India's 10-year bond yield scales over 2-month peak ahead of Warsh speech

Business Recorder reported that Indian government bonds extended their losses on Friday, keeping the 10-year yield at its highest in more than two months. Traders were positioning ahead of a speech by Federal Reserve Chair Kevin Warsh at Jackson Hole, his debut there. Global markets expect the remarks to shed light on the direction of U.S. policy and its approach to inflation.

The benchmark 6.94% 2036 bond closed at a 6.9108% yield, breaching the key 6.90% level for its highest finish since June 11. A hawkish tone in the minutes of the RBI's August meeting has reignited speculation that domestic rates could be tightened. Gopal Tripathi of Jana Small Finance Bank said Warsh's speech would be crucial and that the yield would likely stay below 6.95% unless the Fed chair delivers a surprisingly hawkish message.

The premium over U.S. Treasuries has grown as yields rose, with the spread hitting 224 basis points at one point on Friday, its widest in roughly two months, up from 207 bps, a one-year low reached earlier in August. Headwinds include firmer RBI liquidity draining, a waning lift from an overseas deposit scheme, and rising price pressure from costlier crude linked to the unresolved U.S.-Iran conflict. Even so, insurers, pension funds and state-run banks keep buying long-term debt, cushioning the selling.