India 10Y Yield Pulls Back From Four-Month High

The yield on India’s 10-year G-Sec fell to around 7.1%, retreating from multi-month highs as softer US Treasury yields and easing oil prices reduced pressure on global bonds ahead of the Federal Reserve’s policy decision. The benchmark yield had climbed to 7.07% on Tuesday, its highest in four months, amid surging crude prices and elevated US yields that fueled inflation concerns and expectations of tighter monetary policy. The US 10-year yield eased after briefly topping 5% in the previous session, while Brent crude pulled back following an unexpected rise in US inventories. The softer global backdrop offered some relief to Indian debt, although gains were limited by the RBI’s planned INR 1 trillion OMO sales and expectations of an October rate hike amid higher inflation. Investors also remained cautious ahead of the Fed’s updated economic projections and rate outlook.

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.