10-Year Bond Yield in India

The yield of a bond can vary significantly based on the interest rate, bond price and maturity tenure. A 10-year bond yield in India will likely be higher than a 2-year bond yield. Further, it will likely be lower than a 15-year bond yield. Thus, the mentioned factors are crucial in determining the bond yield. 

What Are Government Bonds?

The Central or state governments issue bonds to generate revenue by collecting funds from investors. These funds are used for infrastructural development, debt payments, operations and social welfare. 

Government bonds are fixed-income debt instruments with long-term maturity. Usually, the tenure of government bonds ranges between 2 years and 40 years. The bond yield can significantly vary based on the tenure of the investment. For instance, a 10-year bond yield in India can be higher than the yield of a bond with a maturity tenure of 2 years. 

What Is a 10-Year Bond Yield in India?

Bond yield is the earnings that an investor receives over a specific time on the invested amount. It is expressed as a percentage and includes interest, principal and other factors. However, the bond yield varies based on the price of the bond.

When the price of a bond increases, the yield falls. On the other hand, when the price of a bond decreases, the bond yield increases. Thus, bond yield has an inverse relationship with bond price. If you invest in a bond with a maturity tenure of 10 years, the yield that you will receive is the 10-year bond yield in India. 

10-Year Bond Yield in India History

Here is the historical data on 10-year bond yield in India:

Check out our website for more details on the yield to maturity of multiple bonds!

Features of Government Bonds

Here are the features of government bonds:

• Low-risk Financial Instrument: As the government issues these bonds, they are considered low-risk investment instruments.
• Liquidity: Government bonds are listed in stock exchanges for trade in the secondary market. As a result, investors can sell these bonds before maturity ensuring liquidity. 
• Lower Returns: Even though government bonds are one of the safest investments, they offer a lower return compared to high-yield bonds. However, investors can ensure capital protection by investing in these bonds.
• TDS Deduction: TDS (Tax Deducted at Source) does not apply to government bonds.
• Lock-in Period: Usually, government bonds do not have any lock-in period, unlike RBI Savings Bonds.
• Tenure: The maturity tenure of government bonds ranges between 2 years to 40 years.
• Stable Returns: Even though the returns on government bonds are low, they offer stable returns for investors.
• Monitoring: As your government bonds remain safe in your demat account, you can easily monitor them when required. 

Types of Government Bonds Based on Interest Rate

The following are the types of government bonds based on interest rates:

1. Fixed-rate Bonds

A fixed-rate government bond has a predetermined interest rate that remains unchanged for the entire tenure of the bond. Despite fluctuations in the market rates, the fixed interest rate remains constant. 

You will find the coupon rate or interest rate mentioned in the nomenclature of the bond. For instance, a 7% GOI 2021 indicates the factors mentioned below:

1. Floating Rate Bonds

In the case of floating-rate bonds, the rate of return changes periodically. However, the interval of the rate of return revision is predetermined during bond issuance. For instance, if a bond has an interval of six months, it indicates that the rate of return will change after every six months. 

Alternatively, there exists another variant of floating rate bonds, in which there are two components of the interest rate: the base rate and the fixed spread. 

Advantages of Investing in 10-Year Bonds in India

Here are the advantages of investing in government bonds:

1. Sovereign Guarantee

As government bonds are issued by the central or state government, they ensure a guarantee of repayment by the issuing authority. As a result, investors reap the benefits of capital protection. 

1. Regular Source of Income

The investors usually receive the interest payout on government bonds every six months. As a result, they can enjoy regular income from their investment in government bonds. 

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