India 10-Year Yield Rebounds

The yield on India’s 10-Year G-Sec strengthened toward 7.1%, reaching a one-week high as investors remained cautious ahead of the Reserve Bank of India's monetary policy decision later this week. While markets widely expect the benchmark repo rate to remain unchanged at 5.25%, uncertainty over the inflation outlook and future policy signals continued to pressure bonds. The benchmark 10-year yield has risen about 34 basis points to around 7.0% since the Iran conflict began three months ago, reflecting growing expectations of tighter financial conditions. Fiscal concerns have also added to the upward pressure on yields, as elevated crude oil prices could boost fuel and fertilizer subsidies and widen the fiscal deficit beyond the government's 4.3% GDP target. Meanwhile, persistent foreign outflows from Indian equities have weakened the rupee and added to pressure on domestic debt markets.

The yield on India’s 10-Year G-Sec hovered near 6.9%, edging lower after the holiday break on easing oil prices and softer US Treasury yields. Bond sentiment was bolstered after reports suggested the US and Iran had agreed to extend their ceasefire arrangement, easing concerns over prolonged disruptions to global crude supply. Brent crude prices have fallen sharply this week, reducing inflationary pressure for oil-importing economies such as India. Meanwhile, US Treasury yields also declined, with the benchmark 10-year yield falling further after softer inflation data reinforced expectations that the Fed may avoid additional aggressive tightening. Still, gains in Indian bonds remained limited as investors stayed cautious ahead of New Delhi’s scheduled debt auction and the RBI’s policy decision next week. Market participants increasingly expect the RBI to keep interest rates unchanged, although some foreign institutions continue to anticipate the possibility of another rate hike.

The yield on India’s 10-Year G-Sec hovered near 7%, as renewed US-Iran tensions pushed oil prices higher and kept investors cautious. Brent crude rebounded toward $98 per barrel following recent US military strikes in southern Iran. Indian bond markets traded in a narrow range, with investors balancing rising oil-related inflation risks against softer US Treasury yields. Traders also remained focused on Friday’s government bond auction, where New Delhi plans to raise INR 280 billion, including through the sale of the 6.68% 2040 bond. Earlier optimism over progress in US-Iran negotiations and easing disruptions in the Strait of Hormuz faded after renewed tensions resurfaced. Analysts at Goldman Sachs have since raised their inflation forecast for fiscal year 2026–27 and now expect two additional RBI rate hikes later this year. Debt markets will be closed on Thursday and will continue trading on May 29 in observance of Eid Al-Adha.