The 10-year G-Sec yield is likely to trade at 6.85-7.00% in the near term.

Net FPI outflows surged sharply to $12.6 billion in Q4 FY2026, largely driven by the conflict-led widening in equity outflows; overall, FPI outflows stood at $16.9 billion in FY2026, in contrast to inflows seen during FY2024-2025.

• India’s yield curve steepened in Q4 FY2026: The 10-year G-Sec yields hardened during Q4 FY2026, specially in March 2026. The 10-year yield was already trending higher following higher than expected Government borrowings and global trade uncertainties. Further, in Q4 FY2026, the yields increased on account of the West Asia war, surge in crude oil prices and weakening of the INR amid FPI outflows. The average 91-day T-Bill rates remained range-bound (5.2-5.5%) during Q4 FY2026. The yield hardened slightly to 5.38% as on March 31, 2026 from 5.26% as on December 31, 2025. India’s 10-year G-Sec yield surged from 6.66% at end-February 2026 to 7.04% on March 31, 2026, and crossed 7.1% in early April 2026 amid increasing risks of a fiscal slippage owing to the adverse impact of the West Asia conflict. However, following the ceasefire, the yields corrected to 6.92% on April 13, 2026. ICRA expects the 10-year G-Sec yield to trade at a range of 6.85-7.0% in the near term.
• Bond issuances increased QoQ in Q4 FY2026: Bond issuances increased to Rs. 3.2 trillion in Q4 FY2026 from Rs. 2.9 trillion in Q3 FY2026 driven by some large deals especially by all India financial institutions (AIFIs) and banks, while trailing the earlier quarterly high of Rs. 3.6 trillion in Q1 FY2026. Bond yields remained elevated throughout Q4 FY2026, specially during March 2026, while the banks offered competitive rates, thereby leading to shift of demand from bonds to banks and hence limiting the bond issuances. The share of NBFCs, corporates and banks (including AIFIs) in issuances during Q4 FY2026 stood at 31%, 45% and 23%, respectively, over 47%, 26% and 26%, respectively, in Q4 FY2025. With yields expected to stay elevated in the near term, bond issuances are likely to remain relatively muted in the next 1-2 quarters, with some growth to come back thereafter. ICRA projects bonds issuance at Rs. 12.8-13.3 trillion in FY2027, with corporate bonds outstanding increasing to Rs. 64.0-64.5 trillion by March 2027 (8.3-9.1% YoY).

Source: NSDL, CDSL, ICRA Research