The previous several weeks have seen pressure on the yield on Indian bonds, particularly after the government’s announcement of the GST changes.
FPI Buys Ease Yields
According to analysts, short-covering by traders, potential Reserve Bank of India (RBI) action, and purchases by foreign portfolio investors (FPI) via the Fully Accessible Route (FAR) caused Indian bond rates to close down by over 3 basis points (bps) on 2 September 2025.
The yield on the 10-year benchmark bond ended the day at 6.5658 percent, down from 6.5943 percent at the start of September 2 and 6.59 percent the day before, according to data from the Clearing Corporation of India (CCIL).
FPIs Boost Bond Demand
According to Mataprasad Pandey, vice-president of Arete Capital Service, “continued purchasing by FPIs, potential intervention by RBI, and short covering by dealers look to be driving down government bond rates.”
Foreign investors infused an additional ₹1,078.99 crore into government securities under the FAR on September 2.
CCIL data shows that FPI holdings in G-secs climbed from ₹2.95 lakh crore on September 1 to ₹2.96 lakh crore on September 2.
GST Reforms Raise Concerns
Prime Minister Narendra Modi pledged next-generation GST changes in his 79th Independence Day speech.
According to the finance ministry, the Center has suggested “basically moving towards a simple tax” with two slabs: standard and merit, with special rates only applied to a few things.
According to analysts, this has sparked worries about decreased earnings and might lead the Center to take out additional loans from the market using government assets.