Informist Poll
10-year yield seen up Oct-end on heavy supply, RBI rate hike
This story was originally published at 22:22 IST on 3 October 2026
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By Janwee Prajapati
MUMBAI – Government bond yields are expected to rise at the beginning of the second half of the calendar year ending March as debt supply piles up. The heavier issuances will add to the pain as crude oil prices and US Treasury yields continue their upward climb while the Reserve Bank of India is expected to hike the repo rate on Wednesday for the first time since 2023.
The yield on the 10-year benchmark 6.94%, 2036 gilt is seen at 7.27% at the end of October, according to the median of estimates from 11 money managers, treasury heads, and economists polled by Informist. The yield on the 10-year benchmark was at 7.19% on Sept. 30. Market participants widely expect the central bank to hike the policy rate by 25 basis points at its monetary policy meeting next week. However, they will closely track comments from the Reserve Bank of India Governor Sanjay Malhotra, as they remain divided on whether the RBI will change the stance from "neutral" to "withdrawal of accommodation", dealers said. Bond yields have already factored in around 100 bps of repo rate hikes from the current 5.25% over the next year. Poll respondents see a greater likelihood of a 50-75 bps rate hike cycle between October and February. These actions should not incrementally drive up gilt yields unless the RBI accompanies it with liquidity drains through open market sales of bonds, respondents said.
Already, the Centre's gambit to have a balanced calendar in the two halves of the fiscal seems to have backfired as the war in West Asia keeps bond yields high. As per the government's Oct-Mar borrowing calendar, it plans to raise INR 7.86 trillion through dated securities. The share of seven- and 15-year papers has been increased, while that of bonds up to 5 years has been cut due to heavy redemptions lined up in those tenors. The 15-year bond will account for 17.6% of total issuance – the sharpest sequential rise from 14.5% in the first half. After two calendars of cuts, long-term bond supply has been raised in the Oct-Mar plan. On a net basis, the government will issue INR 6.26 trillion in the second half of the financial year, higher than INR 5.38 trillion in the first half. Participants said supply in the shorter segment was deliberately kept low to accommodate sales in that bucket through OMO auctions. The RBI has already sold INR 1.00 trillion of gilts through OMO auctions in three tranches in September.
"Bond yield will rise from here because banks and companies will not be able to absorb that supply in duration," Arvind Kanagasabai, Head of Treasury, Tamilnad Mercentile Bank said. "The supply in 10- to 15-year bucket is higher...companies and mutual funds are also vomiting their positions. In addition, the US yields are also rising which is adversely impacting the interest rate differentials."
If the RBI does choose to conduct more OMO sales as feared, the government bond yield curve may bear flatten, with short-term yields rising more than long-term yields. However, some respondents do not see the need for further durable liquidity drains as the RBI is expected to continue its intervention in the foreign exchange market in a way that removes rupee liquidity, respondents said.
Geopolitical developments also continue to sour market sentiment. India's crude oil basket may average around $95 per barrel in 2026-27 (Apr-Mar) as oil flows across the Strait of Hormuz remain volatile. Even if the war ends, respondents expect crude oil prices to remain high for several months as reserves are restocked, potentially driving India's inflation above the RBI 2-6% target band in the December quarter. The inflation reading for September is expected to print at around 5.5%, from 4.82% in August.
"Indian benchmark bond yields face renewed upward pressure as the market braces for a hawkish Reserve Bank of India stance fuelled by oil- and food-related inflation risk and surging global yields," Abhishek Bisen, head of fixed income, Kotak Mahindra Asset Management Co. Ltd., said. While the market is pricing about 75-100 bp possible rate hike over next year. This double whammy of crude oil above $100 per barrel global policy tightening and heavy global debt issuance is projected to keep the 10-year Government of India bond yield around 7.20% with a possibility of 7.40% in the near term.
Moreover, the spike in US Treasury yields to multi-decade highs will drive down overseas demand for gilts, dealers said. Some participants expect US yields to keep rising if the current global scenario persists. Foreign portfolio investors net sold gilts worth INR 106.02 billion under the fully accessible route in September, compared to INR 8.46 billion in August, according to data from Clearing Corp. of India. Towards the end of the month, all eyes will be on the Federal Open Market Committee meeting to see whether the committee will hike its policy rate for the second straight meeting. The median of 12 estimates in the Informist Poll pegged the 10-year gilt yield at 7.33% by the end of December. The most pessimistic view was 7.61%.
Following are the estimates for yield levels of the 10-year benchmark 6.94%, 2036 bond at the end of October and December:
| ORGANISATION | October-end | December-end |
| Shinhan Bank India | 7.15% | 7.05% |
| CSB Bank | 7.35% | 7.25% |
| IBM | 7.30% | 7.50% |
| ICICI Bank | 7.30% | 7.40% |
| IDFC Frist Bank | N.A. | 7.25% |
| Karur vysya Bank | 7.20% | 7.25% |
| Kotak Mahindra Bank | 7.20% | 7.30% |
| Kotak MF | 7.20% | 7.40% |
| South Indian bank | 7.30% | 7.35% |
| Edleweiss MF | 7.20% | 7.40% |
| STCI PD | 7.27% | 7.30% |
| TMB | 7.61% | 7.61% |
| Median | 7.27% | 7.32% |
End
US$1 = INR 94.97
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
With inputs from Aaryan Khanna
Edited by Deepshikha Bhardwaj
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