FII Inflows Stabilize India's 10-Year Bond Yields Despite Global Shifts

A recent report by the Bank of Baroda predicts that India's 10-year government bond yields will remain steady between 6.48% and 6.58% through the current month. This trend is attributed to robust foreign institutional investor (FII) inflows, fueled by a favorable interest rate differential with the US and an optimistic inflation outlook.

According to the report, India's 10-year yield has shown some stickiness since August 2025. The global scene, particularly in the US, has seen wide fluctuations in bond yields. A notable shift occurred following the release of private payroll numbers, impacting the Federal Reserve's policy decisions, with the US 10-year yield subsequently experiencing upward momentum.

In India, yield stability is maintained through strategic planning, like the restructuring of the borrowing calendar. This includes reducing the borrowings in the 10-20-year segment. As the yield gap with the US grows due to the Fed's rate policies, strong debt inflows into India are expected, securing the domestic bond market's stability.