Indian government bonds rallied on Wednesday, driven by a sharp decline in crude oil prices that has improved the inflation outlook for the world's fourth-largest economy.
The benchmark 6.94% 2036 bond yield dropped to 6.7807%, reflecting investor confidence that lower energy costs will help contain domestic price pressures.
The move in fixed income comes as traders position themselves ahead of the Reserve Bank of India's upcoming policy decision.
Market participants are increasingly pricing in a dovish stance from the central bank, with expectations that the RBI may further support the rally by maintaining accommodative monetary conditions or signaling future rate cuts.
This development follows a broader trend of easing tensions in the Middle East, which has contributed to the tumble in oil prices.
The combination of softer energy costs and robust foreign inflows has provided a tailwind for Indian assets, allowing bonds to wipe out losses from the previous session and extend their gains.