The yield on the 10-year Indian G-Sec was at 6.81%, dropping sharply from the five-month high of 6.9% touched on January 14th, tracking the drop in yields in economies with exposure to US credit markets following evidence of softer underlying inflation in the US. Still, domestic developments limited the respite for Indian debt. Slowing growth reduced confidence in New Delhi's fiscal strength, lastly evidenced by FY2025 GDP growth slowing to 6.4% from 8.2% in the previous year, according to a preliminary estimate. Additionally, the RBI’s looser grip on its crawling rupee peg limited the appeal of Indian assets. The combination of higher risk premium and rupee weakness drove foreign investors to close positions on Indian debt, which have previously soared through late 2024 due to the inclusion of Indian government bonds on fixed-income funds by JPMorgan and other major asset managers.
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