The yield on India’s 10-year government security (G-Sec) eased to about 6.94%, pulling back from nearly three-month highs, after larger-than-anticipated FCNR(B) inflows bolstered liquidity and improved sentiment toward Indian debt. The Reserve Bank of India reported mobilizing over $127 billion through the FCNR(B) window—well above market expectations of around $90 billion—taking total inflows, including external commercial borrowings and overseas foreign-currency borrowings, to $136.38 billion.
These inflows strengthened banking-system liquidity, as banks swapped a significant portion of the foreign currency with the RBI, while the firmer rupee helped ease concerns over imported inflation. This backdrop is expected to support demand for shorter-tenor securities, particularly five-year maturities, with much of the inflows likely to remain in the system for three to five years. However, the decline in yields was limited by elevated crude oil prices and higher US Treasury yields, with Brent crude trading near $95 per barrel and the US 10-year yield holding above 4.80%.
