Indian 10-Year Bond Yield Reaches Highest Level in 9 Months

New Delhi | EcoPulse24

The yield on Indian government bonds for a 10-year term has climbed to approximately 6.66%, marking its highest level in nine months, as investors focus on the large increase in scheduled local debt issuances this week.

Indian states are set to auction bonds worth 332.2 billion rupees on Tuesday, which is around 25% higher than previously scheduled amounts, raising concerns about supply pressures in the debt market. Data indicates that states have raised approximately 1.8 trillion rupees through bond issuances since the start of the current quarter, coinciding with an upward trend in yields.

Regarding monetary policy, the minutes from the Reserve Bank of India's December meeting suggest that the monetary policy committee sees potential growth slowdowns next year, along with moderating inflation pressures, which could allow for further interest rate cuts if economic conditions warrant.

Conversely, traders are anticipating additional liquidity injections before the month ends, following the central bank's injection of around 1.45 trillion rupees in December through debt purchases and foreign exchange swaps.

In terms of capital flows, foreign investors have continued to sell, with net outflows amounting to approximately 109 billion rupees since the start of the month, adding further pressure to the bond market.