SBI Research: Indian Bond Yields to Ease to 6.75-7% by March 2027
SBI Research predicts Indian 10-year government bond yields will ease to 6.75-7% by March 2027 despite short-term volatility.
In a comprehensive outlook on the financial landscape, SBI Research has projected that Indian bond yields forecast for the 10-year government securities will moderate to a range of 6.75 to 7.00 percent by March 2027. This projection, detailed in the Ecowrap report released on November 1, 2026, suggests a stabilizing trend for the domestic debt market over the long term.
Short-Term Turbulence vs. Long-Term Stability
While the long-term trajectory appears downward, the research firm has issued a cautionary note regarding the immediate future. Market volatility could trigger temporary spikes, potentially pushing yields as high as 7.6 percent before they begin their descent toward the forecasted range.
Currently, the 10-year Indian government bond yields hover around 7.43 percent. When compared to the US 10-year Treasury yields, which are approximately 4.93 percent, there is a significant spread of about 250 basis points.
The Global Connection: US Treasury Influence
The report highlights that the Indian market does not operate in a vacuum and is closely tied to US Treasury movements. While US yields currently stand at 4.9 percent, SBI Research anticipates a fluctuating path:
- Potential Spike: US yields could temporarily climb to between 5.25 and 5.35 percent.
- Eventual Settlement: They are expected to eventually settle at 4.75 percent.
A critical factor driving this is the US Treasury market's excess supply of USD 304 billion, which is linked to a US fiscal deficit of 6.15 percent of GDP.
Domestic Supply and Government Strategy
On the home front, the Indian government securities market is dealing with an estimated excess supply of Rs 1.52 lakh crore. However, the government has already taken proactive steps to manage this pressure.
Through strategic measures such as bond buybacks and bond switches, the gross borrowing requirement has already been reduced by Rs 1.23 lakh crore. These actions are expected to provide necessary support to maintain yield stability.
The RBI Factor and Currency Outlook
The forecast remains robust even under different monetary policy scenarios. SBI Research suggests that even if the Reserve Bank of India (RBI) decides to hike the repo rate by 50 basis points to 6 percent, the 10-year bond yields would likely still fall within the 6.75 to 7 percent range by March 2027.
Adding to the positive outlook, the Indian rupee is expected to maintain an appreciating bias. This strength is attributed to the anticipated weakening of the US dollar and the moderation of US Treasury yields, both of which are central to the structural health of the Indian bond market.