Indian govt bonds extend worst losing streak in three decades

Indian government bond yields have risen for the tenth consecutive week, marking the longest losing streak in three decades as external headwinds intensify. The sustained uptick in yields reflects mounting pressure from elevated crude oil prices and persistently higher US Treasury yields, both of which have weighed heavily on domestic fixed-income sentiment and broader market sentiment.

The combination of global factors has created a challenging environment for Indian securities. Crude oil prices, which remain elevated, have raised concerns about imported inflation and fiscal pressures, while elevated US yields have made dollar-denominated assets more attractive to global investors, triggering capital outflows from emerging markets including India.

The external pressures have manifested in India's currency and reserve management as well. Foreign exchange reserves have declined by approximately $65 billion over a six-week period, a substantial drawdown that underscores the intensity of external selling pressure and the challenges posed by global monetary conditions. The Reserve Bank of India has likely intervened to support the rupee, contributing to the decline in reserves.

Market participants are closely monitoring both domestic and global economic data, with attention focused on whether crude prices will moderate and whether the US Federal Reserve's policy trajectory might stabilize. The sustained weakness in bonds has raised questions about the near-term direction of Indian monetary policy and the broader impact on credit markets and borrowing costs across the economy.