FX.co ★ Indian 10-Year Yield Retreats from 4-Month High

The yield on India's 10-year Government Security (G-Sec) decreased to 6.56% from a four-month peak of 6.63% recorded on August 26th. This shift occurred as investors anticipated intervention by the Reserve Bank of India (RBI) to stabilize the bond market. The selling pressure on bonds eased amid rising speculation that the RBI might purchase bonds in the secondary market or disregard low bids during auctions to curb the decline in G-Secs observed since August. This sentiment was reinforced by commercial banks' cautions, highlighting their inability to assimilate the larger issuance of new state bonds. The yield on the 10-year G-Sec had increased by up to 30 basis points in August due to the imposition of 50% tariffs by the US, which threatened India's growth prospects and fiscal consolidation, prompting the government to reduce taxes to buoy the economy. Consequently, market expectations for another RBI rate cut this year diminished. These speculations were further solidified by recent GDP figures, revealing an annual growth rate of 7.8%, surpassing the projected 6.7%.