Index entry wait may temper bond rally as FPI inflows start to ease

The Indian 10-year benchmark government bond yield, which fell over 30 basis points in Q1 FY27 to close at 6.84%, may trade in a tight range going forward as higher government borrowing and easing FPI inflows temper the rally. Traders see the Bloomberg Global Aggregate Index inclusion as already priced into yields, with an 8-10 bps sell-off possible if India is excluded and only 3-4 bps softening if included early. ICICI Bank's successful one billion dollar bond sale signals strong global confidence in Indian bank credit, though Axis Bank and Jana Small Finance Bank expect an upward bias on yields, limiting treasury gains for lenders.