Indian government bonds gained in early trade on Thursday, shrugging off a jump in U.S. Treasury yields, supported by easing oil prices and growing foreign appetite in anticipation of their potential inclusion in a Bloomberg bond index.
The benchmark 6.94% 2036 bond yield traded at 6.7207% by 11:15 a.m. IST, down from its 6.7563% close on Wednesday. Bond yields move inversely to prices.
Foreign investors have net bought 324 billion rupees ($3.40 billion) of bonds since June, driven by tax relief measures, a steadier rupee and hopes of India's inclusion in Bloomberg's Global Aggregate Index.
Analysts at Goldman Sachs see foreign flows to Indian government bonds rising by $10 billion in 2026, according to a Wednesday note.
Market participants expect Bloomberg Index Services to announce its decision this month.
Sustained demand from foreign investors helped Indian bonds withstand pressure from a selloff in U.S. Treasuries before key jobs data, traders said.
The U.S. 10-year yield was up 1.5 bps at 4.49% in Asian trade, after gaining over 5 bps in the previous session.
Brent crude hovered near $70 per barrel in Asian trade after the U.S. and Iran concluded a round of peace talks in Doha, easing inflation concerns for oil importing India.
Central Bank Governor Sanjay Malhotra said at an event in Russia on Wednesday that India is unlikely to raise its official inflation target and that there may be a case for lowering it over the long term.
Separately, New Delhi is set to sell 340 billion rupees of the 10-year note on Friday.
"Underlying demand is strong, but traders could look to book profits before the large supply of the 10-year note," a private-bank trader said.
RATES
India's overnight index swap rates eased on an improving inflation outlook and foreign demand.
The one-year rate fell 1.5 bps to 5.7725%, while the two-year swap dropped 1.75 bps to 5.91%. The five-year rate pared 1.5 bps to 6.19%.
