Indian government bonds: 10-yr yield at more than two-month peak on supply, Warsh speech

Indian government bonds declined on Friday, with the 10-year yield reaching a two-month peak due to supply concerns and Federal Reserve Chair Kevin Warsh's upcoming speech at Jackson Hole. Market watchers will scrutinize Warsh's address for insights into US policy perspectives and inflation strategies. Fed officials highlighted persistent inflation worries on Thursday.

The Fed chairman's comments may impact anticipation of domestic rate hikes, following hawkish signals from the Reserve Bank of India's August meeting. India's benchmark 6.94% 2036 bond yield climbed to 6.9079%, up nearly 2 basis points from Thursday's close, hovering near its intraday high since June 18. India is selling ₹34,000 crore of the benchmark bond, extending its outstanding to ₹1.8 lakh crore.

A break below the 6.90% level could trigger a move to 6.95% for the benchmark yield. "Cutoff levels at the auction will provide a clearer signal of demand and set the near-term yield trajectory," noted a trader. Meanwhile, Brent crude futures slipped 5% in Asian trade as mediators prioritized reopening the Strait of Hormuz, amid renewed optimism.

The contract had reached $94 per barrel earlier on Thursday, following a Wall Street Journal report suggesting US President Donald Trump had no intention of reinstating an interim peace deal with Iran. India's overnight indexed swaps showed mixed results in early trading, with the one-year swap down 2 basis points at 5.90%, while the two-year and five-year rates remained unchanged at 6.11% and 6.43%, respectively.