Indian government bonds slipped on Tuesday as rising crude prices and higher-than-expected cut-off yields at a state debt auction undercut positive sentiment from strong inflows drawn by the Reserve Bank of India's overseas deposit scheme.U.S. forces bombed targets in southern Iran after President Donald Trump said Tehran would pay dearly for the deaths of American soldiers. Iran struck U.S. sites in Bahrain, Kuwait and Jordan, while a tanker was hit in the Strait of Hormuz. The attacks came a day after Yemen's Iran-aligned Houthis said they would impose a naval blockade on Saudi Arabia.Brent crude rose 1% to $90.16 a barrel, pressuring Indian assets as higher oil prices threaten to stoke inflation and widen the import bill for the world's third-largest oil importer.ICICI Bank eyes $500 million dollar bond issue via GIFT CityICICI Bank is close to raising at least $500 million through five-year dollar bonds via its GIFT City unit, leveraging the RBI’s concessional swap facility. The proceeds will support client financing, marking the lender’s first US dollar bond issuance in nearly a decade.India's benchmark 6.94% 2036 bond yield settled nearly 2 bps higher at 6.7938%. Bond yields move inversely to prices."As long as crude oil prices are elevated 10-year yield will remain in the 6.7% to 6.9% range," said Gaura Sen Gupta, chief economist at IDFC First Bank.Cut-off yields at the weekly state debt auction were sharply above market expectations, with some states accepting only partial amounts.The yield curve also steepened as liquidity from FCNR flows supported the short end, while oil risks weighed on bonds with longer maturities.In its first update since the scheme was launched in early June, the RBI said the measures it announced in June had mobilised $20.72 billion through July 17.The strong response is adding to confidence that India's balance of payments will remain in surplus this fiscal year, even as volatile crude prices pose risks, economists said.RATESOvernight index swaps ended higher in a choppy session.The one-year swap ended 1.75 bps higher at 5.9675%, while the two-year rose 2.5 bps to 6.1375% and the five-year jumped 3.5 bps to 6.44%.
India bonds fall as Middle East escalation drives oil above $90
On Tuesday, Indian government bonds experienced a downturn, attributed to escalating crude oil prices. The pressure was further compounded by higher cut-off yields observed during a state debt auction. Although robust inflows from the Reserve Bank of India's deposit scheme offered some stability, the potential for rising inflation and an increased import bill due to elevated oil prices remains a concern.
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