FX.co ★ India 10Y Yield Extend Gains

Yields on India’s 10-year government securities climbed to 6.7%, marking a third straight session of gains as escalating geopolitical tensions prompted investors to turn more cautious. The rally in crude oil, which has risen to a 19-month high amid intensified US-Israeli strikes on Iran and retaliatory attacks on energy infrastructure and shipping in the Strait of Hormuz, has added further pressure to the bond market. Higher oil prices and a weaker rupee are expected to stoke inflation and widen the current account deficit, keeping yields elevated ahead of Friday’s final central government debt auction. Traders indicated that possible Reserve Bank of India intervention in the secondary market could help cap further increases in yields, while overnight index swap rates are likely to follow the uptrend in US yields and global crude prices. On the macroeconomic front, investors also took note of robust services sector activity, with the HSBC India Services PMI revised up to 58.1 and the Composite PMI rising to 58.9—the fastest pace since November—signalling resilient domestic demand despite mounting external headwinds.