Bond Yields

CANADA-FOREX/:CANADA FX DEBT-Canadian dollar hits one-month high as Iran says key waterway open

Gold prices are down 10% since the onset of the US-Iran war towards the end of February. Analysts attribute the drop to rising interest rates, a stronger US dollar, and profit-taking among investors amid geopolitical tensions.

Government bond yields have been rising globally as elevated crude oil prices amid expectations of prolonged US-Iran war raised inflation risks, while the ceasefire reached last week remained fragile.

Bond yields had risen sharply in March since the onset of the US–Iran war, with the benchmark 10-year yield touching a high of 7.13%. However, yields softened across the curve yesterday, amid optimism over the US-Iran ceasefire, alongside a broadly reassuring policy stance from the central bank.

The benchmark 6.48% 2035 bond yield rose about 4 bps to 7.0734%, its highest level since May 21, 2024. Notably, benchmark yields have increased by 37 bps in March and 45 bps in FY26, despite 100 bps of rate cuts by the Reserve Bank of India (RBI).

PSU lenders including Bank of Baroda and Canara Bank experienced significant sell-offs on March 27 due to rising bond yields, which reached 6.9%. The Nifty PSU Bank index fell 3.6%, marking a 17% decline from its peak as concerns over fiscal sustainability grow.

Japanese government bond yields have risen, while bond prices have declined, tracking a broader global selloff in fixed-income markets. The move reflects mounting concerns over persistent inflation, driven by a surge in crude oil prices following the escalation of the US-Iran war.

The uptick in bond prices followed a sharp decline in crude oil prices, which helped ease inflationary concerns. The benchmark Brent crude contract was nearly 5% lower at $99.60 per barrel, after falling to an intraday low of $97.15.

Bond yields move inversely to prices, and recent developments in the bond market have led to a sustained upward movement in yields. Meanwhile, the Indian rupee weakened to a fresh record low of 93.94 against the US dollar.

COMEX gold prices have declined about 11%, while MCX gold rate has dropped nearly 19% from their peak levels. The decline comes despite the ongoing escalation of the US–Iran war, which would typically boost demand for safe-haven assets.