India 10Y Yield Slips Ahead of Bond Auction

The yield on India’s 10-year G-Sec hovered around 6.82%, edging lower after recent gains as investors cautiously bought bonds ahead of the government’s INR 280 billion debt auction, including a new 15-year security. However, declines were limited as investors remained wary of rising inflation risks after Brent crude surged more than 7% above $100 per barrel for the first time since May following attacks on Saudi oil tankers in the Red Sea. Higher US Treasury yields also weighed on sentiment, with the benchmark 10-year yield climbing to around 4.70%, its highest since January 2025. Investors also assessed fresh US tariffs of 10% to 12.5% on imports from around 60 economies, including a 10% duty on Indian goods, for their impact on global trade and risk sentiment. Meanwhile, flash PMI data signaled slower growth, with manufacturing PMI easing to 53.9, services PMI dropping to 53.1, and the composite PMI falling to 54.3, its lowest since March 2022.

The yield on India’s 10-year G-Sec rose to around 6.84%, extending gains after reaching four-week highs as escalating tensions in the Middle East drove crude oil prices higher and lifted US Treasury yields, reducing demand for sovereign debt. Brent crude climbed for a fifth consecutive session above $96 per barrel after the US launched a new round of strikes on Iran, marking its 12th consecutive night of attacks, while Yemen's Houthis targeted oil tankers in the Red Sea, raising concerns over further disruptions to global energy supplies. For India, which imports nearly 90% of its crude oil needs, higher energy costs threaten to lift inflation, widen the current account deficit, and pressure the rupee, pushing bond yields higher. Investors also monitored foreign demand for Indian debt, with overseas investors having purchased about $4.5 billion of government bonds over June and July, although analysts warned persistent pressure on the rupee could dampen those inflows.

The yields on India’s 10-Year G-Sec hovered around 6.75%, steadying after falling in the previous session as investors awaited the auction of INR 320 billion worth of three- and 30-year government bonds. Yields found support from relatively stable crude oil prices near $85 per barrel and softer US Treasury yields, which eased external pressure despite renewed geopolitical tensions in the Middle East. Demand for Indian sovereign debt also remained resilient despite higher-than-expected domestic inflation, rupee weakness, and escalating geopolitical tensions. Overseas investors purchased about INR 16.5 billion of bonds under the Fully Accessible Route this week amid expectations of India's inclusion in the Bloomberg bond index, while foreign banks turned net buyers on Thursday, acquiring more than INR 50 billion of government bonds after a three-session selling streak, supporting sentiment ahead of the debt sale.