International oil prices retreat, boosting demand; India's 10-year government bond yield falls to around 6.68%

⑴ On Tuesday, India's 10-year government bond yield fell to around 6.68%, down from the previous day. The sharp correction in crude oil prices boosted demand for sovereign debt. ⑵ U.S. President Trump stated that the conflict in the Middle East with Iran may soon come to an end, easing market concerns about the risk of prolonged supply disruptions and inflation for India, one of the world's largest crude oil importers, leading to a drop in Brent oil prices. ⑶ Lower energy prices improved investor sentiment towards Indian assets, and the rupee also strengthened. The Reserve Bank of India supported the bond market by purchasing government bonds through open market operations, which also provided downward support for yields. ⑷ However, traders remained cautious ahead of a large supply of state bonds. Indian states plan to raise about 460 billion rupees through bond issuance, which limits the further downside for yields.