Indian government bond yields opened marginally lower on Monday, with the benchmark 10-year paper slipping by around 1 basis point as sustained foreign inflows continued to support the debt market. Trading activity remained subdued in early deals as participants awaited fresh global triggers, including the release of the U.S. Federal Reserve’s meeting minutes later this week.

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Benchmark Yield Trades Near 15-Week Low

The yield on the benchmark 10-year government bond stood at 6.7070% in early trade, compared with the previous close of 6.7108%. The movement kept yields close to their lowest levels in nearly 15 weeks.
Bond yields move inversely to prices, indicating that buying interest remained intact despite the absence of significant domestic developments at the start of the week.

Foreign Inflows Continue To Support Bonds

According to Kunal Sodhani, Head of Treasury at Shinhan Bank, the recent decline in bond yields has been supported by easing short-term funding costs, improved domestic liquidity and continued foreign investment into Indian debt. He said expectations surrounding India’s inclusion in global bond indices have also contributed to sustained investor interest.

Foreign portfolio flows through the Fully Accessible Route (FAR) remained positive over the past month. As per market data, inflows through the route exceeded $3.5 billion during the period, extending the steady trend seen since the Reserve Bank of India’s measures announced in June to support capital inflows into the country.

Yields Extend Multi-Week Decline

The benchmark bond yield has been on a declining trend over the past several weeks. Last week alone, the yield eased by around 6 basis points, marking the sixth consecutive week of declines. Over the six-week period, the cumulative fall has crossed 30 basis points.
Lower yields generally reflect stronger demand for government securities and favourable liquidity conditions in the financial system. The recent movement has coincided with improving domestic liquidity and continued overseas participation in the government bond market.

Focus Shifts To Global Events

Market participants are now looking ahead to the minutes of the U.S. Federal Reserve’s latest policy meeting for additional direction on global interest rate expectations. Any change in the outlook for U.S. monetary policy could influence overseas capital flows and bond markets worldwide.

For the time being, bonds issued by the Indian government will be receiving support due to the active participation of foreign institutions along with stable domestic liquidity. Absent any local events, investors will look out for indications on how global policies as well as capital flows influence the bond market.