Quarter-End Buying Nudges Bond Yields Down—Will RBI Cut Rates Next?

Traders closed the September 2025 quarter with quiet buying, but all eyes now turn to the Reserve Bank of India policy outlook.

Can a few basis points tell the story of an entire debt market? On 30 September 2025, the 10-year India government bond yield slipped to 6.55 percent in morning trade compared with the previous close of 6.56 percent. It may look like a minor change. 

Yet, when quarter-end bond market buying combines with the Reserve Bank of India’s policy expectations, the smallest dip carries weight.

Small Decline Signals Big Watch On RBI

The first angle comes from the latest market movement. According to a report published by the Economic Times on 30 September 2025, dealers at state-run banks confirmed that quarter-end flows drove this fall in yields. Such flows arise when banks and funds adjust portfolios to show stable balance sheets at the end of a quarter.

The Reserve Bank of India policy outlook now becomes the deciding factor. Most analysts expect no change at the upcoming Monetary Policy Committee meeting in October 2025. 

Yet, a few research reports from Citi, Barclays, and State Bank of India allow for a 25-basis point cut. This spread of views explains why the Indian debt market movements are narrow but nervous.

The data above shows how little the shifts were through the last week of September 2025. Yet, they point to how every basis point is measured against RBI’s likely stand.

Theory Behind Quarter-End Buying

The second angle is a theoretical look at why quarter-end bond market buying matters. In simple words, this buying is accounting-driven. Banks, mutual funds, and insurance firms prefer to hold more safe securities, like government bonds, at the end of a financial quarter. These holdings help reduce reported risk.

Quarter-end buying is not a market shock. It is more like a temporary cushion. It pulls yields down slightly. When the next quarter begins, demand normalises and yields move with policy and supply factors. Reports from Reuters and ET both stressed that the present move was not driven by fresh economic data, but by calendar-driven flows.

These drivers explain why a single day’s decline cannot be read as a trend. It is a signal, but not a forecast.

Past Links To Sudden Moves In Yields

The third angle connects the present dip with earlier spikes. In March 2025, bond yields jumped after a surprise RBI stance. As covered in this article: Bond Yields Spike 9 bps to 6.42% After Policy, the market reacted sharply to words that hinted at caution.

By contrast, the September 2025 move has been more measured, driven largely by technical buying rather than abrupt policy shifts. Even so, the memory of past yield shocks keeps traders wary. That’s why many now anchor expectations in a 6.50 %–6.60 % band.

As LoansJagat reports in “Muted Response To RBI’s VRRR As Overnight Rates Rise”, banks recently showed low participation in a reverse repo auction because short-term rates had already moved close to policy levels, a signal that markets are adjusting to yield dynamics more smoothly than before.

The contrast shows how different triggers move the market. Past episodes were tied to policy words, while the present one is tied to calendar needs.

How Government And RBI Reacted In Past Years

The fourth angle looks at history. In 2020, during the pandemic, the RBI used special open market operations and “operation twist” to push down long-term yields by nearly 40 basis points. At that time, the aim was to keep borrowing costs low when growth was under stress.

In 2023, the RBI tightened liquidity instead, allowing yields to rise above 7 percent for some weeks. The focus then was to contain inflation. This shows a pattern. The central bank has changed methods as per the year and the pressure of the economy.

For the present year 2025, the RBI has not carried out any large-scale market operation. It is allowing the market to find its balance. Reports from the Ministry of Finance confirm that borrowing in April–September 2025 stood at ₹7.95 trillion, while October–March 2026 borrowing is set at ₹6.77 trillion. The change in supply strategy, where more 10-year bonds are sold and fewer 30 to 50-year bonds are issued, reflects a policy to keep the curve healthy.

The data shows that supply strategy itself becomes a tool. It affects how much demand is created for the 10-year segment, which is the benchmark for pricing.

What Traders Watch Beyond The 10-Year

The Indian debt market movements are not only about the 10-year. Shorter tenor swaps reflect expectations of rate cuts or holds. According to the same ET report of 30 September 2025, one-year OIS closed at 5.46 percent, two-year at 5.45 percent, and five-year at 5.73 percent.

This part of the curve hints at a market still betting on easy policy, but not ruling out higher costs in the medium term.

Conclusion

India government bond yields showed only a one basis point fall on the last day of September 2025. Yet, the attention it drew proves how sensitive the market is to even small shifts. Quarter end bond market buying shaped the session, but the Reserve Bank of India policy outlook now stands as the real trigger.

History shows that the RBI monetary policy impact on bonds is strong when policy surprises come. 

Government supply decisions also affect demand in the benchmark segment. For now, the Indian debt market movements suggest balance, but the next policy meeting will decide if this balance holds or breaks.
 

Apply for Loans Fast and Hassle-Free

Apply Now

About the Author

LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.