FX.co ★ India 10Y Yield Steadies Amid Borrowing Concerns

The yield on India’s 10-year government security (G-Sec) steadied around 6.68%, halting the previous week’s decline, as markets remained fixated on persistent supply worries stemming from the government’s borrowing programme. Yields are expected to stay elevated, with India planning record gross issuance in the next fiscal year, fuelling concerns that demand may struggle to absorb the increased supply.

Providing some offset to upward pressure, investors assessed recent RBI measures aimed at curbing speculative activity in financial markets. The central bank now requires all loans to proprietary trading firms to be fully collateralised and prohibits borrowing to fund their own or broker-facilitated trades. Effective April 1, these rules are set to lift funding costs and restrict leverage for firms that account for over half of equity options turnover and nearly 30% of cash equity trading on the NSE.

Additional downward pressure on yields came from abroad, as the US 10-year Treasury yield fell to 4.05% following softer-than-expected inflation data, which strengthened expectations for at least two interest rate cuts by the Federal Reserve this year.