India sovereign yield curve
G-Sec (INR) — full term structure, 2s10s and 3m10y spreads, NY Fed recession probability, Nelson-Siegel-Svensson fit.
Data as of June 3, 2026Term structure
| Tenor | 3M | 6M | 1Y | 2Y | 3Y | 5Y | 7Y | 10Y | 20Y | 30Y |
|---|---|---|---|---|---|---|---|---|---|---|
| Yield (%) | 5.65 | 5.70 | 5.78 | 5.92 | 6.05 | 6.32 | 6.55 | 6.78 | 7.10 | 7.18 |
Term structure with NSS fit
Observed yields (markers) overlaid with the Nelson-Siegel-Svensson smoothed fit (orange).
Dashed line = current policy rate (5.50%).2s10s spread (5-year history)
Shaded red zones = inverted curve (2s10s < 0). Inversion has historically preceded recession with 6-24 month lead time.Recession probability — 12 months ahead
Estrella-Mishkin probit (NY Fed): P(recession) = Φ(-0.5333 - 0.6629 × spread3m10y).
Nelson-Siegel-Svensson parameters
Fit residual RMSE: 0.025 pp. See the NSS methodology page for the parametric form.
| β₀ | β₁ | β₂ | β₃ | λ₁ | λ₂ |
|---|---|---|---|---|---|
| 7.503 | -1.828 | -1.642 | -0.768 | 1.50 | 5.00 |
How to read this country's curve
Look first at the 10-year yield in the headline tiles above — that is the benchmark long-term borrowing cost for this country. Then compare it to the policy rate set by the central bank. If the 10-year is meaningfully above the policy rate, investors expect rates to stay supportive of growth; if it sits below, the market is pricing rate cuts ahead.
Next, check the 2s10s and 3m10y spread tiles. Green numbers mean the curve is sloping up in the normal way (longer bonds yield more). Red numbers mean the curve is inverted — long bonds yield less than short bonds, which historically precedes a slowdown. The deeper the inversion, the stronger the warning signal, although the lag between inversion and recession typically runs 12-24 months.
Finally, the recession probability at the top combines the 3m10y spread with the NY Fed's statistical model. A reading above 30% is the conventional caution threshold; above 50% historically meant a recession was the base case within a year. For non-US countries this is a useful comparative signal but the exact level should be read with care.
Interpreting the NSS parameters for this country
The four estimated betas decompose the curve into orthogonal factors. β₀ is the long-run level — the asymptotic yield as maturity goes to infinity, interpretable as the market's terminal nominal anchor (steady-state real rate plus expected inflation). β₁ is the slope factor; a negative β₁ produces an upward-sloping curve while a positive β₁ flattens or inverts the front end. β₂ and β₃ govern two curvature humps controlled respectively by λ₁ and λ₂ years — the maturities at which each curvature factor peaks. Diebold-Li (2006) show β₀+β₁ converges to the instantaneous short rate and β₀ to the consol yield, providing direct factor-model intuition.
On the recession probability: the reading uses the Estrella-Mishkin (1998) coefficients calibrated on US post-war NBER data. For developed-market peers (Eurozone, UK, Canada, Australia, Switzerland) the cross-country mapping is broadly defensible, but the absolute level is indicative, not literal — local probit re-estimation (Moneta 2005 for the euro area; Chinn-Kucko 2015 for OECD comparators) typically yields slightly weaker, but still significant, predictive coefficients. The reading is best treated as a relative-rank signal across our nine-country set rather than an unconditional probability.
A final caveat: the spread input embeds both an expected-policy component and a term-premium component. When the ACM term premium is compressed by structural demand for duration (LDI flows, central-bank balance-sheet residuals, foreign reserve recycling), an inverted curve can flag elevated probability without indicating that aggressive easing is priced. Cross-checking the model against survey-based policy expectations and against the country's own forward OIS curve disciplines the signal.
What the G-Sec curve is signalling
India’s Government Securities (G-Sec) curve is the highest-yielding curve we cover, reflecting both higher trend inflation (the RBI targets 4% versus 2% for most developed-market peers) and a structural growth premium. With the Reserve Bank of India’s repo rate at 5.50%, current G-Sec yields trace: 3-month T-bill at 5.65%, 2-year at 5.92%, 10-year at 6.78%, and 30-year at 7.18%. The curve is upward-sloping throughout with a healthy term premium.
Inversion status and term spreads
The G-Sec curve is firmly non-inverted: 2s10s of nearly 90 bp and 3m10y above 100 bp. The Estrella-Mishkin probit model gives a near-zero recession probability for India — but this is a particularly poor fit for the Indian context. The probit was calibrated on US data with a 2% inflation target; India’s higher target and very different macro structure mean the model is informational at best for India. The curve is best read directly: it is consistent with an economy in solid expansion.
What the curve says about RBI expectations vs market pricing
The G-Sec curve embeds these views:
- Markets price roughly 50 bp of further cuts from the RBI over the next 12-18 months as inflation moderates toward the 4% target.
- The 5-year point at 6.32% implies an average expected repo rate of around 5.2-5.4% over five years — somewhat below current policy, consistent with the RBI’s communicated easing bias.
- The long end (30Y at 7.18%) reflects the term premium India typically commands as an emerging-market sovereign with capital controls and a domestic-investor-dominated bond market.
Nelson-Siegel-Svensson fit
India’s curve fits NSS well, with a level factor near 6.5%, modest negative slope, and curvature reflecting the smooth front-end-to-belly transition. The RBI’s own Working Group on the Monetary Policy Framework has used NSS for G-Sec curve estimation in technical reports. Our fit produces sub-5 bp residuals across all observed tenors. See the NSS methodology page.
Cross-references
- Reserve Bank of India overview — repo rate, MPC statements, meeting schedule.
- Real interest rate tracker — India real rate.
- Recession probability dashboard — India in context.
- Nelson-Siegel-Svensson methodology.