India 10Y Yield Retreats from Multi-Year Highs

The yield on India’s 10-year G-Sec fell to around 7.1%, retreating from multi-year highs on renewed buying interest supported by expectations of central bank intervention and lighter state borrowing. Investor sentiment was strengthened by reports of likely Reserve Bank of India purchases last week, while state governments announced a lower-than-anticipated debt issuance plan ahead of this week’s monetary policy decision. Economists widely expect the RBI to maintain its policy repo rate at 5.25%, citing elevated geopolitical risks and supply-driven energy shocks stemming from the Iran conflict. Despite the pullback, upward pressure on yields remains, with crude oil prices hovering near $111 per barrel amid ongoing disruptions in the Strait of Hormuz. Elevated oil costs continue to pose inflationary risks and widen India’s current account deficit, while heavy selling by foreign investors and banks has kept volatility elevated.

The yield on India’s 10-year G-Sec climbed to around 7.1%, extending gains to reach its highest level since May 2024, as oil prices surged following President Donald Trump’s warning of continued strikes on Iran. The spike in crude costs heightened inflation expectations, intensifying concerns over potential rate hikes by the Reserve Bank of India. Market participants highlighted that oil above $100 a barrel could push inflation past 6%, while expectations of further rate increases have already been partially priced into yields, reflecting persistent geopolitical risks and domestic fiscal uncertainties. Traders also remained cautious ahead of the government’s first FY27 debt sale. Meanwhile, investors assessed economic indicators, including the Manufacturing PMI, which fell to 53.9 in March from 56.9 in February, as factory output and new orders grew at the slowest pace since mid-2022. Markets will be closed on April 3 and will resume on Monday.

The yield on India’s 10-year G-Sec climbed to around 6.9%, extending gains to its highest level since July 2024, as a combination of fiscal pressures and energy shocks pushed borrowing costs higher. Brent crude prices, which have surged over 50% in the past month amid Middle East geopolitical tensions, along with New Delhi’s excise duty cuts on fuel, have clouded both the fiscal and growth outlook, further weighing on bonds. Investors are navigating a shortened trading week, with yields expected to trade in a 6.87%–6.95% range amid the fiscal year-end. While some relief may come from the government’s announcement to frontload only 51% of gross borrowing for fiscal 2027, slightly below market expectations, market participants remain cautious. Debt markets will be closed on March 31, and trading will resume on April 2.