FX.co ★ India 10Y Yield Retreats from 3-Week High

The yield on India’s 10-year government security (G-Sec) eased to around 6.77%, pulling back from a three-week high after weaker-than-expected US inflation data drove US Treasury yields lower and reduced fears of an imminent Federal Reserve rate hike. Demand for sovereign debt strengthened as the yield on the US 10-year Treasury slipped below 4.60% following the June inflation report. Sentiment was further lifted by optimism over the possible inclusion of Indian government bonds in Bloomberg’s Global Aggregate Index.

However, the downside in yields was limited by elevated crude prices, with Brent trading near a one-month high after the US reimposed a naval blockade on Iranian ports and Iran responded by attacking US infrastructure in the region, amplifying inflation risks for India. At the same time, foreign investors have channelled about $4.2 billion into Indian government bonds via the Fully Accessible Route since June 1, providing an additional boost to the domestic debt market.