Bond Investing in 2026: Beyond Rate Cuts, Focus on Liquidity & Fiscal Discipline

• 2026 shifts focus for bond investors from rate cuts to liquidity management, fiscal discipline, and global capital flows.
• RBI's liquidity management (repo operations, surplus/deficit) and rupee stability will significantly influence bond yields and debt fund returns.
• India's inclusion in global bond indices is expected to attract foreign inflows, anchoring yields, but global risks like US trade policy could cause volatility.
• Fiscal discipline, including government borrowing and tax collections, will be a key driver; concerns could push yields higher.
• Debt fund selection is crucial: short/low-duration for stability, corporate bonds for carry, long-duration/gilt funds selectively due to higher volatility.

Why It Matters: Retail bond investors in 2026 must prioritize liquidity, fiscal health, and global flows for stable returns, not just rate changes.