Indian 10-Year Yield Retreats from 4-Month High

The yield on the Indian 10-year G-Sec fell to 6.56% from the four-month high of 6.63% on August 26th amid expectations of bond market support by the Reserve Bank of India.

Markets halted their bond selloff amid growing bets that the RBI would buy bonds in the secondary market or reject low bid in auctions to contain the plunge in G-Secs since August.

The expectations were further supported by warnings from commercial banks that they will not be able to absorb larger issuance in new state bonds.

The yield in the 10-year G-Sec surged up to 30bps in August as the 50% tariffs from the US threatened the outlook of Indian growth and fiscal consolidation, driving the government to cut taxes to support the economy.

Consequently, markets trimmed expectations of another rate cut by the RBI this year.

These bets were consolidated by the latest GDP data, which showed an annual expansion of 7.8%, well above expectations of 6.7%.