Bonds worth more than £ 2.6 Lakh Crore are due to adults in the current tax year, the central bank of which has around £ 75,000 crore. The RBI could exchange them for 5-10-year-old loops bonds to help banks about the current impasse, different traders said.
The bond traders of India ask for intervention in the central bank, because a sharp decrease in institutional buying has pushed the proceeds higher, causing the monetary transmission to block, said market participants on Tuesday.
The Benchmark 10-year bond return rose in August 24 Basic points to 6.62 percent, including an increase of 22 BP in the last seven sessions up to and including Tuesday, after Prime Minister Narendra Modi announced tax cuts for goods and services.
In addition to tax care, pension funds and insurers have avoided bonds in favor of shares, while large banks have delayed purchases in the midst of Mark-to-Market losing on existing bond companies as the proceeds enrich.
This has led to a “buyer strike” in the market, which pushes benchmarks above the most important technical levels, said traders.
The returnspike is also forced companies, including Hudco and Bajaj Finance, to withdraw planned fundraising.
“Investors are on the sidelines and short sellers become active with every news, which has led to all the important levels that have been broken,” said VRC Reddy, Treasury Head at Karur Vysya Bank.
“The reserve Bank of India must communicate with the market, while the government has to intervene with tax insurance to stop the current increase in bond returns,” he added.
The increase in returns since the central bank’s policy decision on 6 August has compensated for the decreases that were previously seen in the financial year, thereby reversing the impact of 100 BPs of RBI rate reductions since February.
“The recent sale in the bond market has returned the proceeds to levels that can be seen at the start of the tax year,” says A. Prasanna, economist at ICICI Securities Primary Dealer. He added that this could weigh on borrowing corporate bonds, which had jumped earlier this year.
“The RBI should be worried that the benefits of tariff reductions and liquidity infusion can last longer than normal to percolify in the economy, since the bank’s credit growth is also lukewarm,” said Prasanna.
Question is falling; Delivery remains
Market participants say that structural changes reinforce the pressure on bond returns.
Restrictions on the use of the Portfolio of the Banks of the Portfolio of Hold-to-Maturality (HTM) have forced their ability to make a profit to step to step.
The demand for longer duration of bonds from insurers and pension funds is also delayed, with inflow into tapered private insurers and the national pension system that assigns more funds to shares.
In the meantime, both central and national governments have staged the loans through long -term bonds, which deteriorates the mismatch.
Traders say that even token open market bond -purchases through the RBI can help to shift the sentiment and stabilize the yields.
Bonds worth more than £ 2.6 Lakh Crore ($ 29.71 billion) are due to adults in the current tax year, the central bank of which has around £ 75,000 crore. The RBI could exchange them for 5-10-year-old loops bonds to help banks about the current impasse, different traders said.
“Investors had built up long positions to play the relaxation cycle. The majority of the relaxation took place in a short period and the cycle ended too quickly for investors to adjust their positions,” said a senior trader at an insurance company.
“The market had no chance to correct time and we see a price correction.”
Published August 26, 2025
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