Inflation angst spreads to India bonds as Reserve Bank downplays risk

India’s sovereign bond market is pricing in growing inflation risks, even as the central bank sees the price pressures as transient.

The yield on India’s benchmark 10-year bond jumped 16 basis points in July, the most among similar-tenor notes from other Asian sovereigns, as retail inflation remained persistently above the Reserve Bank of India’s 2%-6% target range.

Still, the RBI is widely expected to leave its key rates unchanged on Friday and continue with its easy monetary stance, as it prioritizes growth after the economy was ravaged by the deadly wave of Covid-19 infections. Governor Shaktikanta Das has insisted that