FX.co ★ Indian 10-Year Yield Drops

The yield on India's 10-year government security decreased to 6.35%, trimming the earlier rise that peaked at 6.4% on June 23rd. This decline is attributed to lower inflation expectations and the Indian government's sound fiscal management. Continuous flows of fuel tankers from the Persian Gulf into the Indian Ocean led to a reduction in oil prices, consequently decreasing refining costs for domestic companies. As a result, investors maintained their attention on India's low inflation environment and the Reserve Bank of India's (RBI) accommodating stance. Notably, the headline inflation rate dropped more than anticipated to 2.82% in May, marking the lowest level in over six years and significantly below the RBI's target midpoint of 4%. In its June meeting, the RBI implemented a larger-than-expected interest rate cut, reducing the benchmark borrowing rate to 5.5%. Additionally, recent data indicates that India's budget deficit for the current fiscal year decreased in May compared to the previous month, as an increase in government revenues exceeded rising expenditures.