• On Tuesday, the 10-year benchmark government bond (6.94% GS 2036) opened 2 bps higher at 6.78% tracking overnight rise in Brent crude oil prices and 10Y UST to 4.71 levels. • Brent crude rose nearly 4% to $90/bbl as hopes of a reopening of the Strait of Hormuz weakened following US President Donald Trump’s response to Iran’s peace conditions. • Participants maintained caution ahead of weekly SDL auction. The cut offs came broadly on expected lines with 9Y GJ coming at 7.36%, 12Y GJ at 7.47% and 18Y MH at 7.64%. • The 10Y benchmark touched 6.80% intraday before easing to 6.78%, aided by a retreat in crude from $90/bbl to $87.5/bbl and likely FCNR(B) flows deployment by banks. The 10Y point closed the day 2 bps up at 6.78% vs 6.76% • The latest banking system liquidity stayed in surplus of ~INR 3.19 Tn. RBI conducted multiple VRRR auctions to absorb the excess liquidity.
