Govt bond yields harden by 4 bps after RBI MPC keeps policy rate unchanged

10-year benchmark yield rose to 6.69% after MPC holds rates and RBI refrains from announcing fresh OMOs

Government bond yields hardened by four basis points on Friday after the six-member Monetary Policy Committee (MPC) decided to keep policy rates unchanged at 5.25 per cent.

 

The yield on the benchmark 10-year government bond rose to 6.69 per cent, compared with the previous close of 6.65 per cent.

 

Some market participants expected the Reserve Bank of India (RBI) would announce further open market operations (OMOs).

 

While no OMOs were announced, RBI Governor Sanjay Malhotra assured markets that the central bank would remain proactive in liquidity management and ensure sufficient liquidity in the banking system to meet the requirements of the economy and facilitate monetary policy transmission.

 

“Liquidity management would be pre-emptive, with sufficient allowance for unanticipated fluctuations in government balances, changes in currency in circulation, forex intervention, etc,” he said.

 

The MPC cut the policy repo rate by 25 basis points in December 2025 after keeping it unchanged in the previous two meetings. The panel had implemented a 50-basis-point rate cut in June 2025.

 

The panel on Friday decided to keep the monetary policy stance unchanged at neutral. The committee had changed the stance to neutral in June from accommodative.

 

Malhotra said the current growth momentum is likely to be sustained in the coming period, signalling confidence in the near-term economic outlook despite external headwinds.

 

The RBI revised the consumer price index (CPI) inflation outlook for FY27 upward, projecting inflation at 4.0 per cent in Q1 and 4.2 per cent in Q2.

 

Malhotra said real gross domestic product (GDP) is poised to register a higher expansion of 7.4 per cent compared with the previous year.

 

He added that future decisions would be based on upcoming CPI and GDP data, scheduled for release in mid to late February 2026 using new base years.

 

The January 2026 CPI figures are due on February 12, with 2024 as the base year, while GDP data for FY2024 to FY2026 will be released on February 27, with 2022–23 as the base year. These revised series are expected to clarify prevailing growth-inflation dynamics and provide a basis for forming a fresh outlook.