Bond yields likely to modestly decline due to easing inflation, rate cut: Report

New Delhi, Oct 14 (IANS The benchmark 10‑year government bond yields is expected to edge lower in the coming months, driven by benign inflation, falling oil prices, and possible monetary easing by the Reserve Bank of India, a report said on Tuesday.

A report from Crisil Intelligence forecasts the 10-year G-sec yield to be between 6.46 per cent and 6.56 per cent by October 31 and between 6.39 per cent and 6.49 per cent by December 31.

Similarly, SDL yields are also expected to decline by 8 to 10 bps over similar tenures. Corporate bond yields also may see a dip of 6 to 10 bps over this tenure, the report said.

Further, Crisil forecasted that the RBI’s Monetary Policy Committee is expected to cut the policy rate further this fiscal year, driven by GDP growth and inflation trends

Analysts indicated that the one-month outlook on bond yield is based on easing inflation and benign oil prices which offset the impact of geopolitical uncertainties and slowing global growth.

Other factors that could affect the yield include market liquidity, renegotiation of US tariffs, foreign portfolio investor (FPI) inflows, rupee depreciation, the US Federal Open Market Committee’s decisions, global uncertainties, and anticipated state and central government borrowings.

The MPC on October 1 maintained the repo rate at 5.50 per cent and a neutral stance, signalling potential room for future rate cuts. Following this, the 10-year benchmark 6.33 per cent GS 2035 closed at 6.52 per cent.

Trading volume for G-secs increased 9 per cent on-month in September, while that for T-bills increased 11 per cent. Trading volume for SDLs decreased 23 per cent, while that for corporate bonds

increased 13.31 per cent. GST rationalisation and stronger direct tax collections are anticipated to boost state revenues, helping to ease supply-demand pressures in the market, the report noted.

Crisil Intelligence forecasted CPI inflation to soften to 3.2 per cent in fiscal 2026 from 4.6 per cent last year

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