US Treasury selloff pushes India 10-year bond yield towards 7%

Business Recorder reported that Indian government bond yields climbed sharply early in the month, with the benchmark approaching 7.00%. The 6.94% 2036 bond traded at 6.9559% at 10:00 a.m. IST on Tuesday, compared with a Monday close of 6.9452%. Earlier in the session the yield touched 6.9653%, its loftiest level since June 8.

Escalating hostilities between Iran and the United States lifted US Treasury yields, which then pulled Indian bonds lower. American forces hit two Iranian missile launchers, and the strikes were followed by counterstrikes targeting American personnel in Jordan. On Monday, the 10-year US Treasury yield moved above 4.75%, a level not seen since January 2025, and extended gains in Asia. Brent crude traded around $91 per barrel, a burden for heavy crude buyers such as India, while the seven-month conflict has kept oil prices elevated.

CME FedWatch data showed odds of a quarter-point Fed hike this month at 66%, up from about 41% a week earlier. That shift followed Jackson Hole remarks by Federal Reserve Chair Warsh, who said borrowing costs could need to rise if inflation stays away from its 2% goal. Separately, India's economy expanded 7.8% on the year in April-June, ahead of the 7.1% Reuters poll estimate, which raises the prospect of tighter policy from the Reserve Bank of India.