The yield on India’s 10-year G-Sec rose to 6.74%, pausing recent losses after slipping to a fifteen-week low, as investors continued to assess the outlook for monetary policy.
Over the past three months, Indian government bond yields have risen amid expectations that the Reserve Bank of India is nearing a shift toward tighter policy, with inflation concerns fueled by the Iran war-related energy shock.
The benchmark 10-year yield climbed 34 basis points between March and May.
The sharper rise in shorter-dated yields has prompted foreign investors to rotate into bonds with maturities of less than five years, which accounted for more than two-thirds of the ten most-purchased securities during March-May, as they offered more attractive risk-adjusted carry with lower duration risk.
Meanwhile, overseas investors bought INR 221 billion of government bonds in January-February, turned record net sellers of INR 177 billion in March, before returning as net buyers in April and May.
