India 10Y Yield Rises on State Debt Supply

The yield on India’s 10-year G-Sec hovered around 7.22%, extending gains to over two-year highs as expectations of higher debt supply and tighter monetary policy weighed on bond prices. States and union territories plan to raise INR 3.61 trillion through bonds in October-December, above market estimates of INR 3.25-3.50 trillion, with issuance skewed toward longer maturities. The yield was also pressured by New Delhi’s larger long-end borrowing allocation and recent RBI open-market bond sales, which have added to the supply overhang as the central bank drains surplus liquidity. Meanwhile, markets increasingly expect the RBI to raise its repo rate by 25 basis points this week, with elevated oil prices and global yields adding to inflation concerns. The 10-year yield ended Thursday at 7.2133%, after rising nearly 10 basis points last week.