March moves

The yield on the 10-year benchmark government security (G-sec) opened at 6.74% and closed at 6.58%, down 14 basis points (bps) from its February close of 6.72% and outside Crisil’s forecast range of 6.65-6.75%.

The first week opened with a bearish bias owing to higher-than-indicated state development loan (SDL) auction amount. States collectively raised Rs 50,500 crores ($5.80 billion) through bond sales, with cutoff yields exceeding market expectations, signalling weak demand. During the week, gilts tracked movement in US Treasury yields. The 10-year benchmark G-sec closed the first week at 6.69%.

The second week opened on a steady note amid lack of firm cues. Consumer Price Index (CPI) inflation in the country eased to a seven-month low of 3.61% in February 2025, driven by a decline in prices of beverages food, particularly vegetables. It gave rise to hopes of a policy rate cut by the Reserve Bank of India (RBI) in the April monetary policy meeting, which aided the G-sec prices. The 10-year benchmark closed the week at 6.70%.

In the third week, bonds traded with a bullish bias in anticipation of policy rate cuts and softer stance by the central bank at the Monetary Policy Committee (MPC) meeting slated for April. The 10-year US Treasury yields eased 6 bps to close at 4.25%. Also, RBI’s announcement of a fresh open market operation (OMO) to purchase G-secs worth Rs 50,000 crore on March 25 to ease market liquidity, aided the bond prices. The benchmark paper closed at 6.63%.

The last week of the month opened on a negative note, tracking a surge in US Treasury yields. As the week progressed, bets on a policy rate cut and softer stance in the April MPC meeting supported market sentiment. Moreover, prices got support from the government’s borrowing calendar for the first half of fiscal 2026, which indicated Rs 8 lakh crore borrowing in line with the market expectations. The benchmark paper closed at 6.58%.

Eventually, in a unanimous decision the MPC on April 9 cut the policy repo rate by 25 bps to 6% with immediate effect. More significantly, it changed its stance from ‘neutral’ to ‘accommodative’ considering the prevailing global economic uncertainties after the tariff tantrum by the US administration. The RBI also lowered the GDP growth forecast to 6.5% from the earlier projection of 6.7%. The 10-year G-sec closed 2 bps down at 6.45%, after the RBI’s announcements.