The yield on the Indian 10-year G-Sec fell to 6.35% trim the rebound that topped at 6.4% on June 23rd amid lower inflation expectations and support from the Indian government’s prudent fiscal position. Uninterrupted flows of fuel tankers into the Indian Ocean from the Persian Gulf drove oil benchmarks to erase its surge, easing the refining costs for domestic firms.

Consequently, investors continued to focus on the low inflationary backdrop in India and the dovish response by the RBI. The headline inflation rate fell by more than expected to 2.82% in May, the lowest in over six years, and well under the RBI’s midpoint target of 4%. The RBI delivered a sharper-than-expected rate cut in its June meeting to lower benchmark borrowing costs to 5.5%. In the meantime, new data showed that India’s budget deficit for the current financial year narrowed from the previous month in May, as a surge in government revenues outpaced higher outlays.