FX.co ★ India 10Y Yield Eases From Two-Week High

The yield on India’s 10-year government security eased to around 6.8%, pulling back from recent highs as softer US Treasury yields and bargain hunting after a two-day selloff lifted demand for sovereign debt. The US 10-year Treasury yield slipped to 4.686%, providing some support to Indian bonds, while foreign investors maintained their interest, purchasing $3.04 billion of Indian government securities in July. This marked a second consecutive month of net inflows following India’s removal of capital gains tax on interest income and sales of government securities for overseas investors.

However, the decline in Indian yields was capped by elevated crude prices and renewed geopolitical tensions. Brent crude climbed to about $92 per barrel amid ongoing uncertainty surrounding the Strait of Hormuz. Earlier in the week, the benchmark Indian bond yield had risen to a two-week high after the Reserve Bank of India unexpectedly ended its discounted forex swap facility for banks hedging non-resident deposit inflows. Market participants were also awaiting the RBI’s policy minutes for fresh guidance on the interest-rate outlook.