Mumbai, June 1 -- The rupee depreciation and a narrow gap between returns on Indian government bonds and those on US bonds have kept foreign investors wary of Indian debt markets.

India's benchmark 10-year government bond yields 7.004%, compared with 4.435% on the US 10-year Treasury, leaving a spread of about 256 basis points, according to the latest available data.

The yield spread, around the start of the war, was at around 272 bps and dropped to 235 bps in March, before recovering. While spreads have improved compared to where they were in 2025, experts said they have historically been above 300 bps.

This, along with the rupee depreciating roughly 3.4% against the dollar since the beginning of the West Asia war, made Indian bonds u...