Bond Yields Poised to Soar as RBI Sales Meet Higher Demand

The Indian bond market is facing a potential surge in yields as government borrowing and Reserve Bank of India (RBI) open market operations combine to increase supply. The RBI plans to sell another Rs 1 lakh crore of government securities through OMO sales, adding to the already high demand for bonds.

IDFC First Bank's chief economist Gaura Sengupta expects yields to rise further towards 7.25%, while traders see this level as a key support where buying interest is likely to emerge and cap further upside in yields.

The trajectory of bond yields will also depend on oil prices, with traders warning that if crude remains elevated around $110 a barrel, the 7.25% level may not hold.