he 1-year at 6.59%, the 2-year at 6.66%, and the 5-year at 6.84%. That feeds straight into government borrowing costs: investors typically demand higher yields on longer-dated bonds when they think policy rates will be higher for longer, especially when inflation is harder to forecast. Energy is the big swing factor here, since India imports nearly 90% of its energy and elevated oil prices can spill into broader prices, pressure the rupee, and strain public finances. That tension shows up in the benchmark 6.94% 2036 bond, which traders saw around 7.40%-7.47% after it closed at 7.4427%, even as Yes Bank, an Indian lender, stuck with a milder 50-basis-point tightening view split across December and February.
Why should I care?
For markets: India’s 6.94% 2036 yield near 7.45% reflects a “100 basis points” debate.
When swaps price more than 100 basis points of RBI hikes, the market is effectively lifting the whole expected rate path, which raises the discount rate used across assets. Longer-dated government bonds feel that most, because they lock in today’s yield for longer – so they need a bigger yield cushion when inflation uncertainty is high. With Brent above $110 and India heavily dependent on imported energy, investors have been reluctant to accept lower long-term yields. The result is persistent upward pressure on long-duration Indian government bonds until either oil cools or the implied pace of RBI hikes eases.