Bond rally spurs rush to tap debt market as borrowing costs ease

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Falling yields and softer crude prices help borrowers lock in lower funding costs

By Mahesh Ravidas Nayak

Updated - November 02, 2026 at 06:32 PM.

Market participants said issuers are keen to take advantage of favourable market conditions before any further monetary tightening. | Photo Credit: Bloomberg

A sharp rally in government bonds, driven by falling crude oil prices and improving global risk sentiment, is prompting corporates and government-backed financial institutions to accelerate bond issuances to lock in lower borrowing costs.

The benchmark 10-year government security (G-Sec) yield fell about 10 basis points on Monday to close at 7.31 per cent, aided by a more than 4 per cent decline in crude oil prices amid renewed hopes of progress in US-Iran talks. The drop in yields has quickly translated into lower borrowing costs for issuers.

Bond Issuances

Nabard on Monday raised ₹6,000 crore through bonds at 8.27 per cent, lower than the 8.30 per cent coupon at which REC raised ₹4,000 crore just last week. SIDBI is scheduled to tap the market on Tuesday for ₹6,000 crore, with market participants expecting strong investor demand amid the ongoing bond rally.

“The rally in government securities has created a favourable backdrop for issuers,” said Venkatakrishnan Srinivasan, founder and managing partner at Rockfort Fincap LLP. “A lot of buying has emerged as investors turn more optimistic about global developments, including softer oil prices and expectations surrounding the US political landscape,” he said.

The decline in yields has improved issuance conditions even though corporate borrowing costs remain elevated in absolute terms. Srinivasan noted that Nabard’s pricing appeared attractive compared with REC’s recent bond sale, largely because government securities have rallied since REC came to the market. “Typically, REC is able to raise funds at a lower cost than Nabard,” he said.

Yield Outlook

Market participants said issuers are keen to take advantage of favourable market conditions before any further monetary tightening. While expectations of another rate hike persist, lower crude prices and hopes of easing geopolitical tensions could provide room for yields to soften further.

Srinivasan said the benchmark 10-year yield could potentially move towards 7 per cent if oil prices moderate further and positive developments emerge on the rupee and geopolitical fronts. “Traders are reacting quickly to every positive development, and that is helping the bond market rally,” he said.

The improving sentiment is also prompting potential issuers to revisit fundraising plans. Reliance Industries Ltd recently secured board approval to raise up to ₹15,000 crore through debt, while REITs, InvITs, and other issuers are also evaluating market opportunities, Srinivasan noted.

The attractiveness of the bond market has increased as alternative funding avenues have become more expensive. Rates on short-term instruments such as commercial papers and certificates of deposit have risen sharply, putting pressure on corporate treasuries. As a result, even with corporate bond yields remaining elevated, issuers continue to find the bond market a relatively competitive source of funding.

With yields retreating from recent highs and investor appetite strengthening, market participants expect a steady pipeline of bond issuances in the coming weeks as borrowers seek to secure funding before market conditions change.

Published on November 2, 2026

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