FX.co ★ India 10Y Yield Rises on State Debt Supply

The yield on India’s 10-year government security (G-Sec) hovered around 7.22%, advancing to its highest level in more than two years as expectations of increased debt supply and tighter monetary policy pressured bond prices. States and union territories plan to raise INR 3.61 trillion through bond issuance in October–December, exceeding market expectations of INR 3.25–3.50 trillion, with supply skewed toward longer tenors. Sentiment was further weighed down by the central government’s larger allocation of borrowing at the long end of the curve and the Reserve Bank of India’s recent open-market bond sales, which have compounded the supply overhang as the RBI absorbs surplus liquidity. At the same time, markets are increasingly pricing in a 25-basis-point hike in the RBI’s repo rate this week, with elevated crude oil prices and higher global yields intensifying inflation concerns. The 10-year yield closed Thursday at 7.2133%, after climbing nearly 10 basis points over the previous week.