India bonds seen extending gains as oil, US yields dip

By Dharamraj Dhutia MUMBAI, Sept 22 (Reuters) — Indian government bonds are likely to extend gains in early trading on Tuesday, aided by lower US Treasury yields and oil prices, though expectations of further liquidity tightening and an eventual interest-rate hike may limit the advance. 06%, according to a trader with a primary dealership. 0497% in the previous session. The 10-year Treasury yield slipped on Monday, as oil prices dropped and European bond yields fell, but the two-year yield hit a more than two-year high on bets of at least one more rate hike in 2026.

"We may see some buying interest at the open, but ample selling is likely to prevent the benchmark 10-year bond yield from falling below 7%," the trader said. Oil prices eased on Monday and stayed steady in Asian trading, as investors hoped for diplomatic progress on the US-Iran war at this week's United Nations meeting and eyed a partial recovery in shipments from Saudi Arabia. On Sunday, Iran and the US exchanged new threats, although President Donald Trump said he would be open to meeting the Iranian president.

Oil prices are critical for a nation like India, which depends on energy imports, as persistently high prices could stoke inflation and strain the current account and the government's fiscal balances. 82% and the Federal Reserve raised interest rates by 25 basis points last week, which was its first such move since 2023. The RBI's monetary policy decision is due on October 7, and a majority are now eyeing a rate hike. 83 billion) through an open market sale and is due to sell 250 billion rupees of securities on Monday.

Rates Overnight indexed swap rates are expected to ease in line with moves in oil and US yields. 5425%. com)