FX.co ★ India 10Y Yield Retreats from 9-Month High

The yield on India's 10-year government securities has declined to below 6.6%, retreating from a nine-month peak. This movement follows the Reserve Bank of India's (RBI) implementation of robust liquidity measures. The central bank has planned to purchase 2 trillion rupees worth of government bonds, to be executed in four phases between December and January. Additionally, a $10 billion dollar–rupee buy/sell swap is slated for the upcoming month, illustrating the RBI's determination to alleviate tightening financial conditions. This resulted in the benchmark yield dropping by up to 8 basis points, marking the most significant daily decline in four months. This movement counters the earlier surge in yields, which was driven by concerns over supply and tightened cash conditions. The upcoming liquidity infusion, which is twice the amount earlier announced, aims to counterbalance cash drains caused by tax payments and the RBI’s dollar sales. Recently, the banking system's liquidity slipped into deficit. With borrowing costs easing, market analysts anticipate that the 10-year yield may trend towards the 6.50% mark.