India 10Y Yield at Two-Week Low

The yield on India’s 10-year G-Sec rose to around 6.67%, rebounding from recent losses in the previous session as investors reacted to cautious market sentiment amid Middle East geopolitical tensions. The increase came despite active RBI intervention in the bond market, with on-screen purchases aimed at offsetting liquidity drained by the central bank’s operations in the foreign exchange market. Insurance companies, pension funds, corporates, and the central bank collectively purchased INR 172.5 billion on Thursday, bringing net buying over the past four sessions to nearly INR 560 billion. Earlier this week, heightened geopolitical tensions following a US submarine strike that sank the Iranian frigate IRIS?Dena in the Indian Ocean contributed to a flight to safety, supporting demand for safer government debt as the conflict’s reach extended beyond the Middle East.

The yields on India’s 10-year G-Sec rose to 6.7%, extending gains for the third consecutive session as escalating geopolitical tensions spurred investor caution. The surge in oil to a 19-month peak, fueled by intensified US-Israeli strikes on Iran and retaliatory attacks on energy infrastructure and shipping in the Strait of Hormuz, added pressure on the market. Higher crude costs and a weaker rupee are expected to push inflation up and widen the current account deficit, keeping yields elevated ahead of Friday’s final central government debt auction. Traders noted that intervention from the Reserve Bank of India in the secondary market could temper further upward moves, while overnight index swap rates are likely to track rising US yields and global oil prices. Investors also noted strong services sector growth, with the HSBC India Services PMI revised to 58.1 and the Composite PMI rising to 58.9, the fastest since November, reflecting resilient demand despite external pressures.

The yields on India’s 10-year G-Sec rose to 6.7%, marking a one-week high, as global geopolitical tensions weighed on investor sentiment. Markets reacted sharply after joint US-Israeli strikes in Iran reportedly killed Supreme Leader Ayatollah Ali Khamenei, prompting concerns about retaliatory action and broader instability. The uptick in yields has also been influenced by offshore activity in non-deliverable overnight index swaps. Last week, the most liquid one-year, two-year, and five-year swaps saw strong receiving interest. Meanwhile, investors digested a positive domestic signal as India’s Manufacturing PMI climbed to 56.9 in February, up from 55.4 in January and marking a four-month high, reflecting a notable improvement in operating conditions and underlying business activity. Markets were closed on March 3, 2026, for the Holi holiday, with trading set to resume on March 4.