India 10Y Yield Hits Near 2-Week High

The yield on India’s 10-year G-Sec rose to around 6.81%, reaching near two-week highs as bond prices weakened following the Reserve Bank of India’s unexpected decision to bring forward the closure of its concessional forex swap facility for FCNR(B) deposits. The move raised concerns over reduced demand for government bonds, with traders noting that much of the inflows under the scheme had been invested in four- to six-year securities, potentially exposing those maturities to selling pressure. Rising Brent crude prices near $90 a barrel also weighed on sentiment amid uncertainty over US-Iran peace talks and disruptions to tanker traffic through the Strait of Hormuz. Still, the 10-year yield remained supported by value buying, while ample banking-system liquidity and elevated foreign-exchange reserves provided some cushion. Market participants now await the minutes of the RBI’s August policy meeting for further cues on the interest-rate outlook.

The yield on India’s 10-year G-Sec hovered around 6.75%, edging lower to four-week lows as easing oil prices and softer US Treasury yields supported demand for government bonds. Brent crude slipped below $87 a barrel after US crude inventories posted their largest weekly increase since January 2023, easing inflation and fiscal concerns for India, the world's third-largest crude importer. Meanwhile, the US 10-year Treasury yield hovered near 4.65% after July producer-price data showed contained wholesale inflation, prompting investors to scale back expectations for a September rate hike. However, gains in Indian bonds could be limited by the government’s INR 320 billion debt auction, including new three-year and seven-year securities, with investors watching demand for signs that the benchmark yield can break below the key 6.75% level.

The yield on India’s 10-year G-Sec hovered around 6.78%, trading in a tight range as elevated oil prices restrained demand for government bonds ahead of key India and US inflation data. Brent crude rose 0.8% to $89.6 per barrel, as uncertainty over the Middle East conflict kept oil prices elevated and raised inflation concerns. Meanwhile, India’s July inflation data, due later Wednesday, is expected to show inflation rising to 4.50% from 4.38% in June, while a hotter-than-expected US reading could revive Fed rate-hike bets and put upward pressure on Indian yields by narrowing the yield premium over US bonds. However, expectations for further RBI rate hikes have eased since the central bank kept rates unchanged last week and lowered its inflation forecasts. Strong foreign inflows and ample liquidity have also supported bonds, with the RBI’s diaspora deposit scheme attracting over $36.7 billion as of July 17, while the daily average cash surplus exceeded INR 3 trillion in August.