the 10-year G-Sec yield crossed 7% on March 30, its highest since July 2024. sharpest monthly increase since February 2017 apparently.
multiple things happening at once. crude oil at $105 to $110 per barrel due to Middle East tensions. rupee past Rs 92 to the dollar. gross borrowing for FY27 set at Rs 17.2 lakh crore. RBI has already injected Rs 10 lakh crore via OMOs and the yield is still climbing.
for someone holding corporate bonds or thinking of buying, what does this actually mean?
the borrowing number is the one that caught my eye. Rs 17.2 lakh crore gross market borrowing for FY27. when the government borrows that heavily it crowds out the market. more supply of bonds means prices fall and yields rise. that supply pressure does not go away quickly.
saw a forecast that the 10-year could hit 7.33% by June 2026. if that plays out the yields available on new bonds will be even better for buyers.
so if I am planning to start investing in bonds, is now a bad time or a good time given all this?
from a yield perspective it’s actually a reasonably good time to enter.
you are buying at yields near multi-year highs. if you pick 2 to 3 year tenures from well-rated issuers you are locking in solid returns without taking on excessive duration risk. the risk of buying now is not that yields are high, it’s that you pick an issuer that faces trouble in a tight credit environment.
stick to AA and above. check if secured. don’t chase the 12 to 13% yields right now because those issuers are the most exposed to the current stress.
summary:
yields at 7%+ = bad for bond prices, good for new buyers
holding to maturity = not affected by yield movements
main risk right now = issuer quality in a high rate environment
what to do = stick to AA+, short to medium tenure, don’t chase high yields
the macro pressure is real but it’s not a reason to avoid bonds entirely