Indian government bonds concluded trading on a relatively flat note Friday, October 24, 2025, after recovering from intraday dips. However, the market experienced a weekly decline due to lackluster trading volumes that emboldened short-sellers, while many investors remained cautious due to uncertainty surrounding interest rates.
The 10-year benchmark bond yield ended at 7.28%, a minor change from its previous close of 7.27%. Earlier in the session, the yield had risen to a high of 7.31%.
Trading volumes remained thin, which analysts attributed to a combination of factors. Uncertainty regarding the future trajectory of interest rates, both domestically and globally, kept major investors on the sidelines. Additionally, some traders were hesitant to take large positions ahead of key economic data releases expected next week.
Short-sellers, sensing the subdued market activity, actively engaged in creating positions, contributing to the bond market's overall volatility. Short-selling involves borrowing bonds and selling them with the expectation of buying them back at a lower price in the future, thus profiting from the anticipated price decline.
The Reserve Bank of India's (RBI) monetary policy stance has been a key factor influencing investor sentiment. The central bank has been focused on ensuring transmission of rate cuts. The market participants are closely watching for signals from the RBI regarding its future course of action.
Globally, rising inflation in some major economies has led to expectations of tighter monetary policies by central banks, adding to the cautious mood in the Indian bond market.
Market participants are now looking ahead to the upcoming release of inflation and industrial production data, which are expected to provide further clues about the health of the Indian economy and the likely direction of interest rates. These data points will be crucial in shaping market expectations and influencing trading strategies in the coming weeks.
Furthermore, developments in the global crude oil market and the movement of the rupee against the US dollar will also be closely monitored for their potential impact on the bond market.
