The benchmark 6.48 per cent 2035 bond yield ended at 6.9419 per cent, the highest level for a benchmark 10-year note since July 25, 2024, after closing at 6.8750 per cent in the previous session.
For the week, the yield rose 20 basis points, the biggest such move since the week ended May 6, 2022, when the central bank started its aggressive rate hiking cycle with a surprise rate increase between scheduled policy meetings.
New Delhi reduced the special excise duty on petrol and diesel on Thursday as fuel prices stay volatile, with supplies choked by the West Asia war.
A government official said the move would cost the government ₹7,000 crore ($739.33 million) per fortnight, while analysts estimate it will entail a fiscal hit of between ₹1.5 lakh crore and ₹1.75 lakh crore for fiscal year 2027.
The move comes as the Brent crude oil price hovers around $110 per barrel, after briefly easing to below $100 earlier in the week.
Elevated oil prices are detrimental for India, the world’s third-largest crude importer, threatening to fan inflation and widen India’s current account deficit.
“If oil continues to trade higher, the crude basket assumed by RBI in October policy at $70 per barrel will undergo a significant revision. The higher crude oil will eventually seep into broader inflation baskets,” said Alok Sharma, head of treasury at ICBC, Mumbai.
Bonds are also under strain as states sold debt worth nearly ₹1 lakh crore during the week, amid waning investor demand.
Rates
India’s overnight index swap (OIS) rates saw heavy reversal of recently entered received positions, with the key swap rates rising to multi-year highs.
The one-year OIS rate ended at 6.04 per cent, while the two-year OIS rate closed at 6.2750 per cent.
The liquid five-year swap rate settled at 6.6350 per cent.
The one-year swap rate is up 56 basis points this month, while the two-year and five-year OIS rates have surged 69 and 65 basis points respectively.
Published on March 27, 2026