Whalesbook
Yields Climb to 10-Month Peak
Indian government bond yields touched a fresh 10-month high on Monday, driven by the upward trajectory of US Treasury yields. The benchmark 10-year government security settled at 6.68%, a level not seen since May 17, 2025. This marks a slight increase from the previous close of 6.67%.
Market participants noted that trading volumes were subdued, with little significant activity taking place. The 6.70% mark on the benchmark 10-year G-sec is now expected to act as a level of support. However, without positive catalysts, yields are unlikely to decline in the near term.
US Treasury Influence and Auction Outlook
The global influence was palpable, as the yield on the benchmark 10-year US Treasury note climbed seven basis points to 4.25% on Monday. This international movement directly impacted domestic debt markets.
Investor focus now shifts to the weekly state bond auction scheduled for Tuesday. Six states are set to borrow a combined ₹13,000 crore. This borrowing amount is substantially lower than the calendar expectation of ₹38,600 crore, a reduction of 66.3%.
Yield Spread and Currency Pressure
Analysts anticipate a potential tightening of the yield spread between the 10-year state bond and the benchmark government bond by one to two basis points, attributed to the reduced supply at the upcoming auction. This spread was 92 basis points at the last auction on January 13.
Meanwhile, the Indian rupee continued its losing streak, depreciating for the fourth consecutive trading session. It closed at 90.92 against the US dollar, down from 90.87 previously. Persistent corporate dollar demand and importer hedging activity weighed on the local currency, preventing any sustained recovery despite a brief pullback in the US dollar.