Rising Bond Yields Pose Greater Challenges for Public Sector Banks in Fourth Quarter
Rising Government Bond Yields Hit Banks' Treasury Income
MUMBAI: The recent surge in government bond yields has had a significant impact on the treasury income of banks in the March quarter (Q4FY26). As a result, non-core earnings, particularly at public sector lenders, have taken a hit.
The impact of rising bond yields was evident in the treasury income of banks, which witnessed a decline in the March quarter. The pressure on treasury income is expected to intensify in the June quarter, following an oil-driven spike in bond yields triggered by the West Asia conflict.
| Bank Type | Q4FY26 Treasury Income (YoY) |
|---|---|
| Public Sector Lenders | -15% |
| Private Sector Banks | -8% |
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
The analysts now expect the pressure to intensify in the June quarter, as the impact of rising bond yields continues to be felt by banks. The trend is likely to be more pronounced at public sector lenders, which have been more vulnerable to the fluctuations in bond yields.
Public Sector Lenders are expected to be particularly affected by the rising bond yields, which have already led to a decline in their non-core earnings. The situation is likely to worsen in the June quarter, as the impact of rising bond yields continues to be felt by these lenders.
Investor Takeaway
Investors should be cautious of the potential impact of rising bond yields on public sector banks' non-core earnings.
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