Surge of the State Banks: Why ₹100 Billion in Bonds Just Changed the Market Game

India’s state-run banks have made a decisive move, snapping up government bonds worth ₹100 billion as yields climbed in response to the Reserve Bank of India’s (RBI) updated liquidity norms. The benchmark 10-year bond yield rose to 6.3365%, creating an attractive entry point for these institutional giants.

 

Key Highlights:

 

Yield Opportunity: The yield spike followed the RBI’s new liquidity rules, requiring banks to hold a 2.5% buffer on digital retail deposits. This temporarily softened overall demand, but state-run banks seized the chance to lock in higher returns.

 

RBI’s Liquidity Moves: The central bank is set to inject another ₹200 billion into the system through open market bond purchases this week, having already bought ₹800 billion in April to maintain ample liquidity.

 

Market Outlook: Traders expect further buying near the 6.35% yield mark, especially with the RBI possibly eyeing rate cuts later this year.

 

Global Context: Indian yields are also tracking gains in US Treasuries, with global monetary policy shifts influencing local sentiment.

 

State banks’ bold buying signals confidence and could set the stage for more market action ahead.

 

Sources: Economic Times, Business Standard, TradingView