The yield on India’s 10-year government security (G-Sec) declined to about 6.8%, a three-week low, as demand for sovereign bonds strengthened on expectations of easing inflation, aided by softer crude oil prices. Sentiment has been bolstered by developments in global oil markets, where the recent moderation in prices has helped alleviate concerns about imported inflation in India.
Traders also highlighted ample liquidity in the banking system, which has kept short-term interest rates under pressure and channelled more funds into government securities. Market participants noted that liquidity conditions have become a key driver of bond demand, with surplus cash prompting investors to move into longer-duration instruments.
This trend has extended to treasury bills as well, where strong demand is expected to lead to further yield declines in upcoming auctions for 91-day, 182-day, and 364-day papers.
