Updates at market open

By Khushi Malhotra

MUMBAI, April 22 (Reuters) - Indian government bonds slipped on Wednesday, as oil prices stayed elevated, with investors wary that President Donald Trump's indefinite extension of a ceasefire with Iran may do little to ease tensions.

Trump said he would extend the ceasefire indefinitely to allow more time for peace talks, though it was not clear on Wednesday whether Iran or Israel would agree. He also said the U.S. Navy would continue blocking Iran's maritime trade, a move Tehran considers an act of war.

Brent crude hovered near $98 a barrel. O/R

India's benchmark 6.48% 2035 bond IN064835G=CC yield was at 6.9062% at 11:30 a.m. IST, against Tuesday's close of 6.8894%. The 10-year yield has stayed within a tight band since the ceasefire began on April 8.

"Upside is currently capped around 6.93%-6.94% (on the 10-year yield) if the war doesn't break out afresh," said Alok Singh, head of treasury at CSB Bank.

Traders say sentiment remains fragile because crude has held above $90, talks have shown little progress, and the Strait of Hormuz remains shut.

A 10% increase in oil prices above $85 per barrel could push up India's inflation by 50 basis points and pare growth by 15 bps, the Reserve Bank of India said in a report earlier.

Citi said in a note it expects a 20-bp risk to the fiscal deficit target for the year if the strait reopens by May, rising to about 50 bps if it is delayed by two more months.

The central bank expects GDP growth to fall to 6.9% in 2026-27 from an expected 7.6% in the year ended March 31, 2026.

RATES

India's overnight index swap rates surged as higher oil prices dampened sentiment.

The one-year OIS rate INR1YMIBROIS=CC was up 1.5 bps at 5.80%, while the two-year swap rate INR2YMIBROIS=CC rose 2.5 bps to 6.01%. The liquid five-year INR5YMIBROIS=CC OIS rate was higher by 4.75 bps at 6.4050%.