Macro & Debt Market Weekly

September 7, 2026

Highlights of the week

India’s 10Y G-Sec yield hardened to 6.96% (+5bps WoW), while the 5Y dropped to 6.52% (-2bps WoW).
Indian corporate bonds stayed mixed, with AAA PSU 5Y and 10Y yields rising by around 1-2 bps over the week, broadly tracking the upward move in government bond yields.
US 10Y (4.78%) and DXY (~99.18) both rose as hike odds repriced to ~60%, largely driven by the Non-Farm Payrolls data release.
India Q1FY27 GDP grew 7.8%, led by strong services growth.
Forex Reserves hit a fresh record of $740.80 bn (week to 28-Aug), up $11.5bn, ninth straight weekly rise, led by $9.3bn in Foreign Currency Assets (FCA) and $2.2bn in gold.
Global yields surged to multi-year highs (10Y Bund >3.36%, UK gilts to 19-year highs, JGB spiked to its highest since 1996).
Brent closed the week at $96.28/barrel as the US resumed strikes on Iran for the first time in about a month and Strait of Hormuz shipping risks intensified.

Source: Bloomberg, Investing.com

Macro Developments

Domestic Markets:

India’s 10Y G-Sec yield hardened to 6.96% (+5bps WoW, +15bps MoM), while the 5Y dropped to 6.52% (-2bps WoW, +11bps MoM). The benchmark G-Sec stayed elevated throughout the week tracking higher Brent crude oil prices and uptick in US Treasury yields. The India-US 10Y spread remained steady at 218bps WoW.
Indian corporate bonds stayed mixed, with AAA PSU 5Y and 10Y yields rising by around 1-2 bps over the week, broadly tracking the upward move in government bond yields.
The rupee appreciated marking a two-month high against the dollar, to end the week firm at 94.49 (89 paise WoW).
The dated G-Sec auction of Rs 320 bn witnessed mixed demand, the coupon on the new five-year 2031 bond was slightly higher than expected while the 40-year, 7.71%, 2066 paper was well bid by long-term investors.
Variable Rate Reverse Repo (VRRR) operations were undersubscribed throughout the week, with a cumulative Rs 33.5 trln on offer across all operations at the 5.24% cut-off rate.
The State Development Loans (SDLs) auction across 15 states/securities was comfortably subscribed.
T-Bills also cleared well: the 91-day at a strong 3.28x cover (yield 5.26%), the 182-day at 4.14x (yield 5.66%), and the 364-day at 2.04x (yield 5.91%).
The Sensex and Nifty each closed lower for the week (Sensex -1%, Nifty broadly similar).

Key Economic Data Releases:

India’s fiscal deficit for the April-July period of the fiscal year 2027 stood at Rs 4.55 trln, reaching 26.8% of the full-year budgeted target of Rs16.96 trln.
India Q1FY27 GDP grew 7.8%, led by strong services growth, signalling resilience despite elevated raw material costs amid the Middle East crisis.
India’s manufacturing PMI slipped to 52.8 in August from 53.5 in July as output, and new orders slowed to five-year lows, while services sector activity accelerated in August. India’s Services PMI rose to 54.1 from 53.3 in July, indicating a stronger pace of expansion.
India’s Q1FY27 CAD widened to $4.2 Bn, or 0.5% of GDP as a sharp rise in the merchandise trade deficit put pressure on the country’s external balance. A year earlier, the CAD was $3.4 billion, or 0.4% of GDP.
Deposit growth fell to 14.7% YoY as of 15-Aug (from 15.4%) while Credit growth moderated to 18.3% YoY, from 19.3% at July-end, indicating some normalization in both credit offtake and deposit mobilization. The relatively smaller decline in deposits compared with credit possibly indicates a shift in banks’ funding mix, with bulk deposits being replaced by FCNR(B) inflows.
Forex Reserves hit a fresh record of $740.80 bn (week ended 28-Aug), up $11.5bn, ninth straight weekly rise, led by $9.3bn in FCA and $2.2bn in gold. With the FCNR(B) window closing 31-Aug, the pace of accretion may moderate from here.

What caught the eye?

Liquidity in the banking system surged to Rs 10.73 trln as on Sep 4, on back off the FCNR(B) inflows and may peak around Rs 12 trln in the coming days. To absorb the ample liquidity, RBI conducted multiple VRRR auctions including a 30-day with an option for premature reversal. However, this may not be sufficient on its own to reduce liquidity. RBI has a concurrent build-up in forward FX forward position worth $36 bn expected to mature in next 3-6 months time, with a good chance that the RBI may let the positions mature rather than rolling them over. Also, the central bank may deploy durable liquidity absorption tools such as FX Sell/buy swaps, MSS or OMO sales.

Global Macro

United States of America

Yields whipsawed all week: an early oil spike (fresh US-Iran strikes) pushed hike odds toward 70%, before Fed Governor Waller’s dovish remarks on Thursday pulled the 10Y back to 4.76% and sent DXY to a two-week low.
Friday’s jobs data reversed course entirely, the 10Y (4.78%) and DXY (~99.18) both rose as hike odds repriced to ~60%.
US Trump’s statement putting pressure on the Fed to cut interest rate after jobs data didn’t move the yields significantly as market remain focused on upcoming US CPI data (Sep 11).
Non-Farm Payrolls data was the week’s biggest catalyst, exceeding expectation (+162K vs. +55K consensus), the strongest gain since March, while July’s print was revised to +21K from -23K. Unemployment rate was steady at 4.1%.

United Kingdom and Eurozone

Yields breached multi-year highs (10Y Bund >3.36%, UK gilts to 19-year highs), however softer oil and Fed Waller’s tone triggered a relief rally mid-week; 10Y Bund settled near 3.35%, 10Y gilt eased to 5.13% by Friday.
Eurozone Producer Price Index (PPI) for July jumped 1.6% MoM (vs. 1.2% expected), lifting the annual rate to 5.8% from 4.6%, almost entirely driven by energy; supporting the case for the ECB’s expected 25bp hike this week.

Asia-Pacific

JGB 10Y spiked to 3%, highest since 1996 on hawkish signals by the Bank of Japan (BOJ), before a well-received 30Y auction pulled yields back to ~2.9 by Friday. The yen surged up to 3% over two sessions as markets priced a more aggressive BOJ move, USD/JPY fell to the mid-155s, its strongest yen level since early August.
Japan’s Composite PMI hit a 6-month high of 53.4 (from 52.7 in July), with sharp cost pressures driving output charges to near-record highs, consistent with the BOJ’s hawkish tilt.

Commodities

Crude Oil and Natural Gas:

Brent closed the week at $96.28/barrel as the US resumed strikes on Iran for the first time in about a month and Strait of Hormuz shipping risks intensified, even though rising Iraqi exports offered a partial offset.

Precious Metals:

Gold whipsawed with the Fed’s dovish narrative and Friday’s US payrolls beat., ending roughly flat for the week. Silver moved the same way, only more aggressively.

Coming Up Next

Date	Time	Region	Event	Forecast
07-Sep	2:30PM	Eurozone	GDP	1.00%
09-Sep	10:30PM	Eurozone	ECB Lagarde Speech	–
10-Sep	5:45PM	Eurozone	Monetary Policy Statement	25 bps hike
10-Sep	6:00PM	US	PPI	0.40%
10-Sep	6:00PM	US	Initial Jobless Claims	205K
10-Sep	7:30PM	US	Existing Home Claims	3.98M
11-Sep	11:30AM	UK	GDP	0.00%
11-Sep	6:00PM	US	CPI YoY	3.40%