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Indian government bonds came under heavy selling pressure early on Thursday after minutes of the central bank’s latest policy meeting signalled it could raise rates if inflation risks materialise.The yield on the benchmark 6.94 per cent 2036 bond was at 6.8382 per cent as of 10:25 am IST, after closing at 6.8170 per cent on Wednesday.Minutes from the meeting showed policymakers growing more cautious on inflation, with RBI Governor Sanjay Malhotra stating although price pressures have not yet broadened significantly across the economy, headline inflation is beginning to move up from the unusually subdued levels seen earlier.STCI Primary Dealer has maintained its call for no rate hikes over the next two policy meetings, but placed a greater likelihood on the December policy being a live event.Retail inflation rose to 4.45 per cent in July—still comfortably within the RBI’s 2 per cent-6 per cent tolerance range, though above its medium-term target of 4 per cent.Deputy Governor Poonam Gupta said there was little room left for additional monetary easing, while adding, depending on how conditions evolve, the case for a rate increase could emerge later in the fiscal year.Inflation concerns have also been amplified by elevated oil prices. Brent crude was holding near $92 a barrel amid an unresolved standoff between the United States and Iran, leading markets to price in the possibility of higher interest rates.The increase in crude prices poses multiple risks for India, the world’s third-largest oil importer. It could put pressure on the rupee, worsen the inflation outlook, and strain both the current account and government finances.RATESIndia’s overnight indexed swap rates jump in opening deals, with mention of rate hikes triggering paying pressure across the curve.The one-year swap rate jumps 10 bps to 5.90 per cent, while the two-year rate rises 8 bps to 6.13 per cent. The liquid five-year rate showed a more subdued reaction notching a rise of 2 bps to 6.43 per cent.Published on August 20, 2026
