RBI’s Rate Cut & ₹26,000 Cr G-Sec Buyback Set to Ease Bond Yields

Image Source: The Economic Times

The Reserve Bank of India (RBI) has delivered a frontloaded rate cut, alongside a ₹26,000 crore government securities (GSec) buyback, aiming to lower bond yields and enhance market liquidity. The move is expected to push yields downward, benefiting investors and reducing borrowing costs for the government.

Key Highlights:

Rate Cut Impact: The RBI slashed the repo rate by 50 basis points to 5.5%, signaling a shift in monetary policy stance from accommodative to neutral.
Bond Market Reaction: While shortterm yields are expected to decline, longterm yields may see temporary volatility as investors adjust to the new rate trajectory.
GSec Buyback Details: The government will repurchase five securities maturing in 2026, including 5.63% GS 2026 and 8.15% GS 2026, through an auction on June 12, 2025.
Liquidity Boost: The RBI’s 100 bps Cash Reserve Ratio (CRR) cut is set to inject ₹2.5 lakh crore into the banking system, supporting credit flow.
Market Outlook: Experts predict bond yields will continue their downward trend, with the 10year benchmark yield expected to stabilize around 6% in the coming months.