Indian government bonds experienced a decline early Friday as the market prepared for a substantial debt sale, while elevated oil prices continued to heighten inflation concerns. This comes despite U.S. President Donald Trump indicating that the conflict in Iran may soon come to an end.
As of 11:45 a.m. IST, the yield on India’s benchmark 6.48 percent 2035 bond stood at 6.9056 percent, slightly up from Thursday’s closing of 6.8884 percent. It is important to note that bond yields move inversely to their prices.
The Indian government plans to auction 320 billion rupees (approximately $3.44 billion) of 5-year and 40-year notes later in the day. A trader at a private bank noted, “Demand and risk appetite in the weekly auction will decide the direction of yields.”
In other developments, President Trump expressed optimism that a resolution could be reached to conclude the ongoing conflict, following a 10-day truce that took effect between Lebanon and Israel. However, benchmark Brent crude futures remained near $100 a barrel as the Strait of Hormuz continues to be blocked, impacting roughly one-fifth of the global oil supply.
The rising oil prices pose risks to inflation and growth in India, which is heavily reliant on imports. Concurrently, increasing U.S. Treasury yields are also exerting pressure on Indian bonds. The yield on the U.S. 10-year bond rose for a third consecutive day to 4.3193 percent during Asian trading hours.
In a related note, India’s central bank has reportedly urged state-run oil refiners to limit spot dollar purchases and utilize a special credit line for their foreign exchange requirements, according to Reuters.
The Indian rupee appreciated by 0.6 percent to 92.66 per U.S. dollar, as a stronger currency can bolster Indian bonds by helping alleviate inflationary pressures, thereby reducing the central bank’s incentive to maintain high interest rates and enhancing the attractiveness of debt to foreign investors.
In terms of rates, India’s overnight index swap rates surged, particularly with a paying bias following the rise in both U.S. and domestic yields. The one-year OIS rate remained stable at 5.80 percent on Thursday, while the two-year swap rate was recorded at 6.02 percent. Additionally, the liquid five-year rate increased by 5 basis points to 6.42 percent.
(Exchange rate: $1 = 92.9860 Indian rupees)
Published on April 17, 2026.
