03.07.202607:34:47UTC+00India 10Y Yield Pauses Decline

The yield on India’s 10-year G-Sec edged up to 6.74%, halting a recent decline after touching a fifteen-week low, as investors continued to reassess the monetary policy outlook. Over the past three months, Indian government bond yields have climbed on expectations that the Reserve Bank of India is moving closer to a tighter policy stance, with inflation worries amplified by the Iran war–related energy shock. Between March and May, the benchmark 10-year yield rose by 34 basis points.

The sharper increase in shorter-maturity yields has encouraged foreign investors to shift toward bonds with maturities of less than five years. These securities represented more than two-thirds of the ten most-purchased instruments during March–May, as they offered more attractive risk-adjusted carry with lower duration risk. Meanwhile, overseas investors bought INR 221 billion of government bonds in January–February, became record net sellers to the tune of INR 177 billion in March, and then returned as net buyers in April and May.