India's 10-Year bond yield likely to trade in 6.50-6.60% range in Sep as traders expect rate cut cycle passed: Report

The report noted that the release of the second-half borrowing calendar will give a clearer picture of how securities are allocated across different maturity buckets, which could provide some relief for yields.

It stated "We expect India's 10Y yield to trade in the range of 6.50-6.60 per cent in the current month".

Another factor supporting yields, the report said, is the widening interest rate differential with the United States, as the U.S. Federal Reserve has embarked on a rate-cutting cycle, while the Reserve Bank of India (RBI) has chosen to maintain its policy status quo for the time being.

On the global front, yields across major economies have been trading in a wide range with no clear direction. In the U.S., yields have shown a softening bias, supported by recent statements from Federal Reserve Chair hinting at a rate cut in September 2025.

The CME Fed Watch tool also indicates that traders are increasingly pricing in the likelihood of a rate cut this month.

However, other advanced economies have displayed stickiness in yields amid expectations of a "wait and watch" approach by their central banks.

For India, the report observed that the 10-year yield showed significant firmness in August 2025, with the longer end of the curve registering maximum movement.

This has been described as a phenomenon of "bear steepening," driven by fading expectations of a near-term rate cut by the RBI even as domestic growth remains firm. Concerns over excess supply of government securities have also weighed on market sentiment.

India's yield curve has consistently displayed a steepening bias in recent months. While earlier episodes of steepening were largely a result of sharp increases in short-term yields, the current trend reflects a bearish steepening at the longer end of the curve.

According to the report, this pattern emerged mainly after the RBI's recent policy decision, where traders formed the view that the country is past the rate cut cycle and has entered a phase of prolonged status quo.

The report stated "Most of the increase in yields happened post RBI policy where traders have formed set of expectations that India is way past rate cut cycle and has entered a status quo phase".

The strong GDP growth print for the first quarter further validated these expectations, despite some statistical base effects and issues with the deflator. As a result, yields have risen, reinforcing the view that India's monetary policy will remain steady in the near term. (ANI)