India’s sovereign bond yields are likely to head sideways in coming months before starting to spike higher toward year-end, according to a 25-year bond-market veteran. Signs of quicker inflation and concern the Reserve Bank of India will pull back on policy support should eventually put yields on a rising path, said Radhavi Deshpande, chief investment officer at Kotak Mahindra Life Insurance Co. in Mumbai. Consumer prices will start to rise as the virus wave subsides, and that will also convince policy makers to ease back on stimulus, she said. “We expect the benchmark 10-year yield to head toward 6.50% as inflation worries and policy normalization concerns begin to resurface along with reducing support from the RBI as we approach the year end,” she said in an interview. Yields may stretch toward the high, last seen in April 2020, by March, she added.
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