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Bond yields could rise to 7.5% on crude, inflation and global debt costs

By Sohail Khan 17 September 2026, 6:14 am

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Business News›Markets›Bonds›Bond yields could rise to 7.5% on crude, inflation pressures

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Bond yields could rise to 7.5% on crude, inflation pressures
Synopsis

Domestic bond yields may rise as much as forty-five basis points. Elevated crude prices and rising inflation expectations weigh on sentiment. The Reserve Bank of India's open market operation sales will increase bond supply. This action drains surplus liquidity from the financial system. Bond traders anticipate yields could reach around seven point five zero percent.

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Bond yields could rise to 7.5% on crude, inflation and global debt costs<br> — The benchmark 10-year yield closed at 7.05% on Wednesday, from its previous close of 7.07%.

Mumbai: Domestic bond yields could spike as much as 45 basis points to around 7.50% as elevated crude prices, rising inflation expectations, and the rising cost of global debt weigh on sentiment, bond traders said.

Reserve Bank of India's (RBI) open market operation (OMO) sales could add to the pressure by increasing government bond supply as the central bank drains surplus liquidity. The benchmark 10-year yield closed at 7.05% on Wednesday, from its previous close of 7.07%.

ET Bureau

"Imported inflation, possible exchange-rate pressure, changes in the expected RBI response, and the compensation investors require for uncertainty signal that 10 year yields can now inch toward 7.25%, and then attempt somewhere around 7.50%, if the supply side shocks and energy security worsens," Soumya Kanti Ghosh, chief economic adviser, State Bank of India said in a recent report.

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"Bouts of domestic liquidity can support the front end yields to some extent, though it does not necessarily eliminate long-end pressure as an oil shock can work through several channels simultaneously," Ghosh said.

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Yields had climbed to around 7.15% in April, Bloomberg data showed.

The RBI will conduct an OMO sale of ₹1 lakh crore in three tranches in September. The central bank also conducted two overnight variable rate reverse repo (VRRR) operations on Wednesday, cumulatively draining ₹2.90 lakh crore from the system liquidity. The RBI will conduct another overnight VRRR on Thursday for ₹3 lakh crore.

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