India's ten-year government bond yields hit 7.12% on 2 April 2026, the highest in nearly two years. The bond yields have been hardening since June 2025, when the RBI cut the repo rate by 50 basis points. With the G-Secs crossing 7%, should you invest in fixed income? In this article, we will understand why the bond yields have risen, whether it is a good time to invest in fixed income, and which fixed income products you should invest in.
The bond yields have risen due to higher borrowing by the Central and State Governments, delay in the inclusion of Indian G-secs in Bloomberg global bond indices, selling of Indian G-secs by FPIs, an increase in yields on US treasury bonds, etc. With the US-Iran War, oil prices have spiked, leading to pressure on India’s balance of payments, fiscal deficit, Indian Rupee, etc.
Higher yields on fixed-income instruments like G-secs and corporate bonds offer investors an opportunity to benefit from them. Investors can consider adopting the accrual strategy, allocating some funds to shorter tenure bonds of 1 to 3 years, holding them till maturity, and benefiting from higher interest rates.
Investors can consider a combination of Government bonds, high-quality AAA-rated corporate bonds, and some exposure to AA/A rated corporate bonds. While G-secs yields are in the 6.95% to 7.05% range, AAA-rated corporate bonds are offering yields in the 7.50% to 7.75% range.
For a long-term investment tenure, an individual can consider G-secs, corporate bonds with a tenure of 5 years or more. If an individual wants to invest through mutual funds, they can consider a gilt fund. However, G-secs or corporate bonds with a longer tenure are sensitive to interest rate changes.
Whether the RBI will hike interest rates or not depends on how inflation behaves. In the April 2026 Monetary Policy Committee (MPC) meeting, the RBI kept interest rates unchanged. The RBI expects the inflation rate to average 4.6% in Financial Year 2026-27.
Currently, G-secs yields have risen, crossing 7%, which are attractive. To benefit from the higher yields, an investor can consider an accrual strategy and invest in short-term instruments with a tenure of up to 3 years.
