The yield on India’s 10-year government security slipped to around 6.7%, paring earlier gains as investors balanced easing oil prices against uncertainty ahead of the US Federal Reserve’s policy decision. Brent crude remained above $100 per barrel amid ongoing tensions in the Middle East but has steadied in recent sessions, offering some relief to bond markets.
Further downward pressure on yields came from a third straight day of declines in US Treasury yields, as markets broadly anticipate that the Federal Reserve will leave interest rates unchanged. Domestically, traders also focused on the RBI’s auction of 340 billion rupees in 91-, 182-, and 364-day Treasury bills.
While long-term yields have softened, tightening liquidity continues to underpin upward pressure on short-term rates. The banking system surplus has narrowed sharply, dropping to about 820 billion rupees from an average of 2.5 trillion rupees in mid-March.
