What is driving Indian bond yields in early 2026?

Indian bond yields in early 2026 are primarily driven by fiscal policy rather than monetary policy.

How do global bond yields affect India's bond market?

Elevated yields in developed markets like the US, Japan, and the UK create spill-over pressures for emerging market bonds, including those in India.

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Fiscal Policy Dominates Indian Bond Market

Q: What is the near-term outlook for Indian bond yields?

Experts anticipate that Indian bond yields will remain range-bound in the near term due to a combination of domestic and global factors.

30 Jan

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Summary

Indian bond yields are driven by fiscal, not monetary policy.
Bond yields expected to remain range-bound in the near term.
Global yield increases create spill-over pressures for India.

Fiscal Policy Dominates Indian Bond Market

As of the first quarter of 2026, Indian bond yields are primarily influenced by fiscal policy rather than monetary policy. Analysts anticipate that yields will remain range-bound in the near term due to a combination of domestic and global factors.

Currently, Indian Rupee bond yields are stable, supported by low inflation and cautious monetary policy. State borrowings are concentrated in the first quarter of 2026, reflecting a significant increase in State Development Loans (SDLs).

Institutional investors, including banks, pension funds, and insurance companies, show limited appetite for bonds. The central government has also adjusted its issuance mix, favoring less long-term paper, a trend states have yet to fully adopt.