Government Bond Yields and Economic Indicators

Government bond yields in India rose to a five-month high due to various economic factors, including higher state bond supply and Fitch Ratings' decision to maintain India's rating at 'BBB-' with a stable outlook.

Key Factors Influencing Bond Yields

• The benchmark 10-year government bond yield increased to 6.60%, the highest since March 27, from the previous 6.55%.
• State development loans (SDL) auction saw a supply exceeding Rs 10,000 crore more than the planned amount, causing sell-offs.
• Fitch Ratings did not upgrade India's sovereign rating, unlike S&P Global Ratings, which recently upgraded it to 'BBB'.
• Fitch cited robust growth outlook and solid external finances but highlighted government finances as a credit weakness.

State Government Bonds and Supply

• 15 states plan to raise Rs 34,150 crore via debt, compared to the earlier planned Rs 20,850 crore.
• Yields on 10-year SDLs rose from 6.84–6.88% in April to 7.09–7.17% by August 19.
• 30-year SDL yields increased from around 6.87% in early April to approximately 7.44% in August.