Archive · 29 Nov 2025
Experts Discuss Bond Market Demand-Supply Mismatch
Experts are talking about a problem in the Indian bond market where there are more bonds being sold than people want to buy.
This is causing bond prices to go down and the interest rates (yields) to go up.
Even though the central bank (RBI) is cutting rates, the yields are still going up because big investors like banks and insurance companies are not buying as many bonds as before.
This is happening because these investors are putting more money into stocks instead of bonds.
The experts say that even though this is a problem, there are still ways to make money in this situation.
For example, short-term bond funds and corporate bond funds can give good returns.
They also suggest that retail investors (regular people) should consider putting their money in short-term funds and corporate bond funds to benefit from the current market conditions.
The Indian bond market is experiencing a demand-supply mismatch, with more bonds being issued than there is demand for.
This mismatch is causing bond yields to drift higher, even as the RBI continues to cut rates.
Institutional investors like banks, insurers, and FPIs are pulling back from buying government bonds, exacerbating the issue.
Experts suggest that this situation presents opportunities for investors, particularly in short-duration funds, corporate bond funds, and dynamic bond funds.
Retail investors are advised to consider short-term funds and corporate bond funds as part of their core debt allocation in the current environment.
- Who
- Experts in the bond market, including Rajeev Radhakrishnan, Tushar Sharma, and Harsimran Singh Sahni
- What
- A demand-supply mismatch in the Indian bond market
- When
- The imbalance has begun to show this financial year
- Where
- In the Indian bond market
- Why
- Due to a lack of demand-side incentivization for debt papers and a reduction in surplus liquidity
- Core Issue
- Lack of demand-side incentivization for debt papers
- Impact
- Bond yields have drifted higher this financial year
- Institutional Investors
- Banks, insurers, FPIs, and RBI are pulling back from buying government bonds
- Benefits
- Higher coupon rates on fresh issuances and hardening yields on existing bonds
- Opportunities
- Short-duration funds, corporate bond funds, dynamic bond funds, target maturity funds, and bond ETFs
- Strategy
- Focus on short-term high-grade bond funds to optimize duration and credit risk
- Advice for Retail Investors
- Consider short-term funds and corporate bond funds as part of core debt allocation
