The yield on the 10-year Indian G-Sec (Government Security) dropped to 6.4% in April 2025, marking the lowest level in over three years. This decline reflects the ongoing measures by the Reserve Bank of India (RBI) to stimulate economic growth and manage liquidity conditions. The central bank has taken a series of actions to support the Indian bond market, including **back-to-back cuts to its benchmark repo rate, which had been held at an over four-year high of 6.5% for a full year to combat the slowdown in domestic growth.

After holding the repo rate steady for a significant period, the RBI decided to take more aggressive steps, including a series of liquidity injections into the commercial banking sector. These measures were implemented after the RBI’s defense of the rupee, which drained domestic reserves and led to tighter financing conditions. With inflation showing signs of easing, the RBI is expected to continue cutting rates, as latest inflation data revealed a fall to an over five-year low in March 2025.

The combination of these rate cuts and liquidity measures has bolstered confidence in the Indian bond market, as the 10-year Indian G-Sec yield continues its downward trajectory. The Indian rupee’s recent stability has also played a key role in foreign investors reconsidering Indian bonds. Following this stability and the inclusion of Indian government securities in the fixed-income funds of DBS and JPMorgan, foreign inflows into Indian bonds have picked up. This influx of capital is helping to further support the Indian bond market and enhance its attractiveness to global investors.

With domestic growth concerns persisting and the RBI likely to maintain an accommodative policy stance, the outlook for the Indian bond market remains positive. The combination of lower interest rates, increased foreign investment, and stable inflation is expected to keep the Indian 10-year G-Sec yield relatively low, fostering investor confidence and further promoting economic stability.

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