FX.co ★ India 10Y Yield Falls on US Treasury Decline

The yield on India’s 10-year government security (G-Sec) declined to around 7.36%, extending its fall for a second consecutive session. A sharp drop in US Treasury yields triggered value buying in Indian bonds, helping counterbalance inflation worries driven by elevated crude oil prices. Indian benchmark yields closely followed the US 10-year Treasury yield, which fell to about 5.05% amid expectations that the Federal Reserve may postpone its next rate hike until December.

Additional support for Indian yields came from easing crude prices, partly on signs of a potential improvement in Russian supply. Nonetheless, inflation risks remain tilted to the upside: consumer price inflation accelerated to 5.54% in September and could breach the Reserve Bank of India’s 6% upper tolerance band in October.

At the same time, expectations of further monetary tightening by the RBI—alongside increasing market bets on a 50-basis-point rate hike in December—and persistently tight banking-system liquidity continue to dampen overall market sentiment.