Fed Hike Pushes India 10-Year Yield Past 7% — SkimNews
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- US Federal Reserve raised rates by 25 basis points on September 16, with the 10-year Treasury yield touching ~5.02% that day and hovering near 5% by September 18 — up roughly 90bps from ~4.09% a year earlier.
- India's 10-year G-Sec yield crossed 7%, quoting at 7.05-7.07% as of September 18, up from ~6.81% in mid-August and ~6.47% a year ago, driven by rising US yields, higher crude oil prices, and anticipation of RBI rate hikes.
- Bandhan AMC's Gautam Kaul and Tata Mutual Fund's Murthy Nagarajan recommend staying at the short end — funds with under one year maturity — where yields-to-maturity are already above 7%, limiting price sensitivity to further yield spikes.
- Edelweiss Mutual Fund's Dhawal Dalal highlights the 2-3 year segment as offering strong value, with AAA-rated NBFC papers yielding above 8% and AAA CPSE bonds around 7.70% for accrual-driven returns.
- PGIM India Mutual Fund's Puneet Pal points to the 3-5 year segment, which benefits from yield curve flattening once the RBI starts hiking — short-term yields rise faster than long-term ones, narrowing the gap.
- ICICI Mutual Fund took a contrarian stance, recommending investors add long duration now that rate hikes are 'fully priced in,' expecting yields to soften if global risk assets face headwinds.
- Crude oil prices were flagged as a key risk by experts — costlier oil feeds inflation, which can force central banks to raise rates further and keep the risk of additional yield increases alive.
Why it matters: Conservative Indian debt investors can now earn YTMs above 7% in sub-one-year paper with minimal price risk, while moderate-risk investors can lock in 8%+ on 2-3 year AAA NBFC bonds. The clear tactical split — ICICI Mutual Fund's contrarian long-duration call versus most managers' short-end preference — gives investors a real positioning decision to make before the RBI starts its own rate hike cycle.
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