India 10Y Yield Falls as Tax Break Spurs Inflows

2026-07-01 07:29 By Mariene Camarillo 1 min. read

The yield on India’s 10-year G-Sec fell to around 6.74%, reaching a fifteen-week low as record foreign inflows into government bonds boosted demand after recent tax incentives for overseas investors.

Investor demand strengthened after the government scrapped taxes on capital gains and interest income for foreign investors in sovereign bonds under the Fully Accessible Route and added new FAR-eligible securities.

The measures drove record monthly foreign purchases of INR 418 billion in June, nearly double the previous record of INR 239 billion set in August 2024.

Further weighing on yields, the central bank reportedly intervened in the foreign exchange market through state-run banks to support the rupee.

Analysts cautioned inflows could slow if global financial conditions tighten and US rates remain elevated.

Still, stronger overseas participation could support India's inclusion in the Bloomberg Global Aggregate Index, with Goldman Sachs estimating about $15 billion in passive inflows.



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India 10Y Yield Falls as Tax Break Spurs Inflows
The yield on India’s 10-year G-Sec fell to around 6.74%, reaching a fifteen-week low as record foreign inflows into government bonds boosted demand after recent tax incentives for overseas investors. Investor demand strengthened after the government scrapped taxes on capital gains and interest income for foreign investors in sovereign bonds under the Fully Accessible Route and added new FAR-eligible securities. The measures drove record monthly foreign purchases of INR 418 billion in June, nearly double the previous record of INR 239 billion set in August 2024. Further weighing on yields, the central bank reportedly intervened in the foreign exchange market through state-run banks to support the rupee. Analysts cautioned inflows could slow if global financial conditions tighten and US rates remain elevated. Still, stronger overseas participation could support India's inclusion in the Bloomberg Global Aggregate Index, with Goldman Sachs estimating about $15 billion in passive inflows.
2026-07-01
India 10Y Yield Hits 15-Week Low
The yield on India’s 10-year G-Sec fell to around 6.71%, extending declines to a fifteen-week low as improved domestic liquidity and easing short-term funding costs boosted demand for government bonds. Recent Reserve Bank of India measures to attract foreign currency inflows are expected to inject billions of dollars into the banking system, reducing banks' reliance on higher-cost certificates of deposit and lowering funding costs. CD yields have fallen by up to 60 basis points over the past three weeks. Meanwhile, the spread between three-month Treasury bill yields and comparable state-run bank CDs narrowed to 140 basis points from over 200 basis points three months ago. Softer global yields also supported the bond market, with the US 10-year Treasury yield edging down to 4.37% ahead of Thursday's US June nonfarm payrolls report. Lower oil prices further improved sentiment, with Brent crude hovering near $72.50 per barrel, easing concerns over imported inflation.
2026-06-30
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.
2026-06-29