Oct 27, 2026 13:05 pm IST

Opinion | India's Bond Market Is Bleeding. And The Worst May Not Be Over Yet

Deepanshu Mohan Deepanshu Mohan Columnist

Deepanshu Mohan Columnist

Oil, war, and a hawkish central bank have made Indian government bonds cheaper than at any point since early 2023. The damage to existing holders is real. So is the opportunity for new ones.

The 10-year yield, which ended 2025 below 6.6%, touched about 7.46% on October 23. The Reserve Bank of India raised the repo rate to 5.50% on October 7, its first increase since February 2023, and moved its stance from neutral to "calibrated tightening". Minutes of that meeting hinted at more to come. Retail inflation reached 5.54% in September, while wholesale inflation hit 11.39%, the highest in the current series. Several gilt funds recorded their worst twelve-month returns since at least 2014 in the year to May.

In the United States, where the 10-year Treasury yield reached 5.3% this month for the first time since 2007, a growing view holds that rising yields lay the groundwork for better returns. The argument applies to India too, though local conditions shape who benefits.

Start with the arithmetic. A bond's yield acts as a buffer against price losses. The benchmark 10-year paper has a modified duration of close to seven years, so a one percentage point rise in yields cuts its price by about 7%. At today's yield, rates would have to rise by about 1.2 percentage points in the next twelve months before........

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