• On Friday, the 10Y benchmark (6.94% GS 2036) opened 2 bps higher at 7.00%, tracking a sharp overnight rise in Brent crude oil prices and US Treasury yields. • Brent crude surged to around $109/bbl amid escalating US-Iran tensions, attacks on Saudi energy infrastructure, disruptions to oil flows through the Strait of Hormuz and fading hopes of a near-term peace deal • The 10Y UST yield hardened to 4.97% after PPI came in higher at 5.4%, driven by elevated energy prices, raising concerns over inflation and Fed rate hikes. • Over the day, the 10Y IGB traded in the 7.00%-7.02% range before touching 7.03% following the RBI Governor’s comments on possible OMO sales to absorb surplus liquidity. The 10Y point closed the day 4 bps higher at 7.02% vs 6.98%. • Banking system liquidity remained at surplus of around INR 10.4 Tn. RBI conducted multiple VRRR auctions to absorb excess liquidity. RBI’s 26 day VRRR of INR 5 Tn saw subdued demand, with only INR 0.6 Tn subscribed at 5.24%.
