India 10Y Yield at 1-Month Low

The yield on India’s 10-year G-Sec fell to around 6.64%, pulling back gains to reach more than a month low as investors stepped away from earlier selling. Heightened geopolitical tensions following a US strike that sank the Iranian warship in South Asian waters contributed to a flight to safety, supporting demand for safer government debt. The Dena, a modern Iranian frigate, was struck by a US submarine in international waters, killing dozens and raising international concern as the conflict spreads beyond the Middle East. Some of the decline was tempered as global bond markets came under pressure. Surging oil prices amid the widening Middle East conflict raised concerns about inflation and potential delays to central bank rate cuts, triggering a selloff in US Treasuries and pushing yields higher overseas. Market participants are now turning their focus to the final central government debt auction scheduled for Friday.

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.