Experts say long-term yields are close to peak and rate cuts may not come soon 

With the stock market indices at all time highs, the bond markets have exhibited unusual swings by bond market standards. In March, the 10 year bond yield reached as high as 7.45 percent in India and over 4 percent in the US owing to elevated inflation. But May saw yields falling to below 7 percent in India and below 3.5 percent in the US. Although, June saw a rise in yields on fears that the Federal Reserve is not yet done with rate hikes and the RBI is no where near a cut.

The surge in bank stocks is now replaced by a surge in the NBFCs. The factors that pulled down yields from March to May have been a high demand from insurance companies mid-March onwards. The insurance companies saw huge inflows ahead of Rs 5-lakh premium cap for taxes kicking in. The Debt mutual funds also saw huge March inflows before higher taxes kicked in from April 1.

The factors that pushed India yields higher in June are fears of Consumer Price Index (CPI) rising if monsoons are sub-par due to El Nino, RBI hawkishness in June policy, US yields rose in June after Fed indicated likely two more hikes, etc. Further, the demand from insurance companies and mutual funds is feared drying up. Also. the supply of bonds in second quarter is seen higher than demand due to fewer bond redemptions.