10-year G-sec breaches 7% as crude above $100 fuels rate-hike bets

The 10-year benchmark government bond yield moved decisively above 7% in September, and SBI Research sees further upside toward 7.15% or higher if crude oil sustains above $100/barrel and inflation broadens beyond food.

The move marks a sharp repricing from the middle of the year, when the curve had rallied on expectations of durable disinflation. That repricing has filtered into corporate bond markets, where spreads have widened 10–20 bps across the AA and A categories.

Drivers of the sell-off

• Crude above $100/barrel lifting the imported-inflation profile.
• A banking system flush with FCNR(B) inflows, forcing the RBI to absorb liquidity aggressively.
• Heavy government and corporate bond supply crowding the calendar.

For credit, the message is one of selectivity. The 3–5 year corporate segment is where fixed-income desks see the best risk-adjusted carry, favouring quality issuers with stable cash flows over duration-heavy, lower-rated paper. That is precisely the trade-off a preparatory rating can illuminate before an issuer walks into the official process.