Source: Crisil Intelligence Date as on April 13,2026
Spreads on AAA Corporate bonds started elevating since April 25, reflecting tighter liquidity and cautious credit sentiment. Over the next few months, spreads moderated slightly with intermittent spikes indicating supply pressures and market volatility. In contrast, SDL spreads began at lower levels but steadily moved upward to 76 bps in January. This suggests an increase in supply from states and a reduced appetite from traditional investors such as banks.
Between August 2025 and February 2026, there were several instances of convergence in the spread between SDLs and AAA bonds over G-sec, driven by a combination of elevated supply pressures and resilient demand for corporate bonds. Currently, spreads of SDL and AAA bonds over G-sec have narrowed, showing signs of moderation with improved demand-supply balance.
The yield on the 10-year benchmark G-sec continued to surge, with March-end at 7.02%, up 36 bps since the close of February. This is the first time since July 2024 that the yield has crossed 7%. West Asia tensions (including fuel excise cuts and soaring international fertiliser prices impacting the subsidy bill), lower liquidity and some hardening in retail inflation exerted upward pressure on the yield. The first two weeks of April saw yields ease to 6.94% on April 13 aided by a lower-than-expected government borrowing plan.
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