Mumbai: Indian government bonds weakened on Monday as a sharp rise in global crude prices triggered risk aversion across domestic markets, with investors reacting to escalating military tensions in West Asia.
The benchmark 6.48% 2035 bond yield climbed to 6.68% in morning trade, compared with 6.66% at the previous close. Bond yields and prices move in opposite directions. The rupee depreciated 0.4% to 91.35 against the dollar, while equity indices declined about 1%.
Oil markets surged after fresh military exchanges involving the United States, Israel and Iran raised fears of prolonged disruption. Brent crude briefly jumped to $82.37 per barrel its highest level since January 2025 before easing to around $77.
For India, which imports the majority of its crude requirements, sustained higher prices pose risks to inflation and the current account balance. The Middle East accounts for more than half of the country’s oil supplies, making domestic assets sensitive to geopolitical shocks in the region.
Market participants reported early selling pressure in longer-dated securities. Traders said investors are watching interest rate swap markets for clearer signals on whether the move in yields represents a short-term reaction or the beginning of a more sustained uptrend.
In derivatives trading, shorter tenor overnight index swap (OIS) rates remained largely stable, while longer maturities saw paying interest. The five year OIS rate rose five basis points to 6.04%, after swaps recorded their steepest monthly decline in nearly a year during February.
Despite the selloff, some traders expect potential intervention from the Reserve Bank of India if yields rise sharply, with hopes that secondary market bond purchases could help stabilise borrowing costs.