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The domestic 10-year government bond yield is expected to trade in the range of 6.48-6.58 per cent in the current month, with a slight downward bias due to higher foreign institutional investor (FII) inflows, according to a report by Bank of Baroda.
The report said that the downward pressure on yields may persist as higher FII inflows are expected on account of the widening interest rate differential with the US and a favourable inflation outlook. It stated "For India, some stickiness in its 10Y yield have been observed since Aug'25. It is expected to trade in the range of 6.48-6.58 per cent in the current month". The report highlighted that global bond yields traded in a wide range recently. In the US, the softening bias in yields that was seen in October 2025 changed significantly following the release of private payroll numbers. After the Federal Reserve's policy decision, the US 10-year yield witnessed upward momentum as divergent commentaries from Fed officials and the strengthening of a few macroeconomic indicators signaled a higher possibility of the policy rate remaining unchanged in December 2025. The report noted that these developments in US yields are likely to have ripple effects across the yields of major economies, including India. For India, the report observed that the 10-year yield has shown some stickiness since August 2025. However, it is now broadly rangebound as traders have already factored in the impact of the recent tax reform on government finances. On the liquidity front, the report pointed out that the trajectory of durable liquidity needs close monitoring, as it has recently moderated due to a fall in foreign currency assets. India's yield curve has shown some degree of upward bias since August 2025. However, during October 2025, it remained largely stable in the absence of new cues. This stability was supported by the government's fine-tuning of its borrowing calendar, with proper allocation across maturity buckets. The report mentioned that the reduction in the share of borrowings in the 10-20-year maturity segment helped to prevent undue pressure in that range. With the widening yield gap between the US and India's 10-year bonds, caused by the Fed's frontloading of rates, the report stated that the debt inflows into India are expected to remain strong. These inflows are likely to support the domestic bond market and help keep yields steady within the projected range, the report said. (ANI)
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