India’s benchmark government bond yield closed near a level last approached in March 2023, as oil prices and planned government borrowing added to pressure on the market.
The 6.94% 2036 government bond closed at 7.4740% on Friday, Oct. 23, compared with 7.4596% in the previous session, Reuters reported. EconoTimes previously covered a nine-week climb in the benchmark yield before a Monday pullback.
Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank, told The Economic Times he expects the 10-year yield to reach 7.75% by December. “I expect the 10-year yield to touch 7.75% by December,” he said. Pawar cited oil prices, liquidity, bond supply and the gap between Indian and U.S. rates. The forecast is his individual view, not a Reserve Bank of India projection or market consensus.
Brent crude futures gained $3.55, or 3.14%, to settle at $116.72 a barrel on Oct. 23, their highest settlement since April 29, Reuters reported. India imports nearly 90% of its crude requirements. Reuters said persistently high energy prices could fuel inflation, put pressure on the rupee and strain public finances.
The Reserve Bank of India (RBI) reported that consumer inflation rose to 4.8% in August from 4.5% in July. At its Oct. 5-7 meeting, the central bank raised its repo rate by 25 basis points to 5.50% and adopted a “calibrated tightening” stance. It projected inflation of 5.2% for fiscal 2026-27, including 6.0% in the third quarter.
The Ministry of Finance plans to raise ₹7,86,000 crore in gross borrowing in the second half of fiscal 2026-27 through 23 weekly auctions. Ten-year securities make up 26.3% of that planned issuance. The government’s full-year dated-securities borrowing estimate is ₹15,99,506 crore, below the budget estimate of ₹17,20,000 crore.
The RBI recorded net liquidity absorption of ₹31,254.95 crore in its Oct. 22 money-market statement, combining same-day and outstanding operations. That one-day figure alone does not establish a persistent liquidity shortage. Higher yields tend to reduce the market value of bonds already in circulation. The RBI’s next Monetary Policy Committee meeting is scheduled for Dec. 2-4, 2026.
