Indian government bond yields rose for a second straight session on Tuesday, with the benchmark 6.94% 2036 bond yield climbing 5 basis points to 6.8269%. The increase marked the sharpest single-day gain in over a month, following a drop to around 6.76% after the Reserve Bank of India’s dovish policy announcement on August 5.
The Reserve Bank of India said on Friday it would close a zero-cost foreign-currency swap facility for banks one month ahead of schedule. The scheme, launched in June to hedge foreign-currency deposits from non-resident Indians, attracted inflows exceeding $50 billion, surpassing initial expectations. Policymakers had flagged concerns about the facility’s impact on domestic liquidity.
Brent crude oil prices approached $92 per barrel during Asian trading, driven by the expiration of a 60-day U.S.-Iran ceasefire on Monday. Neither country has indicated plans to extend the truce, lifting geopolitical risk premiums in energy markets.
India’s overnight index swap rates also rose, with the one-year rate ending at 5.83%, the two-year at 6.0550%, and the five-year at 6.42%. Over the week, swap rates increased between 10 and 17 basis points, reflecting shifting expectations for domestic interest rate policy amid rising oil prices and tighter liquidity conditions.
