India’s 10-year bond yield to stay stable

New Delhi

India’s 10-year bond yield is expected to stay between 6.25% and 6.55% during the financial year 2025-26 (FY26), according to a new report from Bank of Baroda.

The report says that the government’s careful borrowing plans will help keep long-term interest rates steady. More short-term borrowing is planned, which should prevent large swings in the longer-term bond market.

Economist Dipanwita Mazumdar said the Reserve Bank of India (RBI) is also supporting stable rates through its liquidity management. This will help the yield curve evolve in an orderly way. The RBI has been buying bonds through Open Market Operations (OMOs), which increases demand and keeps yields from rising.

In FY25, bond yields were somewhat sticky early in the year due to rising U.S. interest rates and inflation. But later, as the U.S. Federal Reserve started cutting rates before the RBI, India’s bond market gained support.

Another boost came from India’s upcoming inclusion in global bond indices, which starts on June 28. This has attracted more foreign investment, especially through the Fully Accessible Route (FAR), where foreign investors face fewer limits.

Strong demand from banks, mutual funds, and pension funds has also helped keep bond yields steady, even when liquidity was tight. The government’s commitment to its fiscal roadmap has further increased investor trust.

Overall, experts believe that the mix of RBI support, foreign inflows, and solid domestic demand will keep the 10-year bond yield within a stable range throughout FY26.