FX.co ★ India 10Y Yield Falls to Near Two-Month Low

The yield on India’s 10-year G-Sec slipped to about 6.8%, its lowest level in nearly two months, as renewed foreign investor demand improved sentiment in the debt market. Over the last four trading sessions, foreign investors purchased almost INR 10,000 crore of Indian bonds, supported by the government’s decision to fully exempt taxes on capital gains from eligible debt investments and the Reserve Bank of India’s move to widen the range of securities available to overseas investors. These inflows mark a sharp reversal after FPIs had been net sellers of more than INR 10,119 crore of Indian debt since the start of the US-Israel conflict involving Iran. Bond yields were also pressured lower by expectations of RBI support for the rupee. Traders indicated that the central bank likely intervened following recent currency weakness, reportedly selling dollars in the spot market while conducting dollar-rupee buy/sell swaps with maturities of over one year through state-run banks.