India 10Y Yield at Two-Week Low

The yield on India’s 10-year G-Sec hovered around 7.0%, trading in a tight range as softer crude oil prices and lower US Treasury yields provided mild support, while growing expectations of an RBI rate hike in October limited gains. Brent crude fell 3.4% on Monday to around $100 a barrel, easing from last week’s highs amid hopes of progress in US-Iran talks and improved supply through the Strait of Hormuz. Meanwhile, the US 10-year Treasury yield eased towards 4.95%, tracking lower oil prices. However, rate hike bets have increased following the Federal Reserve’s 25-basis-point hike last week, with traders also watching for further RBI liquidity tightening ahead of its October 7 policy decision.

The yields on India’s 10-year G-Sec hovered around 7.0%, extending losses for another session as a pullback in crude oil prices eased concerns over imported inflation and the prospect of near-term RBI rate hikes, triggering short-covering after the recent selloff. Brent crude extended its decline after reports of additional Saudi crude cargoes through Oman eased supply concerns, although prices remained above $100 a barrel amid ongoing Middle East tensions. The decline in oil prices also helped ease pressure from expectations of an RBI tightening cycle, with traders widely anticipating a 25-basis-point hike in October. Meanwhile, the RBI’s first INR 50,000 crore OMO sale drew INR 66,590 crore of bids, reflecting strong demand for government debt and helping limit upward pressure on yields despite the central bank accepting bonds at higher-than-prevailing yields. Traders also continued to assess the RBI’s plans to withdraw excess liquidity.

The yield on India’s 10-year G-Sec rose to around 7.1%, reaching near four-month highs as the RBI’s planned INR 1 trillion bond sales, elevated global yields, and growing expectations of further monetary tightening weighed on demand for government debt. The RBI will sell INR 500 billion of bonds on September 16, followed by INR 250 billion each on September 21 and 28, as it seeks to drain surplus liquidity after lenders raised a larger-than-expected $127 billion through its special forex mobilisation scheme. Meanwhile, Brent crude held around $105 a barrel, while the US 10-year Treasury yield climbed above 5% to its highest since 2007, as Middle East supply disruptions heightened inflation concerns. Markets now see a Fed rate hike on Wednesday as almost certain, while India’s August inflation rose to 4.82% from 4.45% in July, its highest since December 2024. The benchmark yield has now risen for four straight weeks.