India 10Y Yield Rises Ahead of Fed

The yield on India’s 10-year G-Sec rose to around 6.79%, snapping three consecutive sessions of losses as investors turned cautious ahead of the conclusion of the Federal Reserve's two-day policy meeting and rising oil prices weighed on sentiment. Markets assigned a 65% probability to the Fed holding interest rates steady while fully pricing in a 25-basis-point hike in September, with traders closely watching Chair Kevin Warsh's guidance on the policy outlook. Meanwhile, Brent crude climbed 4.7% to around $87.68 per barrel after US and Saudi forces launched strikes on Iran-backed groups in Iraq, reviving concerns over the Middle East conflict and its inflationary impact. Additional upward pressure came from the 10-year US Treasury yield, which edged up to 4.61%, while investors continued to expect the Reserve Bank of India to keep its repo rate unchanged at 5.25% at next week's policy meeting.

The yield on India’s 10-year G-Sec hovered around 6.77%, extending losses for a third consecutive session as lower crude oil prices and declining US Treasury yields boosted demand for sovereign debt. Investor sentiment improved after Brent crude fell 2% to $86.52 per barrel, as hopes for a diplomatic resolution to the US-Iran conflict eased supply concerns. Meanwhile, the US 10-year Treasury yield slipped to 4.63% ahead of the Federal Reserve's policy decision, where rates are expected to remain unchanged despite markets pricing in a high probability of a 25-basis-point hike in September. Traders also monitored the INR 181 billion state bond auction for demand signals, while offshore investors bought INR 4.83 billion of government debt under the Fully Accessible Route. However, further yield declines were capped by profit-taking from state-run banks, which sold INR 33.7 billion of bonds in the previous session.

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.