Ten-year bond yield hits 7.19%, highest in two years

Mumbai: Yields of the 10 year benchmark government bond rose sharply on Monday, to its highest yield in over two years, despite a decrease in overall central government borrowing in H2FY27. The increase in yields come amid a spike in oil prices which stoke inflation concerns, and uptick in global yields.

The 10-year yield closed at 7.19%, its highest level since April 2024 and seven basis points higher than its previous close of 7.12%, CCIL data showed. Yields are expected to increase further, with most dealers expecting 7.25%, while some also expecting 7.50% if oil prices remain high.

"The repricing is now being driven by a combination of liquidity withdrawal, additional bond supply, higher global yields and a more uncertain inflation path. We see limited merit in chasing duration at current levels simply because yields have risen," said Prashant Pimple, CIO Fixed Income, Baroda BNP Mutual Fund.


Brent crude oil prices increased by $2.98, at $107.30, while the US 10-year yields touched 5.23%, its highest since 2007.

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The government announced its borrowing calendar for the second half of this financial year, where it reduced the proportion of 10-year bonds, while increasing proportions of the longer term papers. The government will borrow ₹16 lakh crore in the current year, lower than the ₹17.2 lakh crore budget estimate .

"The market has completely ignored the issuance calendar and has focused on oil," a trader at a large PSU bank said.

"In the current market environment, traders are likely sitting on losses across bonds they purchased over the past two years, as yields have risen from the levels at which those securities were bought," said Alok Singh, head of treasury at CSB Bank.

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The RBI also conducted an open market operation (OMO) sale for ₹25,000 crore, for which banks offered ₹67,655 crores. The OMOs are done to reduce the system liquidity which had ballooned after FCNR(B) inflows.

Banking system liquidity now stands at ₹4.39 lakh crore, from ₹11 lakh crore earlier this month. The RBI will also conduct a variable rate reverse repo (VRRR) auction of ₹2 lakh crore on Tuesday.