Govt 10-year bond yield hits 12-week low as US-Iran deal sinks oil

Elevated ⁠crude prices have posed a key risk ⁠to India’s general finances, pressuring assets in the world’s third-largest oil importer. The yield on the benchmark 6.94% 2036 consider dropped 3.2 basis ​points to 6.8637% by ‌11:10 a.m. IST, its lowest intraday level since March 25. The yield is now 20 basis points above pre-war levels.

The U.S. 10-year yield also fell ‌nearly 6 bps to 4.42% in Asian trade. The rupee was also trading near a five-week high at 94.5750 per dollar. In its ⁠June policy decision, the Reserve Bank of India held rates steady while unveiling measures to boost foreign ‌inflows and stem the rupee’s slide.

Kotak Mahindra Bank estimates the steps could draw about $75 billion in cumulative capital inflows and bring the stability-of-payments gap close to neutral, from a previously estimated $75 billion deficit, easing a key overhang on sentiment.

Traders are now watching to India’s ‌inclusion in the Bloomberg Global Aggregate Index, with Bloomberg Index ​Services expected to review the inclusion again this month.

Foreign investors have poured greater than $1.6 ⁠billion into Indian bonds over the past six sessions.

India’s overnight ⁠index swap rates slipped further, tracking a slump in oil prices. The one-year swap rate dropped ‌5 bps to 5.9175%, while the two-year rate fell 6.5 bps to 6.06%. The five-year rate pared ​5.75 bps to 6.29%.