Indian bonds to see opening dip as US-Iran back-and-forth pushes up oil yet again

India's overnight index swap rates could see marginal upticks tracking a similar move in bond yields.

The one-year INR1YMIBROIS=CC ended at 5.7775%, and the two-year INR2YMIBROIS=CC swap rate ended at 5.9525%, while the five-year INR5YMIBROIS=CC rate declined to 6.2550%.

(Reporting by Dharamraj Dhutia; Editing by Rashmi Aich)

MUMBAI, Aug 11 (Reuters) - Indian government bonds are expected to open lower on Tuesday, as oil prices witness another uptick, while tit-for-tat demands for compensation from Iran and the U.S. have dimmed prospects of reopening the Strait of Hormuz.

The yield on the benchmark 6.94% 2036 bond IN069436G=CC is expected to trade in the 6.76% to 6.80% range, according to a trader at a private bank, after closing at 6.7643% on Monday. Bond yields move inversely to prices.

"Bonds watching oil whip up and down has become a cat-and-mouse story, and the same exercise keeps getting repeated every few days," the trader said.

The benchmark Brent crude contract settled 5% higher on Monday, after Iran and the United States traded demands for compensation, dimming prospects for a deal to reopen the crucial chokepoint.

The contract further rose in Asian trading and crossed the $88 per barrel mark.

Iran said the U.S. must lift sanctions on Tehran and meet a number of other conditions, while U.S. President Donald Trump said Iran must pay compensation for "all of the people that they have killed and gravely wounded."

U.S. Treasuries declined, with the 10-year yield rising to 4.70%, as investors braced for a key inflation reading on Wednesday that could point to persistent price pressures.