10‑Year Indian Government Bond Yield Hits Highest Level Since March 2023

Government bond yields opened on a noticeably higher note on Monday, as the Reserve Bank of India’s latest liquidity‑squeezing steps added fresh pressure on an already nervous market.

The yield on the benchmark 2036 security, which floated around 6.94 % a few days ago, jumped to 7.3553 % at the open – a clear uptick from Friday’s 7.2994 %. In plain terms, investors are demanding a higher return to hold the debt.

Two moves from the RBI are at the heart of the shift. First, a massive ₹25,000‑crore open‑market operation (OMO) slated for October 13, where the central bank will sell government securities to mop up cash. Second, a raise in the minimum daily cash‑reserve‑ratio (CRR) for banks from 90 % to 99 %, taking effect on October 16. While the overall CRR stays the same, the daily bump squeezes banks’ flexibility to shuffle funds, effectively pulling liquidity out of the system.

“The market was already factoring in the recent rate hike,” said a dealer at a primary dealership. “Now we have an OMO sale on top of a tighter CRR, so investors naturally ask for higher yields. It’s like adding more supply to a market where sentiment is already shaky.”

Since early August, yields have been on a steady climb – eight weeks in a row – and the 10‑year benchmark has added roughly 45 basis points over the past seven weeks. The rally follows the RBI’s October 7 decision to lift the repo rate by 25 basis points to 5.50 % and to shift its stance from “neutral” to “calibrated tightening.” Higher oil prices and lingering inflation worries have also kept the upward pressure alive.

Historically, the 10‑year yield hovered around similar levels during the last tightening cycle, touching 7.46 % in February‑March 2023 and staying in the 7.35‑7.44 % band in late 2022. The current surge, however, feels a bit more abrupt because of the added liquidity‑drain measures.

Market watchers will be glued to Tuesday’s OMO auction results and will keep a close eye on how the tighter CRR impacts overall banking‑system liquidity. Those cues will likely shape the next move for yields – and perhaps, for another RBI rate decision down the line.