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Government Security Market Update:

Geo-political tension at middle east has put the crude oil boiling and the Indian government bonds came under heavy selling pressure but supported by the Reserve Bank of India purchase through the secondary market & OMO purchase. Oil prices continued their upward move on Friday, with the benchmark Brent Crude contract up 10% so far this week at $100.30 per barrel, after skyrocketing 28% last week. Risk aversion deepened as Iran, Israel and the U.S. vowed to fight on, even as the Middle East war is set to enter its third week. India is the third largest importer of crude oil and elevated prices have stoked inflation concerns. The RBI and other investors net purchased bonds worth 110 billion rupees in the secondary market this week and 1 trillion rupees of notes through OMO Purchase. Overnight index swap rates witnessed a major reaction to the oil prices. The one year OIS ended at 5.8350%, while the two-year rate ended at 6.04% up by 23 and 26 bps. Earlier in a week the seventeen states sold 3 to 30 years loans in the range of 6.64 to 7.79% and in the Treasury Bill auction the Reserve Bank of India set cut-off at a yield of 5.3171; 5.5397 & 5.6445% respectively. The yield on the 6.48% Government bond due Oct 2035 fell to 6.6798% from 6.6898% last week.

Global Debt Market Update:

The benchmark 10-year Treasury yield rose more than 1 basis point to 4.285%. The 30-year Treasury bond yield was up more than 2 basis points at 4.91%, and the 2-year Treasury note yield most sensitive to short-term expectations of Federal Reserve policy moves slid more than 2 basis points to 3.734% as investors weighed the release of dramatically slower, downwardly revised fourth-quarter gross domestic product growth numbers. Gross Domestic Product a measure of all the goods and services produced across the sprawling U.S. economy, rose at a seasonally and inflation-adjusted annual rate of just 0.7% in the fourth quarter, according to the Bureau of Economic Analysis. The first revision of the GDP reading was a sharp step down from the previous estimate of 1.4% and well below the Dow Jones consensus forecast for 1.5%. It also marked a considerable slowdown from the 4.4% growth rate seen in the third quarter of 2025. The report came ahead of the next two-day policy meeting for the central bank, which ends next Wednesday and is the first time officials will have convened since January. Traders are largely expecting the Fed to hold its key interest rate steady at 3.50% to 3.75%, according to the CME FedWatch Tool.

Bond Market Ahead:

The Indian bond market is entering a period of significant volatility. While domestic fundamentals remain relatively stable, external shocks—specifically the Middle East conflict and its impact on energy prices are the primary drivers of the current bearish sentiment. The rising crude oil will hit the Monetary Policy hard and may force the RBI MPC to take few aggressive steps to stem the rising energy prices and the yield may head above 6.80%. Any positive talk and cooling off the tension at Middle East may drag the yields down towards 6.60% or even 6.50%. US 10-year yields have jumped toward 4.30% in mid-March. This narrowing spread between US and Indian bonds can sometimes trigger FPI (Foreign Portfolio Investment) outflows, though India’s inclusion in global bond indices continues to provide a structural cushion. Expect the RBI to be the most active player on Monday. They have been shielding the 10-year benchmark, preventing it from crossing the 6.72% resistance level through secondary market interventions (buying bonds). If the RBI pulls back, yields could quickly spike toward 6.75%. The RBI likely to address the liquidity issue as the Market will be entering to the last few trading days of the Financial Year end. The RBI will buy the notes from the secondary markets as it will not only address the liquidity issue but also stabilize the yield curves.

Bond Strategy:

* Buy 6.48 GS 2035 around 6.70 to 6.72% with a target of 6.65% and a stop loss of 6.75%.

* Buy 6.68% GS 2040 around 7.12 to 7.11% with a target of 7.07% and a stop loss of 7.15%

SEBI Registration number is INH000000081.

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