Long-tenor bond yields fall as supply-demand balance improves

Market participants reported that demand-supply dynamics in the G-sec market have improved significantly this year, with the share of long-duration securities in the issuance calendar lower than the previous year. As reported by Business Standard, the share of 15-year bonds in total issuance stood at 14.5% in H1FY27, compared with 14% in H1FY26, while the share of 30-year bonds fell to 7.3% from 10.5%. The share of 40-year bonds declined to 8% from 14%, and 50-year bonds accounted for 9.6% of issuance, against 10.5% a year earlier.

Long-tenor government bond yields have declined across maturities in the current financial year, with the 15-year segment witnessing the sharpest fall. According to Business Standard, the yield on the 15-year bond has fallen 51 basis points to 6.94% as on Friday from 7.45% on March 31. Over the same period, the 30-year, 40-year and 50-year yields have declined by 39, 37 and 26 basis points, respectively. This decline reflects improved demand-supply balance and reduced investor exposure to long-term bonds following the RBI's policy stance shift.

The strong demand for long-duration bonds in India comes amid a challenging global backdrop, with U.S. 20-year Treasury yields reaching 5.27% on August 14, 2026, marking a 0.06 percentage points increase from the previous session. According to over-the-counter interbank yield quotes, the yield has edged up by 0.19 points over the past month and is 0.36 points higher than a year ago. A debt fund manager at an insurance company noted that factors that diverted demand away from government securities last year are no longer present, with some demand that had moved towards equities returning to government and state government bonds. The demand for longer-duration government bonds is being supported by expectations of a prolonged pause in interest rates, with investors gradually rebuilding duration exposure.