India 10-Year Yield Rises on Higher US Yields

The yield on India’s 10-year G-Sec fell to around 6.77%, retreating from three-week highs as softer-than-expected US inflation pushed Treasury yields lower and eased concerns over an imminent Federal Reserve rate hike. Demand for sovereign debt strengthened after the yield on the 10-year US Treasury fell below 4.60% following the June inflation report, while optimism over the potential inclusion of Indian government bonds in Bloomberg's Global Aggregate Index further supported sentiment. Still, the decline in yields was capped by elevated crude oil prices, with Brent hovering near one-month highs after the US reimposed a naval blockade on Iranian ports and Iran retaliated by striking US infrastructure in the region, heightening inflation risks for India. Meanwhile, foreign investors have invested about $4.2 billion in Indian government bonds through the Fully Accessible Route since June 1, providing an additional tailwind for the debt market.

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.

The yield on India’s 10-year G-Sec fell to around 6.72%, extending losses for another session as easing crude oil prices, softer US Treasury yields, and sustained foreign inflows boosted demand for sovereign debt. Brent crude dropped more than 2% to about $76 per barrel after nearing $80 earlier in the week. Meanwhile, the 10-year US Treasury yield fell about 3 basis points, supporting demand for Indian bonds by preserving their yield premium. Foreign investors remained net buyers, purchasing INR 15 billion of government securities on Thursday, bringing cumulative inflows to nearly INR 380 billion since early June. However, gains were capped as investors awaited the government's INR 320 billion auction of five-year and 40-year bonds, with demand expected to guide the market's next move. Softer oil prices and a stable rupee also reinforced expectations of a more favorable inflation outlook.