India's 10-Year Bond Yield Rises To 6.93% Amid Inflation Concerns

(MENAFN- KNN India) New Delhi, Mar 28 (KNN) India's benchmark 10-year government bond yield rose sharply by 6 basis points to 6.93 percent on Friday, up from 6.87 percent in the previous session, reflecting rising concerns over inflation and potential monetary policy tightening by the Reserve Bank of India.

The increase comes amid elevated global crude oil prices, with Brent crude crossing USD 100 per barrel, intensifying inflationary pressures. At the same time, the rupee weakening past the 94 mark against the US dollar has added to concerns over India's fiscal and external balances, particularly in the backdrop of ongoing geopolitical tensions in West Asia.

Yields Climb on Rising Global and Domestic Pressures

With the latest uptick, the 10-year bond yield has risen by 26 basis points over the past month. Bond yields and prices move inversely, with rising yields indicating falling bond prices.

Globally, bond yields have also hardened. The US 10-year benchmark yield has increased by around 48 basis points to 4.42 percent over the past month. In Japan, the five-year yield has risen to a record 1.77 percent, while the 10-year yield has climbed to 2.30 percent.

Market participants said the recent spike reflects a swift repricing of risk, with investors demanding higher returns amid growing uncertainty.

Crude Prices and Currency Depreciation Drive Concerns

Higher crude oil prices are expected to widen India's current account deficit and increase import bills, while also putting pressure on government finances through potential subsidy burdens. Analysts indicated that if crude prices remain elevated, bond yields could potentially cross the 7 percent mark in the near term.

A weaker rupee further compounds inflation risks by raising the cost of imports, feeding into domestic price levels. Rising yields typically signal expectations of higher inflation and tighter monetary conditions.

Policy Outlook Remains Cautious

The RBI had kept its key policy rate unchanged at 5.25 percent in its February 2026 review, while raising its GDP growth projection to 7.4 percent. It also marginally revised its consumer price inflation forecast upward to 2.1 percent.

Analysts expect the central bank to maintain a cautious stance in its upcoming April policy review, closely monitoring inflation trends before taking any rate action.

Meanwhile, the Federal Reserve has also kept interest rates unchanged in its March meeting, signalling a wait-and-watch approach amid global uncertainties.

The rise in bond yields reflects growing concerns over inflation, currency volatility, and external risks. Market participants noted that unless crude oil prices ease or the rupee stabilises, upward pressure on yields is likely to persist in the near term.

(KNN Bureau)

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