FX.co ★ India 10Y Yield Retreats from Multi-Year Highs

The yield on India’s 10-year government security (G-Sec) eased to around 7.1%, pulling back from multi-year highs amid renewed buying interest driven by expectations of central bank support and reduced state borrowing. Sentiment improved following reports that the Reserve Bank of India (RBI) likely conducted bond purchases last week, while state governments announced a lower-than-expected borrowing calendar ahead of this week’s monetary policy meeting.

Most economists anticipate the RBI will keep the policy repo rate unchanged at 5.25%, pointing to heightened geopolitical uncertainty and supply-side energy shocks linked to the conflict involving Iran. However, despite the recent decline in yields, upward pressures persist as crude oil prices remain near $111 per barrel, reflecting ongoing disruptions in the Strait of Hormuz.

Elevated oil prices continue to threaten inflation dynamics and widen India’s current account deficit. At the same time, substantial selling by foreign portfolio investors and banks has contributed to sustained volatility in the bond market.