Indian government bonds are expected to extend losses on Tuesday after elevated oil prices and rising US Treasury yields triggered the sharpest selloff since October 2023 in the previous session, while the focus is on a mega state debt sale.
The benchmark 6.48% 2035 bond yield will likely hover between 6.81% and 6.87%, a private bank trader said, after ending at 6.8379% on Monday. Bond yields move inversely to prices.
“Bond markets should be tricky today as the US is showing a keen interest in resolving the Middle East war, raising hopes that the situation will return to normal in a few days, but oil still remains above $100 per barrel,” the trader said.
The benchmark Brent crude contract was off highs on Tuesday, but hovered near $103 per barrel as Iran denied that it held talks with the United States to end the war in the Gulf, contradicting President Trump, who said a deal could be reached soon.
The 10-year Treasury yield was also off highs but stayed close to 4.40%, after breaking that level for the first time in nearly eight months on Monday.
The war is in its fourth week with no end in sight about an end, keeping oil prices up amid supply disruptions.
Higher oil prices are negative for India, the world’s third-largest crude importer, as they threaten to worsen domestic inflation and the current account deficit.
Meanwhile, Indian states will aim to raise 574 billion rupees ($6.14 billion) through bond sales on Tuesday, nearly 100 billion rupees more than scheduled and the highest quantum for this financial year.
If successful, it would push state debt issuance to a record for the current quarter and fiscal year.
RATES India’s overnight index swap (OIS) rates are expected to move with a paying bias, tracking global developments.
The one-year OIS rate ended at 5.97%, while the two-year OIS rate closed at 6.17%. The five-year swap rate settled at 6.52%. ($1 = 93.5150 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sonia Cheema)
Published on March 24, 2026