FX.co ★ Indian 10-Year Yield Pulls Back

The yield on India's 10-year government securities decreased to 6.35%, pulling back from its previous peak of 6.4% on June 23rd. This decline was underpinned by reduced concerns about the potential impacts of the Iran-Israel conflict on India's oil supply and inflation levels. The uninterrupted arrival of fuel tankers into the Indian Ocean from the Persian Gulf led to a stabilization in oil prices, thereby reducing refining costs for Indian companies. As a result, investors' attention remained on India's low inflation environment and the Reserve Bank of India's (RBI) dovish stance. The headline inflation rate in May unexpectedly dropped to 2.82%, the lowest in over six years, significantly below the RBI's target midpoint of 4%. In response, the RBI implemented a more substantial than anticipated rate cut at its June meeting, bringing the benchmark borrowing rate down to 5.5%. Additionally, the central bank introduced a series of liquidity measures to support commercial banks following its defense of the rupee, which had strained domestic reserves and tightened financing conditions.