India 10Y Yields Fall on State Bond Demand

The yields on India’s 10-year G-Sec fell to around 6.86%, reaching a near two-month low as lower crude oil prices eased inflation concerns and improved sentiment toward domestic fixed-income assets. Brent crude plunged to $88.44 per barrel, its lowest level in two months, after US President Donald Trump said a peace agreement with Iran could be signed as early as this weekend, although Tehran stated that no final decision had been reached. Additional downward pressure came after recent Reserve Bank of India measures to attract foreign-currency inflows and support the rupee. The initiatives have reduced benchmark AAA-rated corporate borrowing costs by 40–45 basis points and narrowed credit spreads over government bonds. As a result, Indian companies are expected to raise over INR 310 billion ($3.24 billion) through bonds this week, while expectations that increased overseas borrowing will reduce domestic debt supply have further boosted bond demand and pushed yields lower.

The yield on India’s 10-year G-Sec hovered around 6.9%, stabilizing after recent declines as investors monitored oil prices, which retreated from recent highs despite ongoing tensions between the United States and Iran. Market sentiment remained cautious, although easing crude prices helped temper concerns over the economic impact on India. Brent crude had earlier surged to as high as $95.50 per barrel after the United States carried out fresh strikes on multiple targets in Iran, escalating geopolitical tensions and raising fears of disruptions to global energy supplies. However, prices later eased from those levels, providing some relief to bond markets. Meanwhile, US inflation data offered mixed signals. Headline inflation accelerated to 4.2% year-on-year, the highest level in more than three years, while the core measure rose less than expected. The softer underlying inflation reading helped keep expectations for near-term Federal Reserve interest rate moves largely unchanged.

The yield on India’s 10-year G-Sec fell to around 6.8%, its lowest level in nearly two months, as renewed foreign investor demand lifted sentiment in the debt market. Foreign investors purchased nearly INR 10,000 of Indian bonds over the last four trading sessions, supported by the government's decision to fully exempt taxes on gains from eligible debt investments and the Reserve Bank of India's move to expand the range of securities available to overseas investors. The inflows mark a turnaround after FPIs had net sold more than INR 10,119 of Indian debt since the start of the US-Israel conflict involving Iran. Bond yields also came under pressure from expectations of RBI support for the rupee. Traders indicated the central bank likely intervened after recent currency weakness, reportedly selling dollars in the spot market while conducting dollar-rupee buy/sell swaps with maturities exceeding one year through state-run banks.