India Government 10-Year Bond Yield at 6.31% in Early Trading Today

Mumbai, July 14, 2025 – Indian government bonds remained largely steady in early trade on Monday, with the benchmark 10-year yield holding near recent levels. Traders showed limited appetite for fresh positions, keeping the market range bound as they awaited clearer signals.

The cautious tone roots from upcoming inflation data releases in India and the US, which are expected to influence policy outlooks. Market participants are especially focused on June CPI figures, which could test the current expectations of a near-term rate cut.

10-Year Bond Yield Holds Near 6.310%

The benchmark 10-year Indian government bond yield stood at 6.310% as of 11:27 a.m. IST, marginally higher than the previous close of 6.2994%. Despite a notable drop in US Treasury prices, traders appeared cautious, focusing instead on upcoming inflation figures that could influence policy outlooks in both countries.

A trader from a private bank noted, “Bonds will largely remain range bound during the day unless the inflation data surprises the market”.

Rate Cut Hopes to Be Tested

Investor sentiment has been buoyed by expectations of another rate cut, but these assumptions may be tested depending on the inflation trajectory. DBS, in a recent note, highlighted that headline inflation is expected to remain below the core print, with core inflation projected to hover around 4%. While easing inflation offers the Monetary Policy Committee (MPC) more room to maneuver, DBS indicated that a rate cut in August appears unlikely.

The June CPI data, expected at 4:00 p.m. IST, is forecast to show inflation at 2.50%, down from 2.82% in May. This would mark a more than six-year low, driven by a favorable base and softer food prices.

US Inflation and Impact on Global Yields

The US Consumer Price Index (CPI) data, due Tuesday, is expected to reflect a 0.3% month-on-month increase, up from 0.1% in May. This could potentially put upward pressure on global yields, including India’s longer-duration instruments.

Liquidity Trends and Call Money Rates

On the liquidity front, the Reserve Bank of India’s (RBI) recent actions to drain surplus liquidity are beginning to reflect in the call money market. The weighted average interbank call money rate has edged up to 5.33% over the last 11 days, compared to 5.28% in the preceding period. Since June 27, the RBI has been conducting variable rate reverse repos, with ₹1.52 lakh crore currently parked with the central bank and set to mature on Friday.

OIS Rates Remain Stable

India’s shorter-term overnight index swap (OIS) rates remained mostly steady. The one-year OIS held at 5.54%, the two-year OIS at 5.50%, while the five-year OIS edged up by 1 basis point to 5.71%.

What Is OIS And Why Does It Matter?

An Overnight Index Swap (OIS) is a financial tool where two parties agree to exchange interest payments. One party pays a fixed rate, while the other pays a floating rate linked to the overnight lending rate. As the OIS rates help reflect market expectations for future interest rate changes, they are often used by investors and banks to manage interest rate risk.

Outlook

The bond market continues to tread cautiously, awaiting inflation prints that could reset policy expectations both domestically and abroad. Until then, yields are likely to stay range bound, with trading driven more by data anticipation than directional conviction.

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