Fixed income mkt faces pressure from global inflation, policy uncertainty: UBI

New Delhi

India's fixed income market is expected to remain cautious in the near term, according to a report by Union Bank of India. Bond yields are likely to stay high due to global inflation risks and uncertainty around domestic policies.

The report says market sentiment is cautious, and any short-term gains are likely to be driven by technical factors rather than real improvement in fundamentals.

"Overall, the market bias remains cautious, with yields likely to stay elevated amid inflation risks and policy uncertainty," the report said.

Globally, markets are under pressure due to rising geopolitical tensions, especially in the Middle East. This has pushed crude oil prices above $100 per barrel, increasing inflation concerns worldwide. As a result, bond yields in major economies have risen, with US 10-year yields around 4.45%–4.55% and Japan's near multi-decade highs. This trend is also putting pressure on emerging markets like India.

"The surge in oil prices has reinforced global inflation concerns, shifting market dynamics away from traditional safe-haven flows toward inflation-driven bond repricing," the report noted.