Rupee, bonds face pressure as US Treasury yields rise and crude tops $100

The rupee fell 0.5 per cent to 96.31 per dollar, while the benchmark 10-year bond yield rose to 7.21 per cent as Brent crossed $100 a barrel ahead of the RBI policy meeting.

The rupee depreciated 0.5 per cent to 96.31 per dollar on Thursday, against the previous close of 95.83 per dollar, tracking a rise in the dollar index and US Treasury yields. The benchmark 10-year government bond yield rose to 7.21 per cent, its highest level since April 2024, against the previous close of 7.18 per cent.

 

The rupee was the worst-performing Asian currency during the day, falling 0.5 per cent against the dollar, compared with a 0.49 per cent decline in the Taiwan dollar and 0.4 per cent fall in the Indonesian rupiah.

 

“The Indian rupee weakened in tandem with most Asian currencies as the US dollar extended its rise, supported by higher US bond yields and a rebound in crude oil prices. Risk-averse sentiment, persistent foreign fund outflows, dollar short covering by the market participants and the central bank’s sizeable forward short-dollar position continued to weigh on the currency,” said Dilip Parmar, Research Analyst, HDFC Securities.

 

 

The dollar index rose 0.45 per cent to 101.90, while the US 10-year Treasury yield rose to 5.34 per cent, its highest level since 2002, putting pressure on emerging market currencies and bonds. Brent crude also crossed $100 a barrel, adding to concerns over imported inflation.

 

Indian government bonds came under pressure ahead of the RBI’s October policy meeting, with the rise in US Treasury yields and higher crude prices adding to the pressure.

 

“The 10-year US Treasury yield rose beyond 5.3o per cent, while Brent crude climbed above $100 a barrel which led to selling of bonds,” said a dealer at a primary dealership. 

 

The rupee has depreciated 6.68 per cent so far in calendar 2026, while the 10-year government bond yield has risen 63 basis points. The currency is down 7.91 per cent over the past year, while the benchmark yield has risen 70 basis points.

 

“With Brent above $100 a barrel, the pressure from crude continues to be severe, along with the pressure from FPIs who are selling huge amounts in equity and debt,” said a market participant.

 

Bond market participants said the yield on the benchmark 10-year government bond is expected to touch 7.25 per cent by the Monetary Policy Committee meeting outcome on October 7. 

 

Yields have hardened in the past three months amid escalating geopolitical tensions and rising global yields.

 

Short-term bonds have also come under pressure after the closure of the RBI’s special swap scheme, with the yield on the five-year government bond rising 12 basis points during the current week.