MACRO & DEBT MARKETS WEEKLY

September 16, 2026

HIGHLIGHTS:

India’s 10Y G-Sec yield rose to 7.02% (+6bps WoW) and the 5Y jumped to 6.62% (+12bps WoW). Rupee weakened 107 paise against the dollar, breaching lowest level in two months.
India’s forex reserves jumped a record $44.9bn to a fresh high of $785.7bn.
RBI announced Open Market Operations (OMO) sales worth Rs.1 lakh crore (across three tranches) to absorb the mounting system liquidity (Rs.10.43 lakh crore).
Deposit growth accelerated to 16.7% YoY and credit growth to 19.1%.
US yields surged more sharply, the 2Y rose 26.5bps WoW to 4.64%, and the 10Y climbed 19.1bps WoW to 4.98%.
US CPI for August came in largely in line with expectations, even as a hotter PPI print pushed September Fed hike odds toward 90%.
The ECB hiked key interest rates by 25bps, citing inflationary pressures, and flagged another hike in October if needed.
Commodities stayed volatile, Brent spiked to $110/bbl. mid-week on Iran tensions before easing to $104 (still +9% WoW), while gold extended a third straight weekly decline toward $4,350 on surging Fed hike odds.

INDIA MACRO

Markets:

India’s 10Y G-Sec hardened to 7.02% on Friday (+6bps WoW), while the 5Y rose more sharply to 6.62% (+12 bps WoW). The benchmark remained elevated as oil prices rose amid renewed US-Iran tensions, compounded by RBI Governor Sanjay Malhotra’s comments that the RBI may conduct OMO sales to absorb surplus liquidity.
Corporate bonds traded mixed, diverging from the G-sec yields. AAA spreads compressed sharply at the short-to-medium end (2Y -14bps, 5Y -11bps), supported by surplus banking system liquidity. The 10Y AAA spread remained unchanged, dominated by duration and inflation considerations.
The India-US 10Y spread held steady at 205bps WoW.
The rupee bore the brunt of the geopolitical pressure, depreciating against the dollar to a two-month low of 95.55 against the USD (from 94.49, -1.1% WoW). Equities followed suit, with the Sensex and Nifty both closing the week lower (Sensex -2%).
System liquidity remained in a large surplus of Rs.10.43 trillion. RBI continued absorbing this through multiple VRRR auctions including a 26-day operation. The lack of response to longer duration VRRR forced RBI to announce OMO sale auction of Rs 1 trillion across three tranches to sterilize liquidity in the market.
1Y OIS stayed elevated at 6.10%, indicating a 25bps rate hike by RBI at Oct MPC.

Key Releases:

Forex reserves jumped by a record $44.903bn to a fresh lifetime high of $785.706bn for the week ended Sep 4, a sharp acceleration from recent weeks.
Deposit growth rose to 16.7% YoY as of 31-Aug (from 14.7%), while credit growth ticked up to 19.1% YoY (from 18.3%), both pointing to renewed momentum in bank balance sheets.

Auctions:

The weekly gilt auction saw the 6.20% 2029 paper only partially subscribed, bids of just Rs.45.06bn came in against a Rs.110bn notified amount, triggering a recovery in bond prices.
The SDL auction across 8 states/securities was comfortably subscribed. T-Bills cleared well across all tenors: 91-day at a strong 4.43x cover (yield 5.21%), 182-day at 3.95x (yield 5.62%), and 364-day at 2.67x (yield 5.92%).

GLOBAL MACRO

US 10Y yield almost breached 5% before settling at 4.96% (+19bps WoW), and the 30Y held at a 19-year high of 5.36%, driven by escalating US-Iran tensions, crude peaking at $110/bbl., and mounting debt-sustainability concerns. Treasury’s $18.5bn buyback announcement did little to contain the move.
USD-denominated Asian credit felt the pressure too. The Bloomberg EM Asia USD Credit Index, which tracks USD-denominated government-related and corporate debt across Asia (ex-Japan), fell 0.78% WoW and 0.66% month-to-date, tracking the broader rise in global yields.
Auction demand in the US was mixed: the 10-year note (9-Sep) cleared at 4.834% with a solid 2.71x cover, while the 30-year bond (10-Sep) saw a softer 2.61x cover and a wider tail (5.308% high vs. 5.250% median yield), reflecting thinner demand and building debt concerns at the long end.
US PPI for August surged up to 5.4% YoY, pushing September hike odds to 90%. CPI came largely in line (headline +0.4% MoM), though core inflation ran slightly hot at +0.3% (vs. 0.2% consensus). Equities rallied on Friday on the in-line print but still closed the week lower (S&P -0.8%, Dow -1.6%, Nasdaq -0.7%) as oil dominated sentiment.
ECB hiked the key interest rate by 25bps to 2.65% and flagged another move in October. Germany’s 10Y Bund surged to 3.52% and the UK 10Y gilt held at a multi-decade high of 5.36%. UK’s GDP (Q2) beat expectations with 0.4% growth in July, a print expected to slow as higher energy and borrowing costs increasingly pass through.
Japan’s JGB 10Y touched 2.98% and South Korea’s 10Y hit a multi-year high of 4.54%. The yen, however, was a standout outperformer among the G10 currencies, fuelled by the US Treasury Secretary’s comments citing ‘asymmetric information’ and openly daring traders to bet against efforts to strengthen the currency, a stance that risks a sharper carry-trade unwind if hedgers continue paring back yen exposure. Japan’s PPI ran hot at 7.6% YoY ahead of an expected BOJ hike. Nikkei and Kospi led regional equity losses (-1.93% and -1.76%).

COMMODITIES:

Crude Oil & Natural Gas:
Brent spiked as high as $110/bbl. mid-week on escalating US-Iran tensions before easing to $104 by Friday, still up nearly 9% for the week. Natural gas moved the opposite way, falling to a three-week low near $2.80/MMBtu on a larger-than-expected storage build.

Precious Metals:
Gold extended a third straight weekly decline toward $4,350/oz as hot PPI data pushed September Fed hike odds to 90%. Silver was hit harder, tumbling over 5% in a session before steadying near $63.5 on the same hawkish repricing.

COMING UP THIS WEEK

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