10-Year Bond Yield Falls Most In Nearly Four Weeks On Iran Deal Hopes; Is It The Right Time To Buy?

Indian bonds have recovered over the past two sessions as renewed hopes of a peace agreement between Iran and the US lifted investor sentiment. The easing in oil prices also helped improve sentiment in the domestic bond market, with investors betting that lower imported inflation could give the Reserve Bank of India (RBI) more room to maintain an accommodative stance for a longer period.

On May 6, India’s benchmark 10-year government bond (G-sec) yield posted its sharpest single-day decline in nearly four weeks after easing tensions in West Asia triggered a fall in global crude oil prices. Currently, the 10-year G-sec yield is hovering around 6.93 per cent, falling from nearly 7.02 per cent on Tuesday.

The rally reflected renewed buying interest from banks and institutional investors. Bond yields and prices move inversely, and falling yields indicate rising demand for government securities.

The rally came after reports suggested progress in diplomatic negotiations involving Iran, raising expectations that additional crude supplies could enter global markets if sanctions are eased. Lower oil prices are seen as positive for India, which imports around 80-90 per cent of its crude oil requirements. Softer crude prices can help reduce inflationary pressures, narrow the current account deficit, and ease concerns around the government’s borrowing programme.

Bond markets have remained highly sensitive to global oil movements in recent months, especially after geopolitical tensions in West Asia pushed crude prices sharply higher. Crude oil prices fell below the $100 per barrel mark, after breaching above $120 per barrel when Iran-US tensions were at their peak. Elevated oil prices had earlier fuelled concerns that inflation could remain sticky and delay any future rate easing by the RBI.

Is it a Good Time to Buy Bonds?

Market experts believe the recent correction in yields may offer an attractive entry point for retail investors looking to diversify portfolios and lock into stable income opportunities.

According to fixed-income market participants, current yields around 7 per cent provide a favourable opportunity for retail investors seeking predictable returns and portfolio stability.

“With the domestic interest rate cycle currently in an extended pause, these levels provide an opportunity to lock in relatively attractive yields before potential long-term easing begins,” said Abhishek Kumar, a Securities and Exchange Board of India-Registered Investment Adviser (Sebi-RIA) and founder of SahajMoney.

Experts also believe the intermediate segment of the yield curve — particularly the one- to five-year maturity bucket — currently offers the best risk-reward balance. This segment provides meaningful yields while remaining less vulnerable to sharp mark-to-market volatility compared to longer-duration bonds such as the 10-year benchmark, especially during periods of global uncertainty.

For investors entering the bond market now, experts recommend focusing on high-quality instruments such as government securities and AAA-rated corporate bonds.

“We suggest a disciplined strategy focused on high-quality instruments like government securities and AAA-rated corporate bonds could be a decent mix for the current range-bound environment. Utilising a laddering approach or a phased deployment into short to medium-duration funds could help in managing liquidity needs while mitigating the impact of yield spikes caused by oil or currency fluctuations,” Kumar added.