Still Waters Run Deep: India’s 10-Year Bond Yield Unchanged—What’s the Next Big Trigger?

India's 10-year benchmark government bond yield (IN063335G=CC) was unchanged at 6.2273% on May 19, from the last close of 6.2382%, showing a phase of calmness in the bond market despite global tensions and recent central bank activity.

 

The yield is now at its lowest level in over three years, supported by the Reserve Bank of India’s (RBI) recent back-to-back repo rate cuts and ongoing liquidity injections into the banking system. These measures aim to counter slowing domestic growth and ease financial conditions, especially after the RBI’s defense of the rupee temporarily tightened liquidity.

 

Market analysts expect the 10-year yield to remain in the 6.22%–6.26% range in the near term, with a slight upside bias after the RBI bought fewer bonds than scheduled in its latest open market operation. This selective approach by the RBI triggered some selling pressure but also signaled confidence in current liquidity levels.

 

The positive tone in the bond market is also supported by recent Indian inflation numbers that reported price increases at a six-year low and by strong foreign investor demand after India's inclusion in prominent global bond indices.

 

Looking ahead, the yield is forecast to soften further, potentially trading around 6.21% over the next year, provided supportive policy and liquidity conditions persist. Market participants are also watching for the RBI’s upcoming dividend transfer to the government, which could further impact yields.

 

Source: Trading Economics, TradingView/Reuters, Economic Times