Indian government bonds have declined for five consecutive weeks as US Federal Reserve rate increases and RBI liquidity measures intensify market pressure, raising concerns over inflation and further policy tightening.
Indian government bonds have now fallen for five straight weeks, as a recent US Federal Reserve rate rise and the Reserve Bank of India’s liquidity actions kept pressure on the market. The move higher in global borrowing costs has revived inflation worries, while the RBI’s efforts to drain cash from the banking system have added to expectations that it may need to tighten policy further.
The benchmark 6.94% note due in 2036 ended Friday at 7.0686%, up from 7.0463% the previous day and 4.5 basis points higher over the week, according to reports in The Economic Times and Marketscreener. A basis point is one-hundredth of a percentage point.
Market participants have been focused on the RBI’s liquidity management after it moved to absorb surplus funds from the banking system through bond purchases and other operations. Analysts cited by 5paisa said the central bank’s withdrawal of about ₹1 trillion from the system has lifted yields on longer-dated bonds, including the 10-year benchmark, which rose to around 7.08%.
The pressure is not limited to India. A hawkish Federal Reserve decision, higher oil prices and a rise in US Treasury yields have also weighed on sentiment across emerging markets, according to market commentary cited by IPOLYST. That broader backdrop has left Indian debt investors looking for signs that domestic inflation and liquidity conditions may stabilise before the market can recover.
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