FX.co ★ India 10Y Yield Eases From Three-Month High

The yield on India’s 10-year government security hovered around 6.95%, easing from nearly three-month highs as traders weighed elevated oil prices against the Reserve Bank of India’s liquidity-management actions. The RBI has launched several reverse repo operations to absorb surplus liquidity after the banking system’s excess funds hit a record high, signalling its determination to prevent overly loose monetary conditions from stoking inflation and driving yields higher. On Tuesday, the central bank is scheduled to conduct an overnight variable-rate reverse repo auction of INR 5 trillion, following the withdrawal of INR 2.59 trillion via a 30-day operation a day earlier. Still, Brent crude prices above $97 per barrel remain a key upside risk for yields, as India imports nearly 85% of its crude requirements, heightening concerns about inflation and public finances. The RBI’s cautious stance, including indications that rate hikes may be on the horizon, also continued to keep yields elevated.