India’s government bond market slipped in early trade after a fresh petrol and diesel price increase rekindled inflation concerns. The yield on the benchmark 6.48% 2035 bond climbed to 7.0591% by late morning as US Treasury yields rose to a one-year high. With India importing nearly 90% of crude, higher oil prices threaten the rupee and the current account, while a reported jump in wholesale inflation to 8.3% raised fears of consumer-price spillover ahead of a new 320 billion rupee bond sale.
Global debt has surged to a record near 353 trillion, and investors are beginning to look beyond US Treasuries. With expectations pointing to rising US debt but steadier paths for parts of Europe and Japan, demand is drifting toward Japanese and European government bonds. Meanwhile, US corporate bond markets are heating up, adding to the shift.
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The Reserve Bank of India has reduced deposits with other central banks and increased allocation to US Treasury bills, signaling a shift toward assets with deeper global liquidity. The change is linked to rising geopolitical tensions and aims to strengthen India’s foreign exchange reserves through the transition to more globally liquid instruments.
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