Nahata said the tariff rate under the deal had been fixed at 18%, a level he described as favourable for financial markets across debt, equity and foreign exchange. He pointed to a clear reaction in the bond market, where the 10-year government security yield softened after the announcement. According to Nahata, the yield, which had been hovering around 6.77%, declined to about 6.71%, reflecting renewed confidence in Indian sovereign debt.

Trade deal with US eases uncertainty, strengthens India's debt market: Trustee EPFO

India's Benchmark Government Bond Yield Eases Amid Trade Deal Optimism

India's benchmark government bond yield has shown signs of easing as investor sentiment strengthened following the trade deal between the United States and India, according to Vineet Nahata, a member of the Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO).

Positive Impact of the US-India Trade Deal

The trade deal has reduced uncertainty and reinforced confidence in the Indian financial markets.
The tariff rate under the deal has been fixed at 18%, a level that Vineet Nahata describes as favourable for financial markets across debt, equity, and foreign exchange.
The 10-year government security yield softened after the announcement, declining from 6.77% to around 6.71%.

Deepening the Domestic Bond Market

Vineet Nahata highlights the importance of deepening the domestic bond market through budgetary measures, with several incentives aimed specifically at strengthening the Indian debt market and improving its attractiveness to global investors.

Market-making mechanisms such as total return swaps have been introduced, allowing foreign institutional investors to take exposure to Indian corporate debt and sovereign bonds while hedging their risk more efficiently.
Interest subvention has been announced for municipal bonds, helping to channel funds into urban infrastructure and offering investors a wider range of fixed-income options.

Broader Market Outlook

Vineet Nahata expects the momentum to continue in the long term, with sentiment across debt, equity, and foreign exchange markets already upbeat.

The clarity provided by the trade deal has addressed concerns that markets had been grappling with for some time.
The trade deal is expected to have a stabilising effect on the Indian currency, with the rupee potentially strengthening in the coming weeks.
Global commodities such as gold and silver have also reacted positively to the deal.

Expert Analysis

Vineet Nahata's analysis highlights the importance of the US-India trade deal in stabilising the Indian financial markets and attracting overseas investors.

"The certainty which the market was craving for all this while has now been achieved by yesterday's deal," he said, adding that this is likely to translate into higher overseas investor participation across asset classes.