India 10-Year Yield Hits 2-Month High

The yield on India’s 10-year G-Sec rose to around 6.91%, reaching more than two-month highs as heavy bond supply and renewed rate hike expectations pushed yields higher. The benchmark 6.94% 2036 yield rose nearly 2 basis points, its highest intraday level since June 18, ahead of an INR 340 billion ($3.56 billion) sale of the benchmark note. Meanwhile, hawkish minutes from the Reserve Bank of India’s August meeting revived expectations of a possible rate hike later this year, adding upward pressure on yields, while investors awaited Federal Reserve Chair Kevin Warsh’s Jackson Hole speech for further clues on the US interest-rate outlook. Easing Brent crude prices, which fell 5% after renewed focus on reopening the Strait of Hormuz, offered some relief by tempering inflation concerns and helping limit the rise in yields.

The yield on India’s 10-year G-Sec rose to around 6.87%, remaining close to two-month highs as caution ahead of heavy government debt supply outweighed the impact of easing oil prices. The benchmark 6.94% 2036 bond yield climbed from the previous session, after Indian fixed-income markets were closed on Wednesday. New Delhi is set to sell INR 340 billion of the benchmark bond on Friday, raising concerns over demand and capping gains. Sentiment has also remained cautious following the RBI’s August policy minutes, which showed policymakers were open to raising rates if inflation risks materialise and broaden. Meanwhile, Brent crude fell to around $87 a barrel, extending its decline to more than 7% over four days on expectations that talks between Iran and Qatar could help reopen the Strait of Hormuz and ease supply disruptions.

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.