FX.co ★ India 10Y Yield Nears 10-Month High Ahead of Debt Auction

The yield on India's 10-year government securities increased to approximately 6.67%, nearing a 10-month peak, as investors exercised caution due to the impending substantial debt issuance. The Indian government plans to auction INR 310 billion (approximately $3.43 billion) worth of bonds this Friday. This auction will include a liquid five-year bond and a new 50-year bond, potentially challenging demand from long-term investors like insurance companies. Market sentiment has been negatively affected by Bloomberg Index Services’ decision to delay the inclusion of Indian bonds in its Global Aggregate Index. Furthermore, the Reserve Bank of India's bond purchases have been limited to less frequently traded securities, which has not effectively maintained lower yields. The tightening domestic liquidity situation and lackluster interest from foreign investors have also constrained purchasing. Nevertheless, softer inflation figures from December have helped limit further yield increases by easing immediate pressures on interest rates.