FX.co ★ India 10-Year Yield Hits 2-Month High

Yields on India’s 10-year government bond climbed to about 6.91%, a more than two-month high, as heavy bond supply and renewed expectations of further interest rate hikes drove borrowing costs higher. The benchmark 6.94% 2036 bond yield rose nearly 2 basis points, hitting its highest intraday level since June 18, ahead of an INR 340 billion ($3.56 billion) auction of the note.

Hawkish minutes from the Reserve Bank of India’s August policy meeting reignited expectations of a possible rate increase later this year, adding to upward pressure on yields. Investors also looked ahead to Federal Reserve Chair Kevin Warsh’s speech at Jackson Hole for additional signals on the US interest-rate path.

On the other hand, easing Brent crude prices—down 5% following renewed efforts to reopen the Strait of Hormuz—helped moderate inflation worries and partially capped the rise in bond yields.