The gap between Indian and US 10-year bond yields has narrowed to its lowest point in over two decades, shrinking to 164 basis points (bps) as US bond yields surged amid fiscal deficit concerns. According to Bloomberg data, this is the smallest spread since July 28, 2004, when it stood at 135 bps. Currently, the Indian 10-year benchmark bond yield is 6.2496%, while the US 10-year Treasury yield is 4.5866%.

However, Akshat Shrivastava, Founder and CEO of Wisdom Hatch, noted in a post that while India’s equity market has become globally attractive, its bond market remains in its infancy when compared to global standards.

Explaining the contrast, Shrivastava said the total size of India’s bond market—including both government and corporate bonds—is roughly $2.5–3 trillion, which is less than the market cap of a single US tech company. By contrast, the US bond market is valued at over $50 trillion, making up nearly 40% of the global bond market.

He highlighted that Microsoft ($3.24 trillion), Apple ($2.97 trillion), and NVIDIA ($2.78 trillion) are each bigger than India’s entire bond market.

“Firms like Microsoft, Apple and NVIDIA, EACH are bigger than India’s entire bond market. 
– Microsoft: $3.24 trillion
– Apple: $2.97 trillion
– NVIDIA: $2.78 trillion
India’s bond market is 5% that of US’s bond market. We don’t compete,” Shrivastava wrote on X. 

He added the US money managers do not even think of India, as India. They lump India with emerging markets (EMs). And, make their decisions: whether to put money in EMs or stay in developed markets. Then comes the 2nd layer of discussion: how much equity vs bond split to do. This depends on their reading of macros. 

According to market analysts, a narrowing spread between the yields of government bonds in different countries may prompt foreign investors to withdraw their investments from Indian markets. This phenomenon typically occurs when the yield differential diminishes, leading foreign investors to repatriate funds back to their home countries from emerging economies.

So when global asset managers make allocation decisions, India rarely appears as a standalone opportunity. Instead, it’s grouped into a broader EM basket with countries like Brazil, Indonesia, and South Africa.

“Long story short: we are not competing with the U.S. Our markets are not deep enough or large enough,” Shrivastava concluded.

In a separate post earlier today, Uday Kotak, Founder and Director of Kotak Mahindra Bank, flagged a significant shift in the global bond landscape: the shrinking spread between Indian and U.S. 10-year bond yields.

Kotak noted that this represents a sharp compression in the historical yield differential between the two countries. Historically, Indian bonds have offered much higher yields to compensate for higher inflation, sovereign risk, and currency volatility. But this narrowing gap signals shifting dynamics in global capital flows and investor sentiment.

Kotak added that further convergence—or even a reversal—in yields would depend on broader macroeconomic changes:

“It depends mainly on relative inflation, risk premium, trust, and liquidity, for global and domestic investors in these two countries,” he said.

This, he suggested, could be a sign of India’s maturing economy and improving macro fundamentals, which may be reshaping how investors perceive risk and return in emerging markets.