Understanding the Outlook for Indian Government Bond Yields in 2024

As we step into the new year, there’s a notable buzz in financial circles about the expected trajectory of Indian government bond yields in 2024. The dynamics at play are intriguing, with factors such as state borrowing schedules and global economic trends influencing the sentiment around these crucial financial instruments.

Current Scenario:

The 10-year benchmark bond yield closed at 7.1754% in the final session of 2023, marking a drop of 15 basis points for the year. However, projections for the first trading session of 2024 indicate a potential uptick, hovering between 7.15% and 7.21%. A trader from a private bank highlighted the absence of a fuel price cut announcement over the weekend as a key factor contributing to this shift in sentiment.

State Borrowing Schedule:

A significant element in the upcoming year’s bond market narrative is the borrowing plans of Indian states. The aim is to raise 4.13 trillion rupees ($49.65 billion) through bond sales in the January-March period. This figure has surpassed most market estimates, causing a ripple of concern among traders. Initial estimates hovered around 3.50 trillion rupees, with some stretching to 3.90 trillion rupees. The higher-than-expected state borrowing is viewed as a potential negative surprise that could impact market dynamics.

Market Response:

The anticipation of an increased supply calendar has set the stage for the first trading sessions of the year to potentially witness selling pressure. The recent rally, attributed in part to the expectation of a fuel price cut, might face headwinds as the market digests the implications of the elevated borrowing targets. Market participants, however, remain optimistic about foreign inflows, which saw a surge in October-December 2023. This optimism is fueled by expectations that foreign investments will continue to rise in 2024, providing support to demand and potentially balancing out the impact of increased state bond issuances.

Global Factors:

Beyond domestic considerations, global economic trends also cast a shadow on the outlook for Indian government bond yields. The 10-year U.S. yield has been a key reference point, holding steady around the critical 3.85% level. Investors are closely watching for signs of a mild economic recession in the United States heading into 2024. The prospect of a recession could prompt the Federal Reserve to cut rates as early as March. The U.S. yield experienced a notable drop of over 100 basis points in November-December, countering the upward trend observed in the preceding ten months. This shift in the U.S. yield could have far-reaching implications for global financial markets, including the Indian bond market.


As we navigate the intricate landscape of Indian government bond yields in 2024, it becomes evident that a confluence of factors will shape their trajectory. From the unexpected state borrowing plans to the global economic landscape, market participants are in for a nuanced and potentially volatile year. Keeping a close eye on these developments will be crucial for investors looking to make informed decisions in the evolving financial landscape.

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