The ratings upgrade by the S&P Global Ratings bodes well for the capital flows and sovereign bond yield, according to the Reserve Bank of India’s (RBI) August Bulletin.
The bulletin added that the S&P’s sovereign rating upgrade for India – underpinned by buoyant economic growth, enhanced monetary policy credibility and government’s commitment to fiscal consolidation – could potentially lead to a reduction in borrowing costs, greater investor confidence and higher foreign capital inflows, going forward.
On August 14, S&P Global Ratings upgraded India’s long-term unsolicited sovereign credit rating to ‘BBB’ from ‘BBB-’, while also raising the short-term rating to ‘A-2’ from ‘A-3’.
However, 10-year G-sec yields firmed up during mid-July to early August, amidst uncertainties over India-US trade negotiations and receding expectations of further monetary policy easing, bulletin said.
Following the announcement of S&P’s upgrade of India’s sovereign rating on August 14, 2025 the 10-year G-sec yields eased briefly. Thereafter, yields hardened during the third week of August.
The average term premium (the difference between the 10-year G-sec yield and the 91-day treasury bill yield) increased by 3 bps during July 16 to August 21, 2025 as compared to June 16 to July 15, 2025, Bulletin added.
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