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Government Security Market Update:

With the surging Brent crude oil prices and higher U.S. Treasury yields the Indian government bond yields moved beyond a crucial 6.95% levels to 6.98% on Friday but later due to the positive auction result and a drop in the crude oil prices the yields moved below 6.95% to 6.9365% levels. Elevated oil prices are negative for India, which depends on imports for nearly 90% of its crude requirements, as it could raise the nation's import bill as well as impact inflation and fiscal deficit. India's overnight index swap (OIS) rates continued their upward momentum through the week, tracking a rise in bond yields as well as oil prices, which has again brought talks of rate hikes into the picture. The one-year OIS rate ended at 5.88%, while the two-year swap rate closed at 6.10%. The liquid five-year OIS rate settled at 6.47%. Swap rates were up by 7-9 bps. Earlier during the week the five states raised Rs.16,900 crore by issuing the loans for 7 to 30 years in a yield range of 7.54 to 7.84% and in the Treasury bill auction the Reserve Bank of India 91; 182 & 364 DTB at a yield of 5.2150; 5.47 & 5.5990% respectively. In a weekly auction the government sold 6.03% GS 2029; 6.68% GS 2033; 7.24% GS 2055 & the New GOI SGrB 2056 at a yield of 6.3065; 6.9501; 7.5628 & 7.50% respectively. The yield on the 6.48% Government bond due Oct 2035 rose to 6.9365% from 6.9049% last week

Global Debt Market Update:

The yield on the 10-year U.S. Treasury note was down by more than 1 basis point at 4.306%. The 2-year Treasury yield, which more closely tracks short-term Federal Reserve interest rate policy, dropped more than 4 basis points to 3.78%. U.S. Treasury yields ticked lower on Friday after the Justice Department abandoned a criminal investigation into Federal Reserve Chair Jerome Powell, paving the way for the Senate to vote on nominee Kevin Warsh as his replacement to head the central bank. Yields have moved higher the past week as crude oil prices have climbed. Last Friday, the 10-year Treasury note yielded 4.244% and the 2-year stood at 3.70%. A barrel of West Texas Intermediate crude oil is higher by more than 12% this week. Also on Friday, consumer sentiment held at record-low levels in April even as a ceasefire took hold in the Middle East, according to the latest University of Michigan survey. The school’s Survey of Consumers showed the sentiment gauge at 49.8, slightly above the initial April reading of 47.6 and better than the Dow Jones consensus estimate for 48.6. But the reading marked a 6.6% decline from a month ago and a 4.6% decrease from the same time a year ago, and is the lowest on record. China's finance ministry successfully auctioned 30-year special government bonds at a 2.20% yield, the lowest since November 2025. This reflects easing inflation concerns and improved market sentiment for long-term debt. The issuance, part of Beijing's strategy to fund national initiatives, aims to avoid liquidity shocks through staggered sales. China's 30-year treasury yield has fallen roughly 15 basis points this month after hitting a 1-1/2-year high in mid-March, supported by ample liquidity and receding inflation fears on expectations of a Middle East ceasefire.

Bond Market Ahead:

The Indian government bond market enters the week of April 27 to May 1 under upward yield pressure, primarily riven by geopolitical tensions and rising energy costs. Brent crude has climbed above $105 per barrel due to stalled U.S.-Iran negotiations and supply risks. Since India imports the majority of its oil, this fuels inflation concerns, which typically pushes bond yields higher. Uncertainty over stalled US-Iran negotiations and ongoing disruptions in the Strait of Hormuz keep supply risks and inflation expectations elevated. The rise in swap rates suggests the market is factoring in expectations of a “higher-for-longer” interest-rate environment, anticipating a degree of policy tightening. Goldman Sachs has indicated they see two rate hikes for India in 2026. Resilient domestic economic momentum, indicated by the India Manufacturing PMI rising to 55.9 and the Composite PMI increasing to 58.3 in April 2026, tempers some of the upside pressure on yields. Resilient domestic economic momentum, indicated by the India Manufacturing PMI rising to 55.9 and the Composite PMI increasing to 58.3 in April 2026, tempers some of the upside pressure on yields.

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