In response to Rajkumar Subramanian, Head – Product & Household Workplace at PL Wealth, the benchmark 10-year G-Sec yield has stayed range-bound between 6.25% and 6.45% from April to July, reflecting muted financial transmission.
He attributes this rigidity largely to exterior pressures, notably elevated U.S. Treasury yields pushed by fiscal considerations and the Federal Reserve’s ongoing steadiness sheet tightening.
These world headwinds, he notes, are outweighing home coverage easing, forcing buyers to reassess period threat and shift towards safer, shorter-term devices. Edited Excerpts –
Q) How would you describe the present measurement and depth of the company bond market in India?
A) India’s company bond market has advanced into a considerable section of the broader monetary ecosystem, with excellent issuances valued at over ₹53.6 lakh crore, representing almost 1 / 4 of the nation’s complete bond market as per RBI’s June 2025 knowledge.
Whereas this displays spectacular progress in absolute phrases, the market’s depth stays restricted. Institutional buyers—mutual funds, insurance coverage corporations, banks, and pension funds—dominate with over 95% of holdings.
Retail participation is minimal, constrained by historic limitations reminiscent of excessive minimal funding thresholds and restricted entry to clear pricing. Regardless of a sturdy main issuance surroundings, the secondary market stays skinny, with common month-to-month turnover hovering beneath 4% of excellent volumes.
Over-the-counter trades proceed to dominate, limiting liquidity and worth discovery. Whereas structural foundations are in place, enhanced transparency, broader investor inclusion, and deeper secondary exercise are important to rework the market right into a extra vibrant and inclusive capital-raising avenue.
Q) What elements are driving the record-breaking surge in company bond issuances in 2025?
A) A number of converging elements have propelled company bond issuance in 2025 to unprecedented ranges, with complete fund-raising nearing ₹10 trillion.This marks a major shift in company funding dynamics. Decrease rates of interest—following 100 foundation factors of cumulative price cuts by the RBI—created a horny window for issuers to faucet long-term capital at aggressive prices.
On the similar time, narrowing spreads and considerable liquidity within the system additional incentivized bond market entry. Corporates have additionally displayed robust intent to finance capex and refinance high-cost legacy debt.
Non-financial company capital expenditure has seen double-digit progress, underpinned by rising enterprise confidence and stronger steadiness sheets. Issuers more and more favour personal placements, which supply streamlined execution.
Notably, shorter-duration issuances (<5 years) have seen a pointy uptick, reflecting each issuer and investor preferences amid rate of interest volatility. Establishments reminiscent of mutual funds and insurers, searching for yields above conventional deposits, have remained lively members, supporting this provide glut.
Collectively, these elements sign a extra mature borrowing surroundings—the place strategic capital planning, investor urge for food, and regulatory headroom are converging in favour of bond financing.
Q) How is the U.S. debt scenario influencing world bond markets?
A) The rising fiscal pressure within the U.S.—pushed by rising deficits and mounting considerations over debt sustainability—is more and more influencing world bond markets.
Latest Federal Reserve minutes spotlight a cautious coverage stance, with charges held regular and steadiness sheet normalization persevering with via quantitative tightening.
This has stored long-end U.S. Treasury yields elevated, setting the next benchmark for world sovereign and company yields. The steepening yield curve and elevated time period premiums are prompting world buyers to reassess period threat and tighten allocations, notably in rising markets.
In India, regardless of a cumulative 100 foundation factors of coverage price cuts by the RBI between February and June 2025, the benchmark 10-year G-Sec yield has remained range-bound at 6.25%–6.45% from April via July—signalling muted financial transmission.
This divergence underscores the affect of exterior headwinds, together with sustained U.S. price pressures, geopolitical uncertainties, and risk-averse investor sentiment, that are outweighing the impression of home coverage easing.
As confidence in fiscal prudence erodes, buyers are more and more reallocating in the direction of gold, shorter-duration debt, and high-grade company devices.
In impact, the U.S. fiscal trajectory is not a neighborhood situation—it’s reshaping world capital flows and repricing threat throughout markets.
Q) Why has the issuance of ultra-long-term U.S. Treasuries slowed down not too long ago?
A) The discount in ultra-long-term U.S. Treasury issuance is pushed by a posh interaction of market sentiment, fiscal optics, and evolving coverage priorities. Investor urge for food for long-duration paper has waned amidst persistently excessive time period premiums and risky demand at latest auctions.
As yields on 30-year Treasuries edge nearer to five%, the risk-reward dynamic has turn out to be much less beneficial — notably in a local weather of unsure inflation trajectory and geopolitical tensions. Fed communications have additionally mirrored considerations across the steadiness sheet runoff’s impression on market liquidity.
Though the central financial institution continues to unwind its holdings, reinvestment preferences now lean towards shorter maturities, not directly weighing on the long-end section.
In parallel, the U.S. Treasury seems to be recalibrating its issuance technique—emphasizing short- and medium-tenor securities to handle rollover dangers, scale back curiosity prices, and retain flexibility amid fiscal headwinds.
Till demand normalizes and coverage route stabilizes, ultra-long bond issuance is prone to stay subdued.
Q) What reforms might assist deepen India’s company bond market additional?
A) To unlock the complete potential of India’s company bond market, a mixture of regulatory, structural, and operational reforms is important.
First, broadening participation via decrease issuance thresholds and versatile funding norms—particularly for pension and insurance coverage funds—can catalyse demand and provide. CRISIL estimates such measures might allow ₹4–7 lakh crore in further issuance capability.
Second, aligning the tax remedy of debt mutual funds with different asset courses—by restoring indexation advantages and revisiting long-term capital positive factors taxation—can enhance their competitiveness and encourage better retail and institutional participation within the bond market.
Third, latest initiatives like SEBI’s “Bond Central” platform are encouraging steps towards enhancing transparency, standardizing disclosures, and decreasing the funding minimums to ₹10,000. This might meaningfully widen the retail investor base. Deepening the secondary market is equally important. Encouraging market-making, credit score default swap utilization by funds, and establishing strong buyback frameworks will assist deal with liquidity constraints.
Lastly, supporting securitization, particularly for burdened property, can develop a diversified risk-return spectrum inside the fixed-income house. These reforms, applied in tandem, can rework the present institutional-heavy panorama right into a extra inclusive, liquid, and dynamic market.
(Disclaimer: Suggestions, recommendations, views, and opinions given by specialists are their very own. These don’t signify the views of the Financial Occasions)
