Indian bond yields slide on rain relief, continued foreign demand

MUMBAI: Indian government bond yields extended their slide on Monday, as improved monsoon rains and sustained foreign buying buoyed sentiment, while traders said the 10-year benchmark’s close below a key technical level opened the door for further gains.

The benchmark 6.94% 2036 bond yield settled at 6.6851%, down from its previous close of 6.7108%.

The close below the 200-day moving average, the first since October 2025, is a key technical break and could attract momentum buying, a private bank trader said.

The 10-year yield could drop to 6.64% in the near term, said Alok Singh, head of treasury at CSB Bank.

Monsoon concerns have eased after the cumulative rainfall deficit narrowed to 24% below the long-period average, compared with a 43.1% deficit as of June 28, Barclays said in a note. Rainfall, however, still remains below normal for the season so far, it added.

While improved rainfall has eased immediate concerns, food inflation risks remain due to the El Nino weather phenomenon, Bank of Baroda said in a note.

The rally was also supported by strong overseas demand under the Fully Accessible Route, with foreign investors net buying more than 346 billion rupees ($3.63 billion) of Indian government bonds over the five weeks since June 1, after policymakers announced measures to attract FX inflows and support the rupee.

The U.S. 10-year Treasury yield eased in Asian trade, snapping a four-day rise and falling 2 basis points to 4.4613%, reducing pressure on emerging market bonds.

Rates

India’s overnight index swap rates eased further as monsoon worries cooled and expectations of a domestic rate hike receded. The one-year swap rate was down 4.5 bps at 5.73%, while the two-year fell 3.5 bps to 5.8750%. The five-year ended 4.5 bps lower at 6.1325%.