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

The yield on India’s 10-year government security climbed to about 6.73%, a one-week high, as renewed tensions in the Middle East pushed up crude oil prices and US Treasury yields, dampening demand for sovereign bonds. Brent crude extended its recent rally after the US launched new strikes on Iran and revoked a license that had allowed Iranian crude exports, following attacks on commercial vessels in the Strait of Hormuz. These developments intensified concerns over energy supplies and inflation. At the same time, the yield on the 10-year US Treasury note rose to 4.565%, its highest level in nearly a month, adding further upward pressure on Indian yields.

Despite the selloff, sentiment in India’s bond market remained underpinned by steady foreign inflows, with overseas investors having purchased a net INR 362 billion in government securities since the start of June under the Fully Accessible Route. In addition, improving monsoon conditions helped ease inflation worries: the cumulative rainfall deficit narrowed to 24% as of July 5, down from 43.1% a week earlier.