The yield on India’s 10-year government security (G-Sec) hovered around 6.95%, rising for a third straight session to reach multi-week highs, as climbing US Treasury yields and heightened geopolitical tensions spurred renewed selling in Indian bonds. The benchmark yield touched its highest level since June 8 after US forces struck two Iranian missile launch sites, triggering retaliatory attacks on US personnel in Jordan and stoking fears of further escalation.
At the same time, the US 10-year Treasury yield moved above 4.75%, while Brent crude prices held near $91 per barrel, intensifying worries about inflation and the likelihood of tighter monetary policy in India. In this environment, market participants increased the implied probability of a 25-basis-point interest rate hike by the US Federal Reserve to 66%, up from roughly 41% a week earlier, following hawkish comments from Fed Chair Kevin Warsh. On the domestic front, India’s robust GDP growth of 7.8% in the April–June quarter further reinforced expectations that the Reserve Bank of India may also shift toward a more restrictive policy stance.
