QuantEco Sees 10-Year Yield at 6.75% by March 2026 and 6.90% by 2027

QuantEco Research has pegged the 10-year government bond yield at 6.75% by March 2026 and 6.90% by March 2027, arguing that elevated supply risks will be offset by the Reserve Bank of India’s commitment to a prolonged policy pause supported by active liquidity management rather than rate action.

The yield on 10-year government bond ended at 6.73% on Friday.

In a note following the RBI’s policy decision, the research house said it expected the central bank to rely on a mix of open market purchases, Operation Twist and buybacks to absorb record gross bond and state development loan issuances projected for 2026-27. While supply overhang and global rate uncertainty were likely to cap near-term rallies, QuantEco maintained that adequate primary liquidity infusion would prevent a disorderly rise in yields.

Even with combined central and state borrowings expected to rise to ₹30 trillion–₹31 trillion in 2026-27, the firm saw limited upside risk to yields, citing the RBI’s demonstrated willingness to absorb supply and maintain monetary transmission in a neutral policy environment.

A key anchor for QuantEco’s yield view was the assessment that monetary policy had entered a phase of durable inertia rather than latent tightening. With the policy rate held steady and the stance retained at neutral, the firm argued that the burden of macro-financial stabilisation had shifted decisively towards liquidity operations. In this setting, the absence of rate cuts did not imply a withdrawal of accommodation for the bond market.

Inflation dynamics reinforced this reading. CPI inflation was projected at a series low of 2.1% in 2025-26, with only a gradual return towards the 4% target in the first half of 2026-27. On QuantEco’s estimates, this kept the ex-ante real policy rate marginally positive but broadly neutral, limiting the scope for a sustained rise in term premia in the absence of an inflation shock.

The research house said liquidity, rather than supply or rates, would remain the binding constraint for the bond market over the next four to six quarters. It pointed to the RBI’s record absorption of nearly half of gross government bond issuance in 2025-26, which helped keep yields range-bound despite heavy supply and volatile global conditions.

Looking ahead, QuantEco estimated net liquidity infusion of around ₹3 trillion in 2026-27, with ₹2.0 trillion–₹2.5 trillion likely via bond purchases, supporting its view that the 10-year yield would remain anchored near current levels with only a gradual upward drift.