G-Sec yields near two-year high; inflation risks may keep FY27 trend upwards

Mumbai: Yields on the 10-year benchmark government security are at their highest level in nearly two years and are expected to trade with an upward bias in FY27 amid risks to inflation and potential fiscal slippage stemming from the ongoing West Asia conflict.

The 10-year benchmark yield rose 55 basis points despite a percentage-point cut in the policy rate in FY25. The yields closed at 7.03% on the last day of trading from 6.48% at the start of the fiscal year.

Dealers say that yields moved in the opposite direction despite the efforts by the banking regulator to lower funding costs, largely due to oversupply of bonds and heightened geopolitical risks.


"If the Strait of Hormuz opens and the war ends, we may be able to see some pause in the uptick, but I don't expect a rally. In the first half of FY27, we have the West Asia war and in the second half, we will have supply pressures. So, the upward pressure is going to continue," said a bond trader at a primary dealership.