Indian government bonds were confined to a narrow range early on Thursday. Softer oil prices offset a rise in US Treasury yields ahead of key domestic inflation data and debt supply.
US bond yields have moved higher. The benchmark 10-year US Treasury yield neared 5% in Asian trade after October consumer price data came in above forecasts. Traders have increased their bets on a larger interest rate hike from the US Federal Reserve in December.
Inflation data in focus
India’s October inflation figure is due later on Thursday. A Reuters poll expects annual consumer inflation to reach 5.93%, up from 5.54% in September. An upside surprise could strengthen expectations that the RBI will tighten policy again next month.
Oil and the Iran war
Brent crude fell 1% in Asian trade to $91.80 a barrel. Lower crude prices ease pressure on India, which imports most of its oil, and help the outlook for inflation, the rupee and government finances.
Oil has retreated from $117 per barrel before the US midterms. Traders are closely watching headlines on the Iran war and its impact on oil prices after a Democratic sweep in the midterms raised hopes of a resolution.
“Trump losing the midterms is positive for markets, but we need to see how the US-Iran war develops,” said a trader at a private bank.
With oil prices easing, the RBI may not need to hike as aggressively as was feared a few weeks ago. Still, the backdrop remains fragile.
Benchmark bond and trading mood
The benchmark 6.94% bond maturing in 2036 closed at 7.2139% on Wednesday, after its yield rose 6 basis points that day, the steepest one-day climb in a month. On Thursday, it was little changed at 7.2183% at 10:30 a.m. IST.
A private-bank trader expects the yield to stay within a fairly tight band in the coming sessions. Trading was thin on Wednesday, as many investors stayed on the sidelines ahead of Friday’s auction of the benchmark 10-year bond, where the government plans to sell 340 billion rupees of debt. Analysts view the sale as a large supply test that could show how much appetite investors have for Indian debt.
An asset-manager trader said it makes sense to wait until after Friday’s auction. Once the inflation reading, the RBI’s rate path and investor demand become clearer, the trader believes the market will have more direction. The trader’s view is their own and is not a recommendation from this publication.
RBI rate outlook
The RBI raised its key rate in October, its first increase in nearly four years, and has since shifted to a calibrated tightening stance. Market participants widely expect another 25 basis point hike in December. Some traders are also preparing for a larger increase of 50 basis points, and traders said an upside inflation surprise could spur bets on that bigger move next month.
Swap rates
Overnight index swap rates were subdued ahead of the inflation data. The 1-year and 2-year rates had not yet traded, while the 5-year OIS rate was down slightly at 6.48%.
On Wednesday, the 1-year, 2-year and 5-year OIS rates each climbed by 8 to 9 basis points, ending at 6.3950%, 6.39% and 6.4825%, respectively.
Updated 12 November 2026 with the latest reports.