RBI rate cut ahead: Axis MF shares view on Indian bond market, answers what should investors do?
Indian bond market has been in focus over the past few months as the Reserve Bank of India (RBI) implemented key liquidity measures and rate cuts to support economic growth. While global markets saw heightened volatility, India’s bond market remained relatively stable, with the 10-year government bond yield rising by 3 basis points (bps) in February.
Meanwhile, US Treasury yields declined sharply, reflecting concerns over slowing global growth.
Despite short-term fluctuations, market experts expect bond yields in India to move lower in the coming months, driven by proactive steps from the central bank.
“We expect an overall shallow interest rate cut cycle of 25-50 bps in the next 6-12 months, with 25 bps coming up in the April monetary policy meeting and a long pause thereafter,” says a report by Axis Mutual Fund.
The RBI’s decision to postpone the implementation of the Liquidity Coverage Ratio (LCR) norms until March 2026 is expected to provide banks with sufficient time to manage liquidity without disruptions.
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What happened in the bond market so far?
February was a month of crucial policy actions. The RBI took several steps to ease liquidity conditions, including auctioning $10 billion in dollar/rupee buy/sell swaps, which saw strong demand. Additionally, the central bank cut the repo rate by 25 bps, marking the beginning of a softer interest rate cycle.
Despite these measures, the 10-year Indian government bond yield rose slightly by 3 bps, reflecting cautious investor sentiment. On the global
