Indian bonds are trading higher as tensions between the US and Iran ease, but major debt sales are looming

Indian government bonds edged higher on Monday as geopolitical tensions eased ahead of a third round of US-Iran nuclear talks, although the large debt supply this week capped gains.The 6.48% bond yield for 2035 stood at 6.6970%, down from 6.7215% on Friday, and was up for two days. Bond yields move in the opposite direction to prices.

Geopolitical concerns weighed on sentiment last week after US President Donald Trump released a new report
warnings

urging Iran to reach a nuclear deal, with a deadline of ten to fifteen days. The standoff sent Brent crude futures to a roughly six-month high.

Higher crude oil prices pose a major risk for net energy importer India.

Indian traders lowered their risk on Friday ahead of the weekend for fear of an escalation. No further escalation in the Middle East over the weekend led to any short covering, a trader at a private bank said.Iran noted that it was willing to make concessions in the talks

with the US in exchange for sanctions relief and recognition of its right to enrich uranium helped allay concerns about potential conflict. Brent fell about 1% on Monday to last at $71.28.

As risk sentiment improved, buying emerged at key technical levels. “There were buyers near 6.72-6.73% level over the last decade,” said Alok Sharma, head of finance at ICBC, Mumbai.

Attention now turns to the offer. 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 bond on Friday.

PRICES

Indian overnight index swap (OIS) yields fell as geopolitical concerns eased, with traders looking for steeper positions between the short and long sides.

The one-year OIS interest rate fell by 3 basis points to 5.49%. The two-year rate fell 4 basis points to 5.6050%, and the five-year rate fell 5.5 basis points to 6.0375%.

($1 = 90.7475 Indian Rupees)