India 10Y Yield Retreats From 3-Year Highs

The yield on India’s 10-year G-Sec eased to around 7.37%, retreating from three-year highs as a decline in US Treasury yields, driven by safe-haven demand amid a selloff in technology stocks, supported Indian government securities. The US 10-year Treasury yield fell to a three-week low of 5.11%, reversing its rise to 5.33% after stronger-than-expected September inflation data. However, expectations of further Reserve Bank of India rate hikes and tighter domestic liquidity continued to weigh on Indian yields. The RBI’s aggressive rupee defense has strengthened bets on faster monetary tightening, with markets increasingly pricing in a 50-basis-point hike in December. Persistent inflation, Brent crude above $100 per barrel, and foreign capital outflows have heightened these concerns, while RBI dollar sales risk draining banking-system liquidity and weakening demand for government securities.

The yield on India’s 10-year G-Sec climbed to around 7.4%, returning to more than three-year highs as a spike in crude oil prices and hawkish remarks from the Reserve Bank of India governor intensified selling pressure. Brent crude hovered near $107 per barrel, heightening inflation concerns, while RBI Governor Sanjay Malhotra signalled that financial stability remained closely linked to monetary policy. The central bank’s recent 25-basis-point rate hike to 5.50% and shift to a calibrated tightening stance have strengthened expectations of further increases, with swap markets pricing in around 90 basis points of hikes over the next 12 months. Meanwhile, September consumer inflation accelerated to 5.54%, raising the risk of breaching the RBI’s upper tolerance band in October. Traders also awaited US inflation data for clues on the Federal Reserve’s policy path.

The yield on India’s 10-year G-Sec rose more than 1% to 7.38%, reaching its highest level in over three years, as the Reserve Bank of India’s liquidity-tightening measures and hawkish policy shift intensified selling pressure. The central bank plans to sell INR 250 billion in bonds on Tuesday and raise banks’ daily cash reserve requirement maintenance to 99% from 90%, effective October 16, while its foreign-exchange measures could further drain rupee liquidity. The RBI’s recent 25-basis-point rate hike and signals of further tightening have also prompted mutual funds to reduce exposure to longer-dated government bonds, following net sales of INR 378 billion in July-September and a further INR 51 billion in the three sessions after the rate increase. Meanwhile, Brent crude above USD 100 per barrel and expectations of September inflation rising to 5.4% year-on-year added to concerns over price pressures.