India's 40-Year Bond Yield Surges to Highest Level Since 2018

The yield on India's 40-year government bond jumped to its highest level in eight years on Friday, signaling sustained upward pressure across the country's sovereign debt market.

Long-Dated Yields Spike

Following a government auction, the yield on the 7.71% coupon bond maturing in 2066 climbed to 7.9254%. According to market data, this marks the highest yield recorded for the 40-year maturity since November 2018.

The move reflects persistent selling pressure that has affected the entire Indian government debt market in recent weeks.

Yield Curve Flattens

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The recent surge has contributed to a flattening of the yield curve, a condition where the gap between long-term and shorter-term bond yields narrows. The spread between the 40-year bond and the 10-year benchmark bond has tightened significantly.

Key changes in the yield spread include:

• The current spread has narrowed to 44 basis points.
• This is down from 62 basis points one month ago and 70 basis points two months prior.

This compression is a result of shorter-term yields rising faster than those at the very long end of the curve. Over the last 10 weeks, the 40-year yield has increased by 49 basis points, while the benchmark 10-year yield has climbed by a more substantial 70 basis points in the same period.