Indian government bonds rose on Wednesday as a decline in crude prices on expectations of a U.S.-Iran peace deal lifted investor sentiment and eased domestic inflation concerns.
The benchmark 6.48% 2035 bond yield was at 6.9821% as of 10:30 a.m. IST, after closing at 7.0184% on Tuesday. Bond yields move inversely to prices.
"The fall in crude has eased some pressure in the bond market, especially as investors are hopeful that U.S.-Iran tensions could cool, though they remain cautious until there is more clarity on a deal," a trader with a primary dealership said.
Oil prices eased on Tuesday and extended declines in Asian hours on Wednesday on expectations that supply from the Middle East could resume soon.
On Tuesday, U.S. President Donald Trump unexpectedly said he would briefly pause an operation to help escort ships through the Strait of Hormuz, citing progress toward a comprehensive agreement with Iran, without giving details.
Despite a ceasefire, the strait, which typically carries about one-fifth of the world's oil and natural gas supply, has been largely shut since the war began on February 28.
Benchmark Brent crude has eased more than 5% since Monday's close, and was hovering around $108 per barrel in Asian hours.
Elevated energy prices are detrimental for India - the world's third-largest oil importer - as they could stoke inflation and widen the fiscal deficit.
Meanwhile, traders await a crucial debt sale on Friday, when New Delhi plans to raise 340 billion rupees ($3.58 billion)through the sale of a new 10-year paper, which would replace the existing benchmark in coming weeks.
The market anticipates the cutoff yield to be around 2 bps lower than the current benchmark.
RATES
India's overnight index swap (OIS) rates plunged, as traders unwound heavy paid positions built over the last few days.
The one-year OIS rate was at 5.98%, while the two-year swap rate was at 6.21%. The five-year rate was at 6.61%.
Published on May 6, 2026