Indian bond yields remain stable amid global market volatility

New Delhi [India] June 6 : As global bond markets experience turbulence amid rising long-dated treasury yields in the United States and Japan, experts say India's long-term government securities (G-secs) are expected to remain resilient, supported by strong domestic fundamentals and accommodative policy by the Reserve Bank of India (RBI).

On June 6, 2025, the Reserve Bank of India (RBI) cut the repo rate by 50 basis points.

According to the Federal Reserve Bank of St. Louis, the 30-year U.S. Treasury yield touched 4.89 per cent as of June 4, 2025, reflecting investor unease over inflation and fiscal concerns.

Simultaneously, Japan's 30-year government bond yield surged to a historically elevated level of 2.89 per cent on June 6, 2025, signalling weakening demand for long-dated sovereign debt.

Treasury bonds are critical instruments used by sovereign nations to raise funds and are purchased by a broad spectrum of investors, including retail buyers, pension funds, commercial banks, corporations, and foreign governments.

Amid this global volatility, Indian government bonds have shown relative stability. Speaking exclusively to ANI, Sonal Bandhan, Economics Specialist at Bank of Baroda, said:

"Historically, we have seen that Indian 10y G-sec movement is broadly in line with the movement in US treasury yields. However, of late, we have also seen that Indian G-sec yield has inched down, despite the volatility in the global markets. RBI's liquidity measures, lesser supply of government paper, buybacks, and low inflation have all supported this trajectory."

Sonal added: "Going forward as well, while there will be upside pressure on yields due to elevated US treasury yields, this will be more on the shorter end of the curve. However, the longer end of the bond curve will see downward bias driven by domestic fundamentals. Rate cuts by the RBI will also encourage low interest rate environment."

Abhishek Bisen, Head of Fixed Income at Kotak Mahindra AMC, echoed this sentiment, noting that external bond market swings are unlikely to materially impact Indian yields.

"This scenario is unlikely to impact the Indian bond market in any material way, as there were no material flows that came from rate arbitrage purposes. The 10-year yields have been trading around 6.20 - 6.25 per cent. The Indian market is resilient and has reacted mostly to domestic factors. India headline CPI well anchored below 4.00 per cent."

In conclusion, while global yields rise in response to fiscal stress and inflationary concerns abroad, India's sovereign bond market appears anchored by low inflation and strong domestic fundamentals.

Analysts suggest that the Indian long-end bond yields are likely to stay stable in the near to medium term.

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