India 10-Year Yield Spikes on GST Tax Cut

The yield on the Indian 10-year G-Sec rose toward 6.5% in August, hitting a four-month high, as investors priced in higher government borrowing after Prime Minister Modi announced sweeping GST tax cuts during his Independence Day address on Friday. While aimed at reforming the tax structure to boost consumption and attract foreign inflows, the plan revived fiscal concerns and stoked fears of increased debt supply, pushing bond prices lower despite earlier optimism from S&P’s rating upgrade. Meanwhile, risk appetite was lifted by hopes of a Russia–Ukraine deal after Trump met with Russian leader Putin. However, the geopolitical backdrop remains crucial, with Washington maintaining plans for an additional 25% tariff on Indian goods tied to its oil trade with Russia, while also scrapping a planned trade delegation to New Delhi. Markets now watched this week’s Reserve Bank of India debt auction, as central bank operations could influence liquidity and demand for government securities.