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Indian government bonds declined on Tuesday (July 21, 2026) after international crude oil prices surged to cross $90 per barrel, raising concerns about inflation, fiscal stability and the country’s external balance. A sharp increase in oil prices will have significant implications for the economy and financial markets as India imports more than 80% of its crude oil requirements, analysts said.

On Tuesday (July 21), as hostilities escalated in West Asia between the U.S. and Iran, Brent crude price rose 1% to $90.16 a barrel, putting pressure on Indian bonds.

The 10-year 6.94% 2036 bond yield on Tuesday (July 21) settled 2 bps higher at 6.7938%, indicating growing concerns about inflation and a widening import bill.

According to available data, the one-year swap ended 1.75% bps higher at 5.9675%, the two-year rose 2.5% bps to 6.1375% and three years bond jumped 3.5% bps to 6.44%. Bond prices move inversely to yields.

When investors anticipate higher inflation and interest rates, they prefer selling existing bonds, causing their prices to fall and yields to rise. The decline in Indian government bonds reflects these expectations as market participants reassess the outlook for inflation and economic growth, analysts said.

Analysts believe that the future direction of Indian bonds will depend on global oil price movements, inflation trends, and the RBI’s policy decisions. If crude prices remain elevated for an extended period, bond yields could continue to rise as investors demand higher returns to compensate for inflation risks, they added.

Any decline in oil prices could support a recovery in bond prices.

Published - July 21, 2026 09:34 pm IST