SBI Mutual Fund, India’s largest asset manager ($29B debt AUM), expects the benchmark 10-year sovereign bond yield to rise and remain above 7% as inflation risks, budget deficits, and central bank hawkishness weigh on debt markets.
📌 Key Metrics & Important Takeaways:
- Yield Pressure: India’s 10-year benchmark bond yield is trading near 6.96% (up over 20 bps in 4 weeks) as global yields reprice higher.
- Supply & Borrowing Overhead: The central government plans to borrow 7.90 trillion rupees ($82.83B) in H2 (Oct–Mar), while state governments could raise up to 9 trillion rupees.
- Portfolio Positioning: SBI Mutual Fund is actively avoiding long-duration bonds, citing rate-cycle inflection points and supply-demand mismatches.
- Short-Term Advantage: Massive banking liquidity from foreign currency deposit swaps continues to support short-dated and ultra-short-term paper.
💥 Market Outlook: With key rate decisions looming from the U.S. Federal Reserve and the Reserve Bank of India (RBI), sticky inflation and elevated issuance are keeping the long end of the yield curve under persistent pressure.