India’s Bond Market Turmoil Spurs RBI Intervention Speculation

Indian sovereign bonds endured their steepest monthly selloff since 2022 as 10-year yields surged 20 basis points in August, Bloomberg data reveals. The Reserve Bank of India now contemplates market-stabilizing measures amid a perfect storm of fiscal pressures, unexpected tax cuts, and diminishing rate cut expectations following robust GDP figures.

Market participants anticipate potential RBI intervention through secondary market purchases or auction rejections. ICICI Securities' A. Prasanna notes the central bank could deploy open market operations or symbolic screen purchases to curb yield volatility, stating: "Soft signals like statements or marginal purchases can ensure smooth bond market functioning."

Nomura's Nathan Sribalasundaram suggests alternative measures including call rate adjustments to improve carry trades. With fiscal deficits hitting 30% of annual targets prematurely, all eyes remain on the RBI's next MOVE as traders brace for potential liquidity operations.