Indian government bond yields surge due to interest rate hike expectations

Golden Ten Data reported on May 20th that in the most recent weekly auction, Indian government bond yields surged significantly, indicating that fixed income traders have started to price in expectations of a possible rate hike by the central bank. Data shows that on Wednesday, the yield on 364-day government bonds rose by 21 basis points to 5.9750%, marking the largest increase in nearly four years. The yield on 182-day government bonds increased by 22 basis points, while the shortest-term bonds saw an even greater rise of over 18 basis points. Puneet Pal, Head of Fixed Income at PGIM India Mutual Fund, stated: "The pricing of three-month government bonds has already reflected expectations of a 25 basis point rate hike. This is inevitable, as government bond yields are simply too low compared to overnight index swaps and bank time deposits."