Indian government bonds are likely to be sold in early deals on Friday as several factors weigh on investor sentiment ahead of fresh debt supply through the weekly auction.
The yield on the benchmark 6.94 per cent 2036 bond is expected to trade between 6.85 per cent and 6.90 per cent, a trader at a private bank said, after closing at 6.8709 per cent on Thursday, which was its highest closing level in over two months. Bond yields move inversely to prices.
In an auction later in the day, New Delhi hopes to raise ₹28,000 crore ($2.93 billion), more than half of which would be via 15-year paper.
“All factors are pointing towards a negative trend, and if the demand for the 15-year is weak, a test of 6.90 per cent will definitely be on the cards,” the trader said. Oil prices stayed elevated, with the benchmark Brent crude hovering around $94 per barrel, as the stalemate in the US-Iran war continues to disrupt West Asia supply.
US President Donald Trump has threatened economic retaliation against nations supporting Iran.
India, the world’s third-largest oil importer, is vulnerable to higher crude costs, which could stoke inflation and strain both the current account and government finances. On Wednesday evening, the minutes of the Reserve Bank of India’s August monetary policy showed policymakers were more prepared to raise rates if inflation risks materialise, with concerns mounting over higher food, fuel and input costs feeding into broader price pressures.
The panel had voted unanimously to keep the policy repo rate and stance unchanged, but July’s retail inflation accelerated to 4.45 per cent, above the RBI’s 4 per cent medium-term target.
RATES
India’s overnight indexed swap rates may continue to witness further uptick tracking bond yields.
The one-year swap rate jumped 12.75 bps to 5.9350 per cent, while the two-year rate rose 11.5 bps to 6.1650 per cent. The liquid five-year rate ended 6.75 bps higher at 6.4750 per cent.
($1 = 95.7000 Indian rupees)
Published on August 21, 2026
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