Oil, dollar inflows blunt impact on Indian bonds from index inclusion snub

Government bonds slipped after a volatile start to Monday's ​trading session, as falling oil prices and dollar inflows through the ‌central bank's schemes helped cushion the impact of a ​delay in the inclusion of debt in a ⁠global bond index.

The benchmark Indian 6.94% 2036 bond yield was at 6.8498%, as of 9:50 a.m. IST, after closing at 6.8343% ‌on Friday. The yield witnessed choppy moves and oscillated between 6.83% and 6.89% within minutes of opening.

On ‌Friday evening, Bloomberg Index Services deferred the inclusion of ‌bonds ⁠in its flagship Global Aggregate Index, which left ⁠investors disappointed.

Foreign investors net bought bonds under the fully accessible route worth almost $4 billion since the start of June in anticipation of this inclusion.

"Though ​the delay in inclusion ‌is a negative for now, other factors are providing support to bonds, which has trapped the benchmark yield around 6.85% after the initial swings," a senior treasury official with ‌a private bank said.

The benchmark Brent crude contract ​plunged more than 7% in Asian trade and was below $84 per barrel, after U.S. President Donald Trump ⁠held off on a fresh attack on Iran, seeking to reach a quick deal that would lead to reopening ‌of the Strait of Hormuz.

Meanwhile, the Reserve Bank of India received inflows worth nearly $41 billion till the end of July, under its schemes announced in June.

The focus will now shift to the RBI's policy decision due on Wednesday, when it is widely expected to keep its key interest rate ‌unchanged, according to a Reuters poll.

Commentary on economic projections and any ​guidance on the interest rate trajectory would be the major highlight for fixed income traders.

RATES

India's overnight index ⁠swap rates dipped in early trading, reacting to a sharp drop ⁠in oil prices, which eased fears of a hawkish central bank for now.

The one-year swap rate ‌was at 5.90%, while the two-year rate was at 6.09%. The five-year OIS rate was at 6.39%. Swaps had ​witnessed a surge of 16-24 bps in July. (Reporting by Dharamraj Dhutia; Editing by Rashmi Aich)

Published on August 3, 2026