Topic 2: DEBT: GOLDEN BONDS

In October 2025, India’s debt market demonstrated resilience and underlying strength, showing stability to mild positivity across most segments. While government bond yields edged slightly higher, the broader sentiment remained constructive, supported by expectations of a forthcoming rate-cut cycle and strong demand for corporate debt. The month reflected a delicate balance between global uncertainty and domestic optimism, as both institutional investors and corporates responded to improving liquidity conditions and policy clarity.
The 10-year benchmark government bond yield rose modestly by about 6 basis points to close at 6.59% at the end of October, marking a slight month-on-month uptick but remaining well below levels seen a year earlier. This marginal rise was largely in line with global trends, where U.S. Treasury yields also adjusted amid evolving expectations of monetary easing in major economies. Despite the upward movement, investor appetite for government securities stayed intact, aided by stable inflation data and signs of fiscal prudence from the Indian government.
Corporate bond activity, meanwhile, rebounded sharply after a subdued July–September quarter. October witnessed fresh issuances exceeding ₹1 trillion, highlighting renewed confidence in the credit markets. The resurgence was anchored by large-scale offerings, such as Bharti Telecom’s ₹105 billion and the State Bank of India’s ₹75 billion bond sales, both of which saw strong investor participation. Market optimism surrounding an eventual Reserve Bank of India (RBI) rate cut and a benign inflation outlook spurred this revival, encouraging issuers to lock in funds at relatively favourable rates.
Money market instruments and short-duration debt funds also performed steadily during the month. Continued liquidity support from the RBI and limited concerns over inflation or fiscal slippage kept yields on short-term instruments contained. The overnight call money rate and commercial paper yields moved in a narrow band, reflecting healthy systemic liquidity and balanced demand-supply conditions.
A key highlight of October was the renewed interest from foreign investors. Foreign Portfolio Investors (FPIs) registered net inflows exceeding ₹15,000 crore into Indian debt under the Fully Accessible Route (FAR)—a sharp contrast to the muted participation observed earlier in the year. With global growth slowing and major central banks expected to pivot toward easing in 2026, India’s relatively high-yielding bonds became increasingly attractive to overseas investors seeking stable returns in emerging markets.
The moderate uptick in government yields was influenced by global cues, as economic data from the U.S. and Europe signalled weakening momentum, raising the likelihood of synchronized global rate cuts in the near term. Domestically, the Reserve Bank of India maintained the repo rate at 5.5% during its October policy meeting but struck a notably dovish tone, acknowledging softening inflation and hinting at a supportive monetary stance going forward. This policy communication provided a strong tailwind for corporate bond markets, fuelling optimism about a lower cost of borrowing in the coming quarters.
Additionally, fiscal developments contributed positively to market sentiment. The government’s commitment to fiscal discipline, including rationalized GST rates and a lower-than-expected borrowing program for the second half of FY26, reassured investors about manageable deficit levels. Inflation remained within the RBI’s comfort zone, and the absence of major supply-side shocks further strengthened the case for potential monetary easing.
Overall, October 2025 was a constructive month for India’s fixed-income landscape. Government bond yields saw only a mild increase, while corporate debt markets experienced robust revival, underscored by strong issuance volumes and renewed investor appetite. Steady liquidity conditions, restrained inflation, and positive policy signals combined to foster a favourable environment for both issuers and investors. With growing foreign participation and improving domestic confidence, the outlook for India’s debt market remains optimistic, positioning it as a key beneficiary of the anticipated global shift toward lower interest rates in the months ahead.