India Bond Yields Steady As High Oil Prices, State Borrowing Weigh On Market

Indian government bond yields ended largely unchanged on March 17, 2026, as elevated crude oil prices and heavy state debt supply continued to weigh on sentiment, Reuters reported.

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Bond Yields Hold Near Recent Levels

India’s benchmark 6.48% 2035 government bond yield settled at 6.7143% on Tuesday, compared with 6.7059% in the previous session. The movement reflects a rise of about 5 basis points over the recent period.

On the other hand, the prices of bonds fluctuate inversely, and the yields remain stable when the prices are not moving much during the session.

Crude Oil Prices Remain High

The Brent crude oil prices remain high, trading above $100 per barrel, while the prices are around $103 per barrel during the session. The prices remain high due to the geopolitical tensions between the U.S., Israel, and Iran, which entered the third week since February 28, 2026.

According to Reuters, the Strait of Hormuz has been largely disrupted, as it carries 20% of the world's oil flows. Oil prices have increased by over 40% since the conflict started.
Impact On Inflation And Market Sentiment

An increase in the prices of crude oil has led to an increase in the level of concern about inflation in India, as it is one of the biggest importers of crude oil in the world. An increase in the prices of crude oil has a direct effect on the overall prices in the economy.

State Borrowing Adds Supply Pressure

Indian states raised ₹57,525 crore by issuing debt papers during the session, which is the largest debt sale in the current financial year.

The total debt raised by the states in the current financial year now stands at ₹11.45 lakh crore.

The surge in bond supply has resulted in upward pressure on bond yields as more supply generally hurts bond prices.

RBI Bond Purchases And Liquidity Measures

Market participants are observing the Reserve Bank of India’s additional bond purchases. The Reserve Bank of India has bought ₹1 lakh crore worth of bonds via open market operations and ₹57,200 crore via the secondary market since the onset of geopolitical tensions, according to Reuters. These measures aim to manage liquidity in the bond market.

Overnight Indexed Swap Rates

India’s overnight indexed swap (OIS) rates ended lower. The one-year OIS rate closed at 5.795%, while the two-year rate settled at 5.99%. The five-year OIS rate ended at 6.38%.

Bond yields remained steady during the session as elevated crude prices and increased borrowing activity continued to influence market conditions.