HOW RBI POLICIES IMPACT BONDS

RBI decisions influence interest rates, liquidity and inflation — all of which directly affect bond prices and yields.

REPO RATE & YIELDS

When RBI hikes repo rates, borrowing becomes costlier. Yields on new bonds rise and prices of older bonds fall.

LIQUIDITY CONTROLS VIA OMOs

RBI buys or sells government securities to manage liquidity. This impacts short-term yields and investor sentiment.

WHY INFLATION IS THE KEY

High inflation reduces real returns from bonds. Investors then demand higher yields, pushing prices lower.

FISCAL POLICY & BOND SUPPLY

Higher fiscal deficit leads to more bond issuances. If demand lags, yields may rise to attract buyers.

EXTERNAL FACTORS AT PLAY

US Fed policy, oil prices and global risk appetite affect foreign investor flows in Indian bonds.

GROWTH vs SLOWDOWN

During economic upswings, yields rise. In slowdowns, bonds gain  favour as a low-risk option.

READING RBI SIGNALS

Tracking RBI’s policy stance helps in timing bond investments better — especially for locking in good yields.