India 10Y Yield Hits 3-Week Low

The yield on India’s 10-year G-Sec hovered to around 6.67%, pausing losses from the previous week, as investors remained focused on persistent supply concerns tied to the government’s borrowing programme. Yields are expected to stay elevated as India plans record gross issuance in the next fiscal year, raising concerns that demand may struggle to absorb the additional supply. Offsetting some upward pressure, investors also digested RBI measures curbing speculative activity in financial markets. The central bank now requires all loans to proprietary trading firms to be fully collateralized and bars borrowing for their own or broker trades. Effective April 1, these rules will raise capital costs and curb leverage for firms accounting for over half of equity options turnover and nearly 30% of cash equities on the NSE. Additional pressure came from US 10-year Treasury yields dropping to 4.05%, after softer-than-expected inflation raised bets on at least two Fed rate cuts this year.

The yield on India’s 10-year G-Sec fell to around 6.68%, slipping further to its lowest level in three weeks, following the government’s debt switch. The authorities bought back INR 755 billion of FY27-maturing bonds and issued INR 694 billion of 2040 securities, easing near-term redemption pressure and reducing gross borrowing needs. At the same time, January inflation came in at 2.75%, within the RBI’s 2%-6% tolerance band and above expectations, limiting upward pressure on yields. Supportive liquidity conditions and small declines in short- and medium-term OIS rates also helped stabilize prices. Meanwhile, the fall was partially countered by profit-taking after a four-day rally and caution ahead of the weekly debt auction. Looking ahead, investors remain attentive to upcoming auctions and broader market developments for signals on the near-term direction of yields.

The yield on India’s 10-year G-Sec fell to around 6.71%, reversing gains from the previous session, following the release of January inflation data. India's consumer prices rose to 2.75%, coming within the RBI’s 2%-6% tolerance band and above market expectations, helping cap upward pressure. Global developments are also influencing sentiment. US 10-year Treasury yields climbed to around 4.18% after stronger-than-expected January non-farm payrolls, reducing expectations of near-term Fed rate cuts and weighing on Indian bonds. At the same time, fresh supply from state-run firms, planning to raise roughly $1.9 billion through bonds this week, including 10-year, 5-year, and perpetual issues, continues to keep borrowing-related pressure in focus. Liquidity conditions remain steady, supported by earlier RBI interventions, and investors continue to watch debt auctions and broader market developments closely.