FX.co ★ India 10Y Yield Holds Near 4-Week Low

Yields on India’s 10-year government securities eased to around 6.76%, hovering near a four-week low, as inflation readings in both India and the US reinforced expectations that neither central bank is likely to raise interest rates in the near term. Investors digested India’s July CPI print, which rose to 4.45% from 4.38% in June, undershooting the 4.50% consensus forecast and remaining comfortably within the RBI’s tolerance band. In the US, annual inflation eased to 3.4% in July from 3.5% in June, slightly diminishing the likelihood of a Federal Reserve rate hike next month and lending support to US Treasuries.

That said, the downside in Indian yields was capped as Brent crude prices hovered near $88 per barrel, keeping inflation risks in focus for the world’s third-largest oil importer. The US 10-year Treasury yield also remained elevated, and market participants turned their attention to Friday’s INR 320 billion government bond auction, expected to provide the next significant cue for the direction of domestic yields.