The yield on India’s 10-year government security (G-Sec) climbed to around 7.23%, marking its highest level in more than two years, as investors assessed the Reserve Bank of India’s (RBI) latest rate hike against lingering inflation pressures, rising global bond yields, and elevated crude oil prices. The yield on the benchmark 6.94% 2036 bond rose by 2 basis points, and the broader 10-year government bond yield later added 5 basis points after the RBI increased the repo rate by 25 basis points to 5.50%—its highest level in a year and the first hike since February 2023.
The decision, which met market expectations, coincided with the central bank’s shift in policy stance to “calibrated tightening,” following a persistent rise in consumer prices, with retail inflation reaching 4.8% in August after ten consecutive monthly increases. Market participants are now closely monitoring the possibility of further liquidity tightening, either via additional bond sales or a moderate increase in the cash reserve ratio. In September, the RBI conducted bond sales totaling INR 1 trillion ($10.39 billion), the largest monthly amount in at least a decade.