India 10Y Yield Falls on Inflation Data

The yield on India’s 10-Year G-Sec fell to around 6.7%, its lowest level in thirteen weeks as declining crude oil prices reduced inflation concerns and boosted demand for government securities. The benchmark yield extended its decline for a fourth straight session after Brent crude retreated to about $72 per barrel. Lower oil prices also supported foreign demand for Indian debt, with foreign portfolio investors purchasing a net INR 236 billion of government bonds in June, putting inflows on track for their strongest monthly total in two years. Additional downward pressure on yields came after RBI Governor Sanjay Malhotra said it was premature to discuss interest-rate hikes, leading investors to scale back expectations of tighter monetary policy. The decline in yields was somewhat limited by a scheduled INR 280 billion government debt auction, as market participants remained cautious ahead of fresh bond supply. Indian markets will be closed on June 26 and will resume trading on June 29.

The yield on India’s 10-Year G-Sec hovered around 6.8%, steadying after retreating to a three-month low as investors awaited the outcome of a INR 320 billion debt auction while monitoring developments in the Middle East. Market participants expect bond yields to remain range-bound until the auction results provide fresh direction. Meanwhile, softer oil prices continued to exert downward pressure on yields, with Brent crude holding below $80 per barrel amid expectations of increased supply after tanker traffic resumed through the Strait of Hormuz. Investor sentiment was further underpinned by sustained overseas demand for Indian debt. Foreign investors have poured more than $2.2 billion into local bonds over the past 10 trading sessions following measures announced by the Reserve Bank of India on June 5 to encourage dollar inflows. Much of the recent buying has been concentrated in the 6.68% 2040 and 7.24% 2055 securities, with the latter included in the latest debt sale.

The yield on India’s 10-Year G-Sec hovered around 6.8%, extending its decline near a three-month low amid demand from overseas funds and foreign banks. Sentiment remained supported by strong foreign inflows, with overseas investors purchasing more than $2.2 billion of Indian government bonds on a net basis so far this month, the strongest buying pace in 15 months. Additional downward pressure on yields came from the Reserve Bank of India's temporary removal of the interest-rate ceiling on fresh FCNR(B) deposits to attract foreign currency inflows. However, further gains were capped after the Federal Reserve adopted a more hawkish tone, pushing US two-year Treasury yields to a four-month high and reducing expectations for a continued rally in Indian bonds. Meanwhile, oil prices remained subdued, with Brent crude trading below $80 per barrel amid optimism over a reported US-Iran peace agreement and the potential reopening of the Strait of Hormuz, a key global energy route.