Core Viewpoint - The Reserve Bank of India's unexpected decision to purchase ultra long-dated government bonds, including a 25-year bond maturing in 2050, aims to address the demand-supply mismatch in the market and is expected to help lower yields on such securities [1][3]. Group 1: Central Bank Actions - The Reserve Bank of India plans to buy bonds worth up to ₹50,000 crores on Thursday, with a similar purchase expected on December 18 [1]. - The central bank's decision to include ultra long-term bonds in its open market operations is anticipated to increase demand and stabilize yields [3]. Group 2: Market Dynamics - There has been a demand-supply mismatch for ultra-long tenor bonds, with weak demand from insurers and pension funds leading to reduced purchases this year [2][7]. - The yield on bonds with maturities of 30 years and above has increased by 25-30 basis points in 2025, despite the RBI's interest rate cuts and significant bond purchases [2]. Group 3: Future Projections - The Indian government plans to sell 30-to-50-year bonds worth ₹127,000 crores from December to March, while the RBI is expected to buy around ₹2 trillion worth of bonds during the same period [4]. - Market reactions indicate a decrease in yields on the 30-year and 40-year bonds, reflecting optimism about improving demand and future purchases by the RBI [5].

Group 1 - The Reserve Bank of India's (RBI) share in outstanding government securities has increased to 14.2% in June 2025 from 11.9% in June 2024 and 10.6% in December 2025 [2] - The share held by banks has declined, while the share of insurance companies has remained broadly unchanged during the same period [2] - The Central government is expected to borrow around ₹1.00 lakh crore every month until February 2026, with significant State Development Loan (SDL) issuances likely to compete with short-term government borrowings [2] Group 2 - Bond yields are expected to remain rangebound and move sideways in the coming days, as banks and mutual funds have been net sellers of government securities, while the "Others" category has emerged as a major buyer [3] - The RBI has intervened in the foreign exchange market to curb excessive speculation and defend the rupee, resulting in a net sale of foreign currency amounting to around $14 billion between June and August 2025 [4][5] - India's foreign exchange reserves declined from $703 billion in June 2025 to $690 billion by the end of October 2025, with reserves excluding gold and Special Drawing Rights (SDRs) falling by $30 billion during the same period [4][5] Group 3 - The RBI's recent Open Market Operations (OMOs) in the secondary market may be a tactical move to inject permanent liquidity to offset the liquidity drained due to forex interventions [6] - The RBI has shifted part of its intervention strategy towards the Non-Deliverable Forward (NDF) markets instead of spot market operations to manage currency volatility without impacting banking system liquidity [6]