India 10Y Yield Climbs to 19-Month High

The yields on India’s 10-Year G-Sec hovered around 6.75%, steadying after falling in the previous session as investors awaited the auction of INR 320 billion worth of three- and 30-year government bonds. Yields found support from relatively stable crude oil prices near $85 per barrel and softer US Treasury yields, which eased external pressure despite renewed geopolitical tensions in the Middle East. Demand for Indian sovereign debt also remained resilient despite higher-than-expected domestic inflation, rupee weakness, and escalating geopolitical tensions. Overseas investors purchased about INR 16.5 billion of bonds under the Fully Accessible Route this week amid expectations of India's inclusion in the Bloomberg bond index, while foreign banks turned net buyers on Thursday, acquiring more than INR 50 billion of government bonds after a three-session selling streak, supporting sentiment ahead of the debt sale.

The yield on India’s 10-year G-Sec fell to around 6.74%, extending losses for a second session as softer US economic data strengthened expectations that the Federal Reserve will delay further interest rate hikes. The benchmark yield has fallen about 5 basis points over the past two sessions after reaching a three-week high earlier this week. Lower crude oil prices supported bonds, with Brent easing below $85 per barrel despite ongoing Middle East tensions, reducing concerns over imported inflation. Expectations of further domestic policy tightening also eased, with economists projecting India's inflation to slow to 4.0% in July from 4.4% in June, reinforcing views that the Reserve Bank of India will keep interest rates unchanged. Additional downward pressure on yields came from strong demand, as state-run banks bought INR 156 billion of government bonds over the past three sessions, while foreign investors purchased more than $4.2 billion of Fully Accessible Route bonds since June 1.

The yield on India’s 10-year G-Sec rose to around 6.79%, extending gains for a third session to a three-week high as higher crude oil prices, stronger US Treasury yields, and rising domestic inflation weighed on sovereign debt. Brent crude climbed about 2% to nearly $85 per barrel as tensions in the Middle East and continued uncertainty over shipping through the Strait of Hormuz fueled supply concerns, lifting global inflation expectations. Meanwhile, the US 10-year Treasury yield touched an almost eight-week high, while the 2-year yield reached its highest level since February 2025, reducing the appeal of emerging-market bonds. Domestic sentiment was also pressured after India's consumer inflation accelerated to an 18-month high of 4.38% in June, exceeding forecasts as higher energy costs lifted transport prices, while wholesale inflation rose to 9.87%, its fastest pace since September 2022, driven by food, fuel, and manufacturing costs.