India bonds could open weaker as US threatens more Iran sanctions

Indian government bonds are
likely to start the holiday-truncated week on a ​cautious tone,
with oil prices remaining elevated ahead of an ‌expected US
announcement on additional sanctions against Iran ​that could
further disrupt supplies.

The yield on ⁠the benchmark 6.94 per cent 2036 bond is
expected to trade between 6.83 per cent and 6.88 per cent on Monday, a trader at
a private bank ‌said, after closing at 6.8495 per cent on Friday and
posting its biggest weekly rise of the ‌financial year.

Indian debt markets are shut on ‌Wednesday ⁠for a local
holiday.

“We are in for another ⁠week, which is expected to be
dominated by moves in oil prices, with hardly any triggers on
the local front,” the trader said.

US ​Treasury Secretary Scott ‌Bessent will brief media later
in the day and has threatened to impose “the toughest sanctions
in history” on Iran, while President Donald Trump has also
threatened to ‌impose sanctions on Tehran’s trading partners.

Iran has condemned ​US plans to announce new sanctions even
as President Masoud Pezeshkian called for a ⁠diplomatic solution.

Benchmark Brent crude remained above $92 a barrel, raising
concerns for major energy importers such as India, where ‌higher
oil prices could fuel inflation and strain the current account
and government finances.

Last week, minutes of the Reserve Bank of India’s August
monetary policy showed policymakers are open to rate hikes, if
inflation risks materialise and broaden.

Governor Sanjay Malhotra said evidence of such ‌spillovers
could warrant “policy tightening”, while Deputy Governor Poonam
Gupta said a case ​for a hike may emerge this year.

A key supportive factor for bonds is the ⁠central bank’s
weekend announcement that it had garnered nearly $73 billion
through ⁠measures rolled out to bolster India’s balance of
payments.

RATES

India’s overnight indexed swap rates may continue to ‌witness
further uptick tracking bond yields.

The one-year rate ended at 5.9025 per cent, while
the two-year rate closed at ​6.1250 per cent. The
liquid five-year rate settled at 6.42 per cent.

Published on August 24, 2026