India bonds trim losses as soft CPI spurs value buying

Indian government bonds trimmed ​most of their losses ​on Monday, as softer-than-expected inflation data drew in ​late-session buyers, tempering concerns over price pressures following oil's surge after the collapse of the U.S.-Iran peace talks.

Retail inflation quickened to 3.40% in March, but below the ‌central bank's ⁠target of ⁠4% and the 3.48% Reuters poll projection.

The yield on the benchmark 6.48% ​2035 bond ended the session at 6.9395%, up 2 basis points from 6.9119% ​on Friday, but down 4 bps from the day's high. Brent crude futures topped $100 a barrel on Monday, after President Donald Trump said ​the U.S. Navy would start blocking ships to ⁠and from ‌Iran via the Strait of Hormuz.


Higher oil ​triggered a ​risk-off move across assets in India, the world's third-largest ⁠crude importer. The rupee endured its steepest fall in ​two weeks, down 0.7% at 93.3750 per ​dollar, and the benchmark Nifty 50 fell 0.86%.

"Inflation was softer-than-expected, which prompted some value buying," said Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank.

Traders said mutual funds and foreign lenders likely stepped in to buy debt near 6.97%, ‌a level viewed as attractive for demand.

These investors were also net buyers on Friday, purchasing a combined 62.26 ​billion rupees ($667 million) ​worth of government bonds.

India's ⁠debt markets will be closed on Tuesday, April 14, for a local holiday.

RATES Overnight index swap rates surged as traders ramped up paying ​on oil jitters, even as bonds came off highs on value buying.

The one-year OIS rate added 2 bps to end at 5.84%, while the two-year rate advanced 3 bps to 6.02%. The five-year climbed 5.25 bps to 6.3575%.

($1 = 93.3400 Indian rupees)