“The RBI’s 25 basis point hike to 5.5%, its first since February 2023, will reach bonds, loans and deposits at different speeds. The bond market had moved ahead of the RBI. The 10-year government bond yield was already above 7% before today, so I don’t expect the hike on its own to move yields much further. Where yields go next depends on how the market reads the new tightening stance, along with liquidity, crude and the rupee. Borrowers will feel it next, as repo-linked home loans reset at least once every three months. Rates on new FDs should follow, though each bank sets its own pace,” said Nishchay Nath, Founder & CEO, BondScanner. “For retail investors, the practical step is to spread money across maturities rather than lock everything into one long tenure. Existing bondholders may see prices dip on paper, but a fixed-rate bond’s coupon and maturity value do not change. Beyond government bonds, a higher yield still has to be weighed against credit quality.”
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Neel Achary
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