Indian Bond Yields Decline Ahead of RBI Policy Announcement

Indian Government Bond Yields Edge Lower Ahead of RBI Monetary Policy Decision

Indian government bond yields declined in early trade on June 5, as investors remained cautious in anticipation of the Reserve Bank of India's (RBI) monetary policy decision later in the day. The benchmark 10-year bond yield was trading at 6.9802 percent, down from 6.9931 percent in the previous session. It is worth noting that bond yields and prices move in opposite directions.

The RBI's policy review will be the key trigger for the bond market, with the central bank widely expected to keep the repo rate unchanged at 5.25 percent. However, a section of market participants expects a 25-basis-point rate hike, given the pressure on inflation and the rupee from the prolonged West Asia conflict.

Market participants will closely watch the RBI's announcement for measures to attract dollar inflows and support the rupee, which has remained under pressure. Any revision to the central bank's inflation and growth projections for FY27 will also be closely tracked.

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Recent media reports suggest that the government is considering a proposal to scrap capital gains tax on investments in government securities by overseas investors, a move that could support foreign portfolio inflows into Indian debt.

Market participants will also track FY26 GDP data, expected later in the day, along with the weekly debt auction.

Note: The table above represents market participant expectations for the RBI's monetary policy decision.

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