The yield on India’s 10-year G-Sec rose to 7.14%, extending gains to reach its highest level since May as a sharp selloff in US Treasuries, elevated crude prices, and heavy domestic debt supply continued to weigh on sentiment. The 10-year US Treasury yield climbed above 5.1%, its highest since 2007, after Federal Reserve officials signalled the need for further rate hikes, while Brent crude remained around $105 a barrel, raising inflation concerns and expectations of a hawkish RBI stance. Domestic pressure was also amplified by the government’s INR 340 billion bond auction, with traders watching the 7.15% level as a key threshold for the benchmark yield. The rise in shorter-tenor rates also reflected firmer expectations of higher near-term policy rates, with the five-year rate jumping 9 bps on Thursday.
The US 10-year Treasury yield hovered around 5.2% on Friday, near its highest level since mid-200. Traders refocused on hawkish comments from Fed officials, while a lack of concrete progress in US-Iran negotiations to end the conflict continued to fuel concerns about inflation. Meanwhile, the University of Michigan’s consumer sentiment survey confirmed a sharp rise in inflation expectations in September. Strong US economic data, worsening fiscal conditions and rising government debt have also weighed on the Treasury market. Adding to woes, efforts by Treasury Secretary Bessent to cap long-dated yields through increased Treasury buybacks are widely seen as having had limited impact. Investors currently expect the Fed to raise the federal funds rate by 25bps next month, with the probability of such a move standing at around 66%.
