Will Govt Bond Yields Decrease by 10 bps by November Due to Stable Inflation and Oil Prices?
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Synopsis
As the landscape of Indian bond yields shifts, experts predict a slight decrease driven by stable inflation and oil prices. This report unpacks the potential impacts on the economy and investors, emphasizing crucial factors to watch in the coming months.
Key Takeaways
- Benchmark Indian bond yields expected to decline.
- 10-year government bond yield projected at 6.38 percent-6.48 percent by November.
- State development loan yields to drop to 7.15 percent-7.25 percent.
- Stable oil prices mitigate geopolitical risks.
- Minimal repo rate cut likelihood in October.
New Delhi, Sep 17 (NationPress) The benchmark Indian bond yields are projected to experience a slight decline over the upcoming three months, influenced by favorable inflation data and steady oil prices, according to a report released on Wednesday.
The yield on the 10-year government bond, which was recorded at 6.59 percent on August 31, is anticipated to drop to a range of 6.42 percent-6.52 percent by the end of September and further to 6.38 percent-6.48 percent by the close of November, as reported by Crisil Intelligence.
Additionally, yields on state development loans are expected to decrease from 7.23 percent to a range of 7.15 percent-7.25 percent by November, while 10-year corporate bond yields may fall from 7.19 percent to between 7.08 percent-7.18 percent.
Crisil highlighted that stable oil prices are mitigating the impact of geopolitical uncertainties and a slowdown in global growth. Key factors influencing these yields include the upcoming decision from the US Federal Open Market Committee, domestic market liquidity averaging Rs 2.84 lakh crore in August, ongoing US-India trade discussions, and fluctuations in foreign capital inflows.
Between July 1 and September 8, Foreign Institutional Investors divested from Indian equities amounting to Rs 1.02 lakh crore, with Rs 7,800 crore sold in the first six sessions of September.
The report also notes a minimal chance of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) reducing the repo rate in its October meeting, as the Central Bank has indicated a pause and any further actions will be data-driven.
The actual fiscal impact is expected to be less significant than initially thought due to the recent rationalization of the Goods and Services Tax (GST).
India's Q1 GDP growth hit 7.8 percent, and the government's initiative to simplify the GST structure is projected to inject around Rs 50,000 crore into the economy, enhancing domestic consumption.
Recently, SBI Capital Markets reported that fiscal pressures in the US and UK are complicating global trade issues, with increasing debt burdens resulting in steeper bond yield curves.
Point of View
It’s essential to approach the evolving situation of Indian bond yields with a blend of caution and optimism. While favorable inflation data presents opportunities, global economic uncertainties must not be overlooked. We remain committed to providing insights that empower our audience to navigate these financial waters with confidence.
NationPress
20/09/2025
Frequently Asked Questions
What are Indian bond yields?
Indian bond yields represent the return an investor can expect from government bonds in India, reflecting the overall health of the economy and interest rate movements.
How do oil prices affect bond yields?
Stable oil prices can help lower inflation, which in turn may lead to lower bond yields as central banks may avoid raising interest rates.
What is the significance of the Monetary Policy Committee (MPC)?
The MPC of the Reserve Bank of India sets key interest rates, which influence borrowing costs and economic activity, thereby impacting bond yields.
What is the expected impact of GST rationalization on the economy?
The simplification of the GST structure is anticipated to enhance domestic consumption by freeing up additional capital, which can stimulate economic growth.
Why is foreign capital inflow important?
Foreign capital inflows are crucial for maintaining liquidity in the market and influencing exchange rates, which can affect bond yields.
