Indian bond yields rose to a more than five-month high on August 25, driven by domestic uncertainties such as expectations of higher government borrowing following GST reforms and an increase in state government bond supply, experts said.
They added that global uncertainties are also pushing yields higher.
The 10-year benchmark bond yield ended at 6.5967 percent, the highest since March 28, 2025, when it was traded at 6.582 percent.
"Global uncertainties, GST rationalisation, and fiscal incentives to support sectors affected by higher US tariffs have raised expectations of additional government borrowing, possibly breaching fiscal prudence. At the same time, state government supply has increased, particularly in the long end, where demand has remained tepid. Consequently, the yield gains have evaporated quickly," said V. Ramachandra Reddy, Head of Treasury at The Karur Vysya Bank.
In his 79th Independence Day address, Prime Minister Narendra Modi promised next-generation GST reforms.
The Centre has proposed to 'essentially move towards a simple tax' with two slabs, standard and merit, with special rates applicable only to select items, the finance ministry has said.
This has raised concerns of lower revenue and may prompt the Centre to borrow more from the market through government securities, experts said.
Bond yields, which had eased after the S&P ratings upgrade, have been rising since the announcement of GST reforms.
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