FX.co ★ India 10Y Yield Falls on Oil Pullback

The yield on India’s 10-year G-Sec slipped to around 6.77%, extending the previous session’s decline as investors rotated back into sovereign debt following a sharp drop in crude oil prices, which eased concerns over inflation and the fiscal outlook. Brent crude fell below $93 per barrel after the United States paused its strikes on Iran, partially unwinding last week’s rally that had briefly pushed prices above $102 and stoked expectations of higher borrowing costs.

The retreat in oil prices also strengthened expectations that the Reserve Bank of India would face less pressure to tighten monetary policy, while a pullback in US Treasury yields ahead of this week’s Federal Reserve decision further bolstered demand for Indian bonds. Foreign interest remained strong, with overseas investors purchasing a net $4.3 billion of Indian government securities under the Fully Accessible Route, amid anticipation that India’s eventual inclusion in the Bloomberg Global Aggregate Index will draw additional long-term inflows.