Indian Bond Market Shifts Focus: Beyond Rate Cuts, Liquidity & Fiscal Dynamics Key for 2026

• Indian bond markets are entering a nuanced phase, with the RBI's rate cut cycle on pause and 10-year government bond yields stabilizing around 6.57–6.59 percent.
• Future bond market direction will be driven by liquidity management, fiscal dynamics, currency stability, and global flows, rather than just repo rate moves.
• RBI's liquidity operations, including OMOs and FX swaps, are crucial for managing system liquidity and anchoring short-term rates, potentially capping upward pressure on yields.
• Rupee stability against global factors like US trade policies and commodity shocks remains vital, as depreciation could complicate inflation and limit RBI's accommodative stance.
• Fiscal arithmetic, including the government's borrowing calendar for FY27 and commitment to consolidation, will significantly influence supply pressures and market patience.

Why It Matters: Indian bond traders must now focus on liquidity, fiscal cues, and global crosscurrents as rate cuts are no longer the primary driver.