India 10Y Yield Remains Under Pressure

The yield on India’s 10-year G-Sec fell to around 6.76%, extending declines to a fourteen-week low as strong foreign portfolio inflows and relatively stable crude oil prices supported demand for sovereign debt despite renewed tensions in the Middle East. Iran launched strikes on US military bases in Kuwait and Bahrain, but Brent crude remained near $71.9 per barrel after both sides agreed to halt hostilities and resume peace talks. Further weighing on yields, Goldman Sachs raised its 2026 India GDP growth forecast by 30 basis points to 6.8%, while lowering its headline inflation and current account deficit projections by 20 basis points each to 4.4% and 1.1% of GDP, respectively. Meanwhile, foreign investors have purchased a net INR 279 billion of Indian government bonds so far in June, supported by the RBI's June 5 measures to encourage capital inflows and growing expectations of India's eventual inclusion in Bloomberg's Global Aggregate Index.

The yield on India’s 10-Year G-Sec fell to around 6.7%, its lowest level in thirteen weeks as declining crude oil prices reduced inflation concerns and boosted demand for government securities. The benchmark yield extended its decline for a fourth straight session after Brent crude retreated to about $72 per barrel. Lower oil prices also supported foreign demand for Indian debt, with foreign portfolio investors purchasing a net INR 236 billion of government bonds in June, putting inflows on track for their strongest monthly total in two years. Additional downward pressure on yields came after RBI Governor Sanjay Malhotra said it was premature to discuss interest-rate hikes, leading investors to scale back expectations of tighter monetary policy. The decline in yields was somewhat limited by a scheduled INR 280 billion government debt auction, as market participants remained cautious ahead of fresh bond supply. Indian markets will be closed on June 26 and will resume trading on June 29.

The yield on India’s 10-Year G-Sec hovered around 6.8%, steadying after retreating to a three-month low as investors awaited the outcome of a INR 320 billion debt auction while monitoring developments in the Middle East. Market participants expect bond yields to remain range-bound until the auction results provide fresh direction. Meanwhile, softer oil prices continued to exert downward pressure on yields, with Brent crude holding below $80 per barrel amid expectations of increased supply after tanker traffic resumed through the Strait of Hormuz. Investor sentiment was further underpinned by sustained overseas demand for Indian debt. Foreign investors have poured more than $2.2 billion into local bonds over the past 10 trading sessions following measures announced by the Reserve Bank of India on June 5 to encourage dollar inflows. Much of the recent buying has been concentrated in the 6.68% 2040 and 7.24% 2055 securities, with the latter included in the latest debt sale.