India 10Y Yield Rises as Index Inclusion Delayed

The yield on India’s 10-year G-Sec hovered around 6.84%, edging higher after losses in the previous session as investor sentiment remained subdued following Bloomberg's decision to defer the inclusion of Indian government bonds in its Global Aggregate Index. The decision disappointed investors who had largely viewed index inclusion as a near certainty, triggering foreign sales of nearly $600 million in bonds under the Fully Accessible Route over the last six sessions, including the biggest weekly outflow in four months. Still, overseas investors remained net buyers of $3.9 billion in FAR bonds between June 1 and July 31. Investors also awaited this week's Reserve Bank of India policy meeting, where economists expect the central bank to keep interest rates unchanged, while closely monitoring its assessment of inflation risks from elevated oil prices and weak monsoon rainfall.

The yield on India’s 10-year G-Sec edged down to around 6.8%, retreating from recent gains as softer crude oil prices and lower US Treasury yields improved demand for sovereign debt. Brent crude fell about 1.5% to around $87.7 per barrel, extending the previous session’s 1.8% decline, as continued tanker flows through the Strait of Hormuz and the Red Sea eased supply concerns despite stalled US-Iran talks. Meanwhile, the US 10-year Treasury yield slipped to around 4.65%, reversing part of Thursday’s surge after signs of progress toward a potential peace plan in Gaza reduced safe-haven demand, and falling oil prices reinforced the decline in yields. However, gains in Indian bonds remained limited as investors awaited New Delhi’s INR 340 billion auction of the benchmark 10-year bond and next week’s Reserve Bank of India policy decision, where the central bank is widely expected to keep its key policy rate unchanged.

The yield on India’s 10-year G-Sec rose to around 6.78%, extending gains for a third consecutive session as higher US Treasury yields following the Federal Reserve's policy decision reduced the appeal of emerging-market debt. The Fed left interest rates unchanged after its two-day meeting, driving the US 10-year Treasury yield about 10 basis points higher since Tuesday to 4.70%, which put upward pressure on Indian yields. Investor sentiment was also dampened ahead of New Delhi's INR 340 billion auction of 10-year bonds on Friday and the Reserve Bank of India's policy meeting next week, where economists expect the benchmark rate to remain unchanged at 5.25%. Meanwhile, escalating Gulf tensions kept inflation concerns elevated after Brent crude briefly climbed above $90 per barrel following fresh US strikes on Iran, while foreign investors remained net sellers of FAR bonds amid higher oil prices and delayed progress on India's inclusion in the Bloomberg bond index.