FX.co ★ India 10Y Yield Rises Ahead of Bond Sale

The yield on India’s 10-year government security (G-Sec) inched up to around 6.78% on Friday, partially reversing this week’s earlier decline, as a sharp rebound in crude oil prices dampened appetite for government bonds ahead of New Delhi’s INR 320 billion debt auction. Market participants focused on the sale of five-year and 40-year securities for signals on overall demand, particularly at the long end of the curve.

At the same time, Brent crude rose to about $83.7 per barrel, a gain of nearly 6%, amid renewed concerns over shipping disruptions through the Strait of Hormuz. The move heightened worries about India’s import bill, inflation outlook, and the trajectory of the rupee. Firmer oil prices also pushed the US 10-year Treasury yield up to 4.68%, denting the relative attractiveness of emerging-market debt.

Even so, expectations that the Reserve Bank of India will sustain ample banking system liquidity—following its dovish policy decision and lowered inflation forecast—continued to support sentiment. In addition, reported RBI intervention in the foreign exchange market helped contain downward pressure on the rupee.