Mint Quick Edit | RBI’s bond-buying aims to soften yields as debt investors await India’s budget for cues

Why this urgency? Banks are short of cash and bond yields have spiked, putting RBI in a bit of a spot as the government’s debt manager. The yield on 10-year securities has hit an 11-month high of about 6.7%. Broad blame for hardening yields can be assigned to bond issuances planned by states, raising concerns of oversupply, the held-off inclusion of Indian bonds in a global index and rupee weakness, among other factors.

But one could also read recent yield upmoves as a market response to fiscal-policy expectations. For debt-reduction comfort, a spend-heavy Union budget would need the aid of faster nominal GDP growth than this year’s 8% estimate. Right now, the gap between output expansion in rupee terms and yields is rather too small. While RBI bond-buying might soften the latter, perhaps investors will be calmed by budget numbers.