India 10-year benchmark govt bond yield at 6.38% vs previous close 6.37%

India 10-year benchmark govt bond yield at 6.38% vs previous close 6.37%

India's 10-year benchmark government bond yield increased to 6.38% from the previous close of 6.37%, according to data from the Reserve Bank of India (RBI) on July 2, 2025. This upward movement in yields is attributed to several factors, including rising U.S. Treasury yields and expectations of a cautious approach by the Federal Reserve towards monetary policy easing.

The benchmark 10-year bond (IN063335G=CC) traded between 6.29% and 6.33% in the morning session, with the yield closing at 6.3090% on Tuesday. The five-year 6.75% 2029 bond (IN067529G=CC) ended at 5.9980%. A trader at a private bank noted that there could be some upward movement in the opening trades, but no large swings were forecasted for the overall trend to remain sideways for the day and the following day [1].

The U.S. yields have been on the rise, with the 10-year yield (US10Y) nearly hitting the crucial 4.50% mark and the 30-year yield (US30YT=RR) rising above 5.00%. Data showed that retail inflation in the U.S. increased by 0.3% in June, the largest monthly rise since January, pushing the annual inflation rate to 2.7%. The odds of a rate cut from the Federal Reserve are nearly zero for July, with the likelihood reducing to 55% from 65% a week ago [1].

Meanwhile, back home, India's retail inflation slowed to a more than six-year low of 2.10% in June, prompting calls for at least one more rate cut this year. The overnight index swap rates (OIS) in India are expected to see paying pressure tracking elevated Treasury yields. The one-year (INR1YMIBROIS=CC) OIS rate ended at 5.53%, while the two-year OIS rate (INR2YMIBROIS=CC) was at 5.50%. The five-year (INR5YMIBROIS=CC) OIS rate finished at 5.73% [1].

The benchmark BSE Sensex (SENSEX) and the broader NSE Nifty 50 (NIFTY) declined on Wednesday, with the Sensex down 0.5% to 82,101 and the Nifty declining 0.45% to 25,036, following losses in IT stocks. The Indian rupee (USDINR) weakened by 0.2% to 85.9950, as dollar demand from foreign banks and a large local corporation, along with tepid risk appetite, put pressure on the rupee [2].

The 10-year benchmark bond yield ended at its highest level since Jun. 30, closing at INR 100.11, or 6.31% yield, against INR 100.17, or 6.31%, the previous day. The most-traded 6.79%, 2034 bond closed at INR 102.82, or 6.38%, against INR 102.91, or 6.37%, the previous day. The Reserve Bank of India's two-day variable rate reverse repo auction drove up overnight money market rates and the cost of funding for banks, pushing the Secured Overnight Rupee Rate (SOFR) up 17 basis points [3].

The movement in U.S. yields after the minutes of the US Federal Open Market Committee meeting are expected to be closely tracked, as traders anticipate a preliminary US-India trade deal. This deal is likely to help the rupee appreciate and attract foreign portfolio investment inflows into both equities and fixed-income [3].

References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3TD06K:0-india-bond-yields-may-inch-higher-as-us-yields-move-up/
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3TB0IJ:0-india-stocks-rupee-bonds-swaps-call-at-1-p-m-ist/
[3] https://informistmedia.com/MoneyWire/31893/india-gilts-review--down-as-vrrr-auction-drives-up-banks--funding-costs