India’s surging bond yields are starting to draw interest. JPMorgan Chase & Co says 10-year yields are becoming “reasonably attractive” now their premium over the central bank’s policy rate has increased to around 1 percentage point.

The nation’s 10-year yield jumped to a six-month high of 6.94 per cent Wednesday, from as low as 6.40 per cent in July, as rising oil prices add to inflationary pressures. The Reserve Bank of India held its repurchase rate at 6 per cent when it met last month.

“While we are saying that there will be no more cuts, there is nothing in the underlying economy that is calling for a rate hike,” said Brijen Puri, head of markets for India at JPMorgan in Mumbai.

Yields are now at the higher end of their range over a six-to-12 month perspective, Puri said.

Any further steepening of the yield curve seems unlikely unless the RBI decides to increase interest rates, he said.

The key to bonds going forward will be whether the government manages to stick to its intended path for the fiscal deficit, Puri said. The government has said it will maintain its deficit target of 3.2 per cent of gross domestic product for now and review it in December.