RBI to Sell Bonds Worth ₹27,000 Cr to Manage Yields

Mumbai, June 20, 2025 — In a calibrated effort to guide the bond market and ensure orderly yield curve evolution, the Reserve Bank of India (RBI) has announced the reissuance of ₹27,000 crore worth of government securities. The move is part of the central bank’s broader strategy to manage liquidity, support market stability, and strengthen confidence amid shifting macroeconomic conditions.

The reissuance will be carried out via an auction scheduled for June 21, 2025. Two benchmark instruments will be offered: ₹12,000 crore of the 7.10% GS 2029, and ₹15,000 crore of the 7.46% GS 2054. Both securities are reissues of existing bonds already in circulation, a method commonly used to deepen market liquidity by increasing outstanding stock.

This bond auction takes place against a backdrop of growing expectations of further monetary easing, a cooling inflation environment, and elevated fiscal borrowing requirements. With headline inflation softening to 3.2% in May and the RBI having recently cut the repo rate by 50 basis points, policymakers are now focusing on ensuring that transmission to longer-end yields takes place effectively.

The 7.10% GS 2029, a mid-tenor instrument, is expected to draw interest from banks and mutual funds with medium-duration strategies. The 30-year 7.46% GS 2054, on the other hand, is primarily targeted at long-term institutional investors such as pension and insurance funds that seek duration exposure and predictable cash flows.

Market participants have interpreted the reissuance as a signal that the RBI intends to maintain an active presence in the secondary bond market while avoiding abrupt interventions like large-scale open market operations (OMOs). By choosing benchmark securities with established liquidity, the RBI aims to improve price discovery and ensure better participation across tenors.

“The RBI is using reissuance as a tool to smoothen the yield curve without creating supply shocks,” said Kavita Mehra, Head of Fixed Income at Axis Mutual Fund. “This is particularly important now as we navigate a lower inflation environment but with persistent long-end yield resistance.”

Despite repo rate cuts and soft inflation, the benchmark 10-year bond yield has remained elevated—hovering near 6.97%. This stickiness has been a concern for the central bank, especially as it seeks to foster a more accommodative monetary stance without igniting volatility.

The auction will be conducted via the uniform price method, under which all successful bidders will be allotted bonds at the same rate. Eligible participants include primary dealers, banks, mutual funds, insurance firms, and foreign portfolio investors registered under the RBI’s Fully Accessible Route (FAR).

This reissuance is also aligned with the Centre’s borrowing calendar. The Government of India has budgeted gross market borrowings of ₹14.13 lakh crore for FY2025, with approximately ₹7.5 lakh crore scheduled for the April–September period. Regular bond reissuances are critical to maintaining a predictable and stable issuance structure, which in turn supports secondary market development.

The timing of this ₹27,000 crore auction is notable, as it comes just ahead of potential global turbulence. Rising crude oil prices and mounting geopolitical risks in West Asia could tighten global financial conditions. A well-anchored domestic yield curve, supported by robust bond demand, is essential for protecting India’s macroeconomic stability and sustaining foreign capital inflows.

India’s upcoming inclusion in the JP Morgan Government Bond Index–Emerging Markets (GBI-EM), scheduled to commence in June 2025, further raises the stakes. Strong participation in auctions like this one will be critical to building investor confidence and demonstrating the depth and resilience of India’s sovereign bond market.

Should demand prove strong—especially for the 30-year paper—the auction could offer a key vote of confidence in India’s long-term fiscal trajectory and support the RBI’s goal of yield curve alignment without the need for disruptive interventions.