November 7, 2025

Indian bond traders are ringing alarm bells and asking the Reserve Bank of India (RBI) to take swift action! They want the RBI to jump into the market, buy government debt, and also shake up the auction rules. This news comes from three sources close to the talks held between RBI officials and primary dealers on Tuesday. Why all the fuss? Well, government borrowing is heavy, but long-term investors like insurers and pension funds aren't showing much interest this year. That means bond yields are staying high, even though the RBI has slashed interest rates by 100 basis points since early 2025. To make things trickier, recent moves by the RBI to manage forex have squeezed liquidity, creating tension in the bond market. Guess what happened next? Indian government bonds shot up on Thursday, thanks to big buying over the past two days. Many believe this strong hands activity might be the RBI itself stepping in. One trader said, "Open market bond purchases (OMO) were a unilateral demand from across participants, as everyone is on the same page when it comes to supply concerns." The traders are pushing for the RBI to buy over 1.5 trillion rupees ($17.1 billion) in bonds to calm the storm. However, the RBI has stayed quiet about any bond buying plans so far. Besides buying bonds, the traders want the RBI to switch back auction rules to uniform pricing from the current multiple price bidding system in use since April 2024. The uniform pricing method means everyone pays the same price—the cutoff rate—helping investors avoid sudden mark-to-market losses. A trader explained, "For the time being this could calm down nerves and give some comfort to investors that their investment will not move into immediate mark-to-market loss." So, the bond market is buzzing with hope as traders seek RBI’s helping hand to cool the heat, lower borrowing costs, and restore investor confidence. Will the RBI answer their call and dance to their tune? The financial world is watching closely!

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Tags: Reserve bank of india, Bond Traders, Government debt, Open market operations, Auction Rules, Indian Bond Market,