India bonds rise as investors see value after 10-year yield nears 7.40%

Indian government bonds have begun attracting investor interest after the benchmark 10-year yield climbed to a three-and-a-half-year high of 7.39%. The move has brought fresh attention to bond valuations as markets assess the Reserve Bank of India’s efforts to reduce liquidity.

Yield climbs sharply

The 10-year benchmark yield has increased by 38 basis points over the past month. It is now close to the 7.40% level, marking a significant shift in India’s government bond market.

The rise has been linked to the central bank’s strategy of minimising liquidity. As yields reached their highest level in three and a half years, investors saw value in Indian bonds, according to the information provided.

RBI prepares further measures

The Reserve Bank of India is scheduled to conduct a government bond sale worth ₹25,000 crore on Tuesday. The central bank also plans to raise the cash reserve ratio to 99%, with the change taking effect from mid-October.

These steps form part of the liquidity-focused policy backdrop facing the bond market. The planned sale and higher reserve ratio will be key developments for investors tracking the direction of government bond yields.

Market focus remains on liquidity

For now, the 10-year benchmark remains the central reference point for market participants. Its recent 38-basis-point increase, combined with the RBI’s planned actions, has made liquidity and bond pricing the main issues shaping the market.

The next focus will be the scheduled ₹25,000 crore sale and the implementation of the higher cash reserve ratio in mid-October.