Indian 10-Year Yield Falls to Over 3-Year Low

In April, the yield on the 10-year Indian Government Security (G-Sec) declined to 6.36%, marking its lowest level in over three years. This drop was fueled by the anticipation of reduced interest rates and initiatives aimed at enhancing liquidity, factors that have bolstered the Indian bond market and caused a divergence from U.S. bond prices. The Reserve Bank of India (RBI) implemented consecutive cuts to its benchmark repo rate, which had been maintained at a four-year high of 6.5% for an entire year, in response to the deceleration in domestic economic growth. Additionally, the central bank has executed a series of liquidity injections into commercial banks following efforts to support the rupee that had depleted domestic reserves and tightened financing conditions. It is anticipated that the RBI will continue to lower rates, given that the most recent inflation figures indicate a drop in price growth to its lowest point in over five years. Meanwhile, the rupee's stabilization has prompted foreign investors to reconsider Indian bonds, leading to renewed foreign investments into the country's fixed-income market, spurred by their inclusion in funds managed by DBS and JPMorgan.

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