India 10Y Yield Extends Rebound

India’s 10-year government bond yield rose to around 7.20%, extending its rebound after hitting an over-one-month low, as higher US Treasury yields and concerns over additional bond supply weighed on debt prices. The US 10-year Treasury yield jumped toward 5% following stronger-than-expected inflation, reducing the relative attractiveness of Indian debt and potentially limiting foreign investment. At the same time, substantial government borrowing needs and continued issuance of the benchmark 10-year bond add to securities supply, while tighter banking-system liquidity could constrain domestic demand. Persistent domestic inflation may also limit the Reserve Bank of India’s scope for rate cuts, keeping borrowing costs elevated. However, crude oil prices fell 17% last week, easing imported inflation risks and pressure on India’s external balance and government finances, potentially giving the RBI greater room to ease monetary policy and putting downward pressure on yields.

India’s 10-year government bond yield rose to 7.18%, rebounding slightly after hitting an over one-month low, as investors booked profits following a sharp debt rally. Persistent domestic inflation could limit the Reserve Bank of India's scope for rate cuts, while substantial government borrowing needs add to bond supply and keep yields elevated. Additionally, tighter banking-system liquidity following the RBI's withdrawal of surplus funds could constrain banks' capacity to expand government bond holdings. Higher US Treasury yields could divert foreign investment away from Indian debt, while net selling of government securities in September and October may further constrain demand. Meanwhile, crude oil prices fell 17% last week, easing imported inflation risks and pressure on India's external balance and government finances, potentially giving the RBI greater room to cut rates and putting downward pressure on yields. Indian markets will remain closed on November 10 for a local holiday.

India’s 10-year government bond yield fell to 7.12%, extending its decline to its lowest level since late September, as easing crude oil prices and softer US Treasury yields offered relief to local debt markets. Brent crude pulled back to below USD 100 per barrel amid hopes for a resolution to the US-Iran conflict, easing concerns over imported inflation, current-account and fiscal pressures, while moderating expectations of further Reserve Bank of India rate hikes. Lower US Treasury yields also improved the relative appeal of Indian government securities. However, Middle Eastern supply risks continue to leave India vulnerable to energy price fluctuations given its reliance on imported energy. Persistent foreign investor outflows from government bonds and substantial government borrowing needs may also constrain bond demand. At the same time, persistent domestic inflation could limit the scope for monetary easing and keep borrowing costs elevated.