FX.co ★ Indian 10-Year Yield Sinks to 3-Year Low

In April, the yield on India's 10-year government securities dropped to 6.4%, marking the lowest level in over three years. This decline was driven by expectations of lower interest rates and recent measures implemented to enhance liquidity in the Indian bond market. The Reserve Bank of India (RBI) lowered its benchmark repo rate twice in succession, after maintaining it at a four-year high of 6.5% for an entire year to address the slowdown in domestic economic growth. Furthermore, the RBI undertook a series of liquidity infusions into commercial banks, following its efforts to stabilize the rupee which had exhausted domestic reserves and constrained financing conditions. Given that the latest inflation data indicated that price growth had decreased to a more than five-year low, the central bank is anticipated to continue with its rate cuts. Meanwhile, the rupee's depreciation paused, providing an opportunity for foreign investors to consider re-entering the Indian bond market. This shift has reignited foreign inflows into domestic fixed-income securities, particularly after their inclusion in funds managed by financial institutions such as DBS and JPMorgan.