The benchmark 10 year G-Sec yield hit a two-year high of 7.21 per cent on October 1. Rising global yields and inflation fears pushed bond prices down. Venkatakrishnan Srinivasan said, “Bond markets have absorbed the global rise in yields, uncertainties arising from the West Asia crisis and soaring oil prices.”
The benchmark 10 year G-Sec yield hit a two-year high of 7.21 per cent on October 1, as global yields hardened and domestic inflation expectations strengthened. The last time the government bond yielded a similar return was on April 19, 2024, when it touched 7.22 per cent.
A combination of rising global bond yields and higher inflation expectations has made domestic government bonds cheaper, pushing yields higher. The US 10 year Treasury yield, for instance, inched up to 5.33 per cent, a two-decade high, as investors grew concerned about rising government debt and soaring crude oil prices.
Persistent uncertainty
Persistent uncertainty in West Asia has kept crude prices above $100 per barrel. On the domestic front, markets have largely priced in a 25 basis point (bps) rate hike by the Reserve Bank of India (RBI) at the upcoming Monetary Policy Committee meeting scheduled for October 7, 2026, to tackle elevated retail inflation stemming from a 13 per cent rainfall deficit.
“Bond markets have absorbed the global rise in yields, uncertainties arising from the West Asia crisis and soaring oil prices,” said Venkatakrishnan Srinivasan, Managing Partner at Rockfort Fincap LLP. “Current yield levels are unlikely to move below 7.2 per cent unless the crisis in West Asia subsides and crude oil prices fall below $80 a barrel and remain there,” he added.
Higher crude prices have also weighed on the domestic currency, with the rupee trading at ₹96.25 against the dollar, 30 paise weaker than the previous day, according to CCIL data. Forex dealers observed that the RBI’s presence through dollar sales was not evident in the market. The currency pair could weaken further to ₹96.6 per dollar, according to Dilip Parmar, Research Analyst at HDFC Securities.
Persistent foreign fund outflows, elevated crude prices and a weakening rupee have deepened risk aversion among investors, pulling Indian equity markets lower for the eighth consecutive week. This marks only the second instance of such a prolonged losing streak in the past 25 years. The Nifty closed at 22,421.95, down more than 10.5 per cent since August 2026.