Bond yields likely to ease before RBI's monetary policy review meeting

Optimism building around potential announcement of an OMO calendar

As the market absorbs the GDP growth data for the first half of the current financial year, government bond yields are expected to ease this week, ahead of the Reserve Bank of India’s monetary policy review meeting.

 

Even as there is an expectation of a status quo in the policy review meeting scheduled on Friday — given strong Q2 GDP growth numbers — optimism is also building around a potential announcement of an open market operation (OMO) calendar to purchase government bonds.

 

The market expects an announcement of OMOs worth more than ₹2 trillion likely on Friday.

 

India’s real GDP expanded 8.2 per cent in the second quarter (July-September) of financial year 2026 (FY26), bringing first-half (H1) growth to 8 per cent. The robust performance was driven by momentum in the manufacturing, construction, and services sectors. Notably, this growth comes despite external challenges, including U.S. tariffs on Indian exports.

 

The yield on the benchmark 10-year government bond is expected to trade in a range of 6.50 per cent to 6.56 per cent during the week.

 

However, state bond supply worth ₹31,350 crore, higher than the calendar amount of ₹21,000 crore, might weigh on sentiment. Additionally, the central government plans to sell ₹32,000 crore worth of 10-year bond on Friday, which might further put pressure on the bond prices.

 

The yield on the benchmark 10-year government bond settled at 6.54 per cent on Friday.

 

“The yield (on benchmark 10-year government bond) will trade between 6.50 per cent to 6.56 per cent, until the policy. Even if the rate cut doesn’t happen, the policy is expected to be dovish and OMO calendar is expected,” said a dealer at a state-owned bank.

 

Most market participants expect the RBI Monetary Policy Committee (MPC) to maintain status quo at the upcoming policy review, given the sharp depreciation in the rupee recently.

 

The local currency remained under pressure on month end dollar demand and is expected to trade in the current range. The rupee witnessed its worst month since July, depreciating by 0.8 per cent in November so far. The local currency fell by 0.17 per cent on Friday to settle at 89.46 per dollar.

 

The Indian unit has been the worst performing currency in Asia in 2025.

 

Traders will also keep an eye on global markets as the US returns from the Thanksgiving holiday. So far, no India-US trade deal has been announced, which was earlier expected by the end of the month.

 

“The trade deal and MPC outcome will determine the course of the rupee movement,” said a dealer at a private bank. “The RBI might consider a pause given the current pressure on the rupee,” he added.