FX.co ★ India 10Y Yield Hits Near 2-Week High

The yield on India’s 10-year government security (G-Sec) climbed to about 6.81%, approaching a two-week high as bond prices softened. The weakness followed the Reserve Bank of India’s unexpected decision to advance the closure of its concessional forex swap facility for FCNR(B) deposits, which unsettled the market by raising concerns over a potential decline in demand for government securities.

According to traders, a significant share of the inflows mobilised under the scheme had been parked in four- to six-year government bonds, leaving those maturities particularly vulnerable to selling pressure. Sentiment was further dampened by Brent crude prices hovering near $90 a barrel, amid heightened uncertainty around US–Iran peace talks and disruptions to tanker traffic through the Strait of Hormuz.

Even so, value buying helped limit the rise in the 10-year yield, while comfortable banking-system liquidity and robust foreign-exchange reserves offered additional support. Market participants are now focused on the minutes of the RBI’s August policy meeting for further guidance on the future path of interest rates.