India 10Y Yield Climbs to Near Four-Month High

The yield on India’s 10-year G-Sec rose to around 7.1%, reaching near four-month highs as the RBI’s planned INR 1 trillion bond sales, elevated global yields, and growing expectations of further monetary tightening weighed on demand for government debt. The RBI will sell INR 500 billion of bonds on September 16, followed by INR 250 billion each on September 21 and 28, as it seeks to drain surplus liquidity after lenders raised a larger-than-expected $127 billion through its special forex mobilisation scheme. Meanwhile, Brent crude held around $105 a barrel, while the US 10-year Treasury yield climbed above 5% to its highest since 2007, as Middle East supply disruptions heightened inflation concerns. Markets now see a Fed rate hike on Wednesday as almost certain, while India’s August inflation rose to 4.82% from 4.45% in July, its highest since December 2024. The benchmark yield has now risen for four straight weeks.

The yield on India’s 10-year G-Sec rose to around 7%, reaching more than three-month highs as surging crude oil prices, higher US Treasury yields and growing expectations of global monetary tightening triggered a broad bond selloff. Brent crude climbed above $100 a barrel to around $108 as escalating Middle East tensions disrupted energy supplies and shipping through the Strait of Hormuz and Red Sea. Meanwhile, US Treasury yields rose after producer price inflation strengthened expectations of a Federal Reserve rate hike next week, with markets pricing a 72% chance of a 25-basis-point increase and the 10-year yield nearing 5%. German and Japanese 10-year yields also climbed to multi-year highs, reinforcing the global bond selloff. Domestic bonds faced additional pressure from expectations of RBI liquidity withdrawal, with banking system liquidity exceeding INR 10 trillion. Markets are closed on Monday in observance of Ganesh Chaturthi, trading will resume on September 15.

The yield on India’s 10-year G-Sec inched up to 6.96%, extending gains for a second straight session as rising crude oil prices and elevated US Treasury yields heightened inflation concerns and weighed on Indian bonds. Brent crude held above $100 a barrel amid escalating tensions around the Strait of Hormuz, raising concerns over India’s import bill, fiscal position, and inflation outlook. Meanwhile, the US 10-year Treasury yield remained elevated near 4.84%, close to its highest level since 2023, adding to pressure on domestic debt. The rupee also weakened for a fifth consecutive session to 95.16 per dollar, reinforcing imported inflation risks. However, an INR 10.49 trillion banking-system liquidity surplus helped cushion the selloff and limited the rise in yields. Investors are now focused on US and Indian inflation data and the Federal Reserve’s policy decision next week for further cues.