The increasing likelihood of is making a particular segment of the bond market more appealing — specifically, long-term bonds with maturities of 10 years or more.
Interestingly, the wars that seem to be troubling the world nowadays may have a direct bearing on the attractiveness (and price movements) of long-term bonds.
“Yes, the 10–15 year segment (in ) currently offers compelling relative value,” says Saurav Ghosh, Co-founder of Jiraaf.
The 10-year benchmark yield stands at around 6.45%–6.55%, while longer maturities in the 13–15 year range offer yields of 6.86%–6.9%. This pickup over the benchmark makes it attractive, particularly as inflation stays contained and the RBI edges closer to a rate-cutting cycle.
Moreover, the Centre’s latest H2 FY26 borrowing calendar indicates a reduction in ultra-long-term (>20 years) issuances, signalling that the government expects borrowing costs to trend lower over the coming decade.
“In a rate-cutting environment, tend to offer better relative value as they stand to gain more from declining yields,” says Shweta Rajani, Head – Mutual Funds, Anand Rathi Wealth Limited.
Bonds with longer maturities (10–15 years) typically see larger price appreciation since their cash flows are locked in for a longer duration. Currently, the 10-year G-Sec stands at 6.58%, compared with 6.20% for the 5-year and 5.78% for the 2-year, indicating a yield spread of around 80 bps (basis points – 1 basis point is one hundredth of a percentage point).
Historically, the spread has ranged between a maximum of 3.12% and a minimum of -0.15%, with an average of 1.13%.
Notably, during the rate-hiking cycle from 2020 to 2022, the spread had widened to its highest levels. This indicates that as rate-cut expectations strengthen, longer-tenor bonds could outperform, offering attractive relative value opportunities along the 10–15 year segment of the curve.
“While volatility might remain in this segment due to some uncertainties around trade deal, timing of rate cuts in India and SDL (state development loans) supply in Q4 FY2026, but over 6 months, yields in this segment are expected to soften as some of the uncertainties are out, MPC (Monetary Policy Committee) eases rates during this period and expectations of OMOs (open market operations) start crystallizing,” says Shriram Ramanathan, CIO, Fixed-Income, HSBC Mutual Fund.
The is highly sensitive to macroeconomic and global factors such as inflation, economic growth, and interest rate trends. When inflation begins to moderate, central banks often adopt a dovish policy stance, initiating rate cuts that push yields lower and boost long-term bond prices.
In India, inflation has eased and moved closer to the RBI’s target range, which triggered a series of rate cuts in 2025. As a result, long-term government bond yields have declined from around 7.3% to 6.5% over the past two years, reflecting the demand for long-term bonds.
“Additionally, geopolitical uncertainties such as trade tariffs, wars, rising commodity prices, or economic sanctions often create market volatility and risk aversion,” says Rajani. During such periods, investors typically move toward safe-haven assets like government bonds. This increased demand for sovereign securities is pushing bond prices higher and yields lower, particularly at the long end of the yield curve.
Positive influences (on long-term bonds) include a domestic or global rate-cut cycle, India’s fiscal consolidation, and the government’s deliberate move to curb ultra-long-term issuance, which helps stabilise long-term yields. The inclusion of Indian bonds in global indices and continued foreign inflows will further compress yields. A supportive global backdrop—moderating crude prices and lower U.S. yields can also act as a tailwind, say experts.
On the negative side, higher-than-expected or a weaker rupee could delay RBI easing. Domestically, any fiscal slippage or sharp pickup in government borrowing could steepen the curve again. Additionally, geopolitical shocks or spikes in commodity prices may temporarily push yields higher.
“Nonetheless, the structural narrative remains favourable for long-duration bonds in India, as growth-led disinflation and reduced supply should anchor yields over time,” says Ghosh.
But, in long-term bonds, as in the more glamorous equity segment, knowing your investment doctrine is a must.
“For investors looking at longer duration products, it is important to have a longer investment horizon, as near-term volatility can result in adversely diluting returns,” says Ramanathan.
How to invest in long-term bonds?
Fine, so you have decided to add long-term bonds to your investment portfolio, but what are the ways of investing in this asset class? Again, the experts guide us.
“For the long-term debt portion of the portfolio, retail investors can consider categories such as Low Duration Funds and Target Maturity Funds,” says Rajani. Low Duration Funds invest in a mix of high-quality corporate bonds and sovereign securities, offering moderate volatility and relatively stable returns. Target Maturity Funds, on the other hand, primarily hold sovereign G-Secs or gilts, providing better stability & liquidity with moderate yields.
However, these categories are more tax-efficient for investors in lower tax brackets. “For those in higher tax brackets, Arbitrage Funds can be a more efficient alternative, as they are taxed as equity and can deliver higher post-tax returns with relatively low volatility,” says Rajani.
“In the government bond segment, investors can consider Gilt Funds or 10-year constant maturity funds,” says Ghosh. These directly mirror long-term sovereign yields and will likely gain as rates soften. With the government reducing ultra-long-term borrowings, supply pressure at the long end may ease, thereby improving price stability for 10– to 15–year maturities.
In the corporate bond space, investors may consider Corporate Bond Funds, Banking & PSU Debt Funds, or Medium- to Long-Duration Funds. These offer higher yields with relatively controlled credit risk. For those seeking a balanced exposure, Dynamic Bond Funds can dynamically shift between duration buckets based on prevailing interest rate trends. “Retail investors should match their investment horizon with the fund’s average maturity and focus on fund houses with a consistent duration management record,” says Ghosh.
“The products in the Longer duration category which investors can look at are Gilt Funds and Dynamic Bond Funds,” says Ramanathan, who cautions that investors should look at these products keeping in mind the possibility of volatility in returns and investment horizon.
Ramanathan also suggests that investors could look at the Income plus Arbitrage category, which has allocation to longer duration products and provides a tax advantage when invested for longer periods of time.
Surfing the (long-term) waves
Typically, longer-term bonds (or bonds with higher duration) have a greater risk due to interest rate cycles. How would AMC fund managers and investors deal with such volatility?
Long-term bonds with maturities of 10–15 years typically carry higher interest rate risk, as their prices are more sensitive to changes across economic cycles.
“To mitigate this risk, fund managers in active debt funds actively manage portfolio duration, extending duration when rate cuts are anticipated and shortening it when rates are expected to rise. They also employ a roll-down strategy, holding longer-dated bonds that gradually move down the yield curve, benefiting from price appreciation as maturity shortens,” says Rajani.
For investors, Rajani suggests maintaining two separate debt baskets, one for short-term stability and another for long-term allocation. Those in lower tax slabs can consider Target Maturity Funds for predictable returns and tax benefits, while investors in higher tax slabs may find arbitrage funds more efficient from a post-tax return perspective.
“Fund managers manage duration risk through active maturity adjustments and the use of interest-rate derivatives to hedge their exposure,” explains Ghosh of how AMC fund managers deal with long-term bond strategies.
Ramanathan, giving his insight, explains that AMCs typically look at longer-duration instruments with two key themes in mind. One, when the view on interest rates is fairly constructive and second, when longer duration products are used to generate alpha through short-term trading to capture volatility.
(Manik Kumar Malakar is a freelance writer. He writes on bonds, the stock market and personal finance.)
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.