FX.co ★ India 10Y Yield Rises on Persistent Supply Pressure

India's 10-year Government Securities (G-Sec) yield reached approximately 6.67%, nearing the ten-month highs observed last week. This uptick was primarily due to persistent supply concerns overshadowing the central bank's liquidity initiatives. Fresh bond issues, notably INR 398 billion through state government bond sales, fueled this rise in yields, emphasizing worries that bond issuance continues to surpass demand. Although the bond sale amount was less than initially projected, market expectations were for a more significant reduction after a considerable decrease in state borrowing announced recently. Investor caution heightened with the anticipation of crucial fiscal indicators, notably potential increases in government borrowing in the upcoming budget. While liquidity measures from the Reserve Bank of India, including an INR 1 trillion bond purchase, a USD 10 billion foreign exchange swap, and a 90-day variable rate repo operation amounting to INR 250 billion, provided some support, these efforts were insufficient to fully counterbalance the pressures arising from bond supply.