India 10Y Yield Nears Four-Month Low

The yield on India’s 10-year government bond fell to around 6.69%, its lowest level in nearly four months, as stronger US Treasuries, improving monsoon conditions, and sustained foreign inflows boosted demand for sovereign debt. Foreign demand remained a key support, with overseas investors buying a net INR 346 billion of Indian government bonds through the Fully Accessible Route over the five weeks since June 1. The 2036 benchmark attracted INR 102 billion in inflows, while the 2031 bond drew INR 72 billion, together accounting for more than half of total foreign purchases amid expectations of inclusion in the Bloomberg Global Aggregate Index. Lower yields were also supported by improving monsoon rainfall, which eased food inflation concerns, while lower crude oil prices following OPEC+'s production increase further lifted sentiment. Investors also await the minutes of the Federal Reserve's latest policy meeting for fresh interest-rate signals.

The yield on India’s 10-year G-Sec rose to 6.74%, pausing recent losses after slipping to a fifteen-week low, as investors continued to assess the outlook for monetary policy. Over the past three months, Indian government bond yields have risen amid expectations that the Reserve Bank of India is nearing a shift toward tighter policy, with inflation concerns fueled by the Iran war-related energy shock. The benchmark 10-year yield climbed 34 basis points between March and May. The sharper rise in shorter-dated yields has prompted foreign investors to rotate into bonds with maturities of less than five years, which accounted for more than two-thirds of the ten most-purchased securities during March-May, as they offered more attractive risk-adjusted carry with lower duration risk. Meanwhile, overseas investors bought INR 221 billion of government bonds in January-February, turned record net sellers of INR 177 billion in March, before returning as net buyers in April and May.

The yield on India’s 10-year G-Sec fell to around 6.72%, hovering near fifteen-week lows as easing crude oil prices and sustained foreign buying outweighed rising US Treasury yields. Foreign investors have been net buyers of INR 324 billion in Indian government bonds since June, supported by tax relief measures, a steadier rupee, and expectations that India could be included in Bloomberg's Global Aggregate Index, with a decision expected later this month. Goldman Sachs also forecasts foreign inflows into Indian government bonds to increase by $10 billion in 2026. Meanwhile, Brent crude hovered near $70 per barrel after the US and Iran concluded another round of peace talks, easing inflation concerns. Investors also welcomed remarks from Reserve Bank of India Governor Sanjay Malhotra that India is unlikely to raise its inflation target, although traders remained cautious ahead of Friday's INR 340 billion auction of benchmark 10-year government bonds.