India Bonds Slide Fifth Week on Fed Hike and RBI Liquidity Clampdown

India's government bonds saw their fifth consecutive weekly loss as investors grew increasingly bearish on domestic policy tightening. The benchmark 6.94% 2036 bond yield closed at 7.0686%, up from 7.0463% on Thursday, marking a 4.5 basis points rise for the week.

The market was hit with three major blows this week: a global debt rout that pushed yields to multi-decade highs, a Federal Reserve rate hike that bolstered inflation-fighting resolve and heightened expectations of an RBI rate hike in October, and the RBI's bond sales, which added supply pressure in a demand-light market.

Ajit Banerjee, president and chief investment officer at Shriram Life Insurance, said the Fed's decision will add to calls for the RBI to hike in its October meeting to maintain India's interest rate differential with the US and mitigate any potential foreign fund outflow.