Bond rally loses steam as yields continue to harden

FOR THE SECOND consecutive session, the benchmark 10-year G-Sec yields hardened on sustained selling by foreign institutional investors (FIIs).

- CHRISTINA TITUS & MAHESH NAYAK

On Tuesday, the yield on the 10-year 6.48% 2035 bond rose 5 basis points (bps) to 6.62%, up 10 bps from 6.49% on Friday’s post-MPC close.

“Globally, yields have steepened, while with recent policy rate cuts and liquidity measures in India, the market seems to believe we are close to the final phase of rate cuts,” said the treasury official at a foreign bank.

According to him, this has led to reduced market positions, especially during year-end adjustments and as overseas investors unwind positions ahead of holidays, leading to higher yields.

Over the past two sessions, FPI selling in G-Sec via FAR was close to $3,291 crore. For FY26, FPIs, as on December 9, have been net buyers to the tune of 9,003 crore.

The recent move reflects growing investor concerns that the Reserve Bank of India (RBI) is unlikely to deliver further rate cuts amid supply-side pressures and global yield movements that weigh on the market sentiment.