerts pressure on the central bank to consider interest rate increases.
In terms of rates, India’s overnight index swap rates, which are more sensitive to interest rate expectations, are expected to trend upward following a significant decline on Monday. The one-year swap rate concluded at 6.15%, the two-year rate at 6.35%, and the five-year rate settled at 6.67%.
Published on May 26, 2026.
