India 10Y Yield Rises to 8-Week High

The yield on India’s 10-year G-Sec rose to around 6.85%, rebounding to an eight-week high as hawkish RBI policy minutes strengthened expectations of an earlier rate hike. Yields climbed as traders reassessed bets on an extended rate hold following the Aug. 3-5 meeting minutes, which highlighted growing inflation risks. RBI Deputy Governor Poonam Gupta said there was no scope for further policy easing and that a case for a rate hike may emerge during the fiscal year, while Governor Sanjay Malhotra warned that broader food, fuel and input price pressures could require tighter policy. The benchmark 6.94% 2036 bond yield rose 4 basis points to 6.86%, while five-year yields climbed as much as 8 basis points. Higher Brent crude near $92 per barrel also lifted inflation concerns, as stalled US-Iran peace efforts and tensions around the Strait of Hormuz raised concerns about supply disruptions.

The yield on India’s 10-year G-Sec weakened to around 6.8%, retreating from recent gains as easing US Treasury yields and bargain buying after a two-day selloff supported demand for government bonds. The US 10-year Treasury yield eased to 4.686%, offering some relief to Indian debt, while foreign investors continued to show demand, buying $3.04 billion of Indian bonds in July, their second consecutive monthly inflow after India scrapped capital gains tax on interest and sales of government securities for overseas investors. The decline in yields was limited by elevated oil prices and renewed geopolitical risks, with Brent crude rising to around $92 a barrel as uncertainty over the Strait of Hormuz persisted. The benchmark bond yield had climbed to a two-week high on Tuesday following the RBI’s early withdrawal of its discounted forex swap facility for banks hedging diaspora deposits. Investors were also awaiting the RBI’s policy minutes for fresh interest-rate cues.

The yield on India’s 10-year G-Sec strengthened to around 6.84%, extending gains for a second session to a near four-week high as surging oil prices and higher global bond yields heightened pressure on domestic debt markets. Brent crude climbed above $90 a barrel for the first time in nearly three weeks after the US-Iran ceasefire expired, raising concerns over renewed inflationary pressures and India’s external balance given its heavy reliance on imported oil. Meanwhile, the US 30-year Treasury yield climbed to its highest in almost 20 years, while the 10-year yield rose to 4.74%, raising the hurdle for emerging-market bonds. The market also remained wary of the RBI’s decision to end its FCNR(B) swap facility a month early, which is expected to reduce the liquidity and bond demand generated by the more than $50 billion of inflows under the scheme. With that support fading, Indian bonds are becoming more exposed to swings in oil prices and global rates.