A large banking-system cash surplus is reportedly boosting demand for short-dated bonds while leaving longer-duration debt more exposed to pressure.
Indian bond traders reportedly expect the yield curve to steepen, reflecting a market view that the RBI (India's central bank) will hold interest rates while a large cash surplus in the banking system supports demand for short-dated bonds. That combination can anchor shorter-maturity debt even as longer-duration bonds remain more vulnerable, creating a wider gap between short- and long-term yields.