Jefferies Sees Room for 75 bps RBI Rate Cut in 2025 as Dollar Weakens

Indian Bond Market Gains Strength as Inflation Cools and RBI Shifts Policy: Jefferies

The Indian bond market is gaining momentum. Easing inflation and hopes of more interest rate cuts by the Reserve Bank of India (RBI) are driving this trend. A recent report from Jefferies says this could be a great opportunity for long-term investors, especially in uncertain global markets.

Inflation Drops to Multi-Year Lows

A key reason for this rally is falling consumer price inflation. Over the last year, inflation averaged 4.6%. In April 2025, it fell further to just 3.2%, the lowest since July 2019.

This gives the RBI more room to cut rates. It has already reduced rates by 50 basis points, and Jefferies expects another 75 basis points of cuts by the end of the year.

Indian Bonds Outperform Global Bonds

Indian government bonds are doing better than many global bonds. The 10-year Indian rupee bond has outperformed the US 10-year Treasury by 51% in USD terms since April 2020.

Jefferies says:
“It’s now possible that the 10-year Indian government bond yield could fall below the US 10-year Treasury yield.”

Global Investors Show Confidence in India

A global bond portfolio tracked by Jefferies has India’s 15-year bond as its largest holding, making up 25% of the portfolio. This shows strong confidence from global investors. Many are moving away from G7 bonds and looking to India for higher returns.

The Rupee’s Strength and Emerging Markets

The Indian rupee’s stability and the strong performance of emerging market bonds are adding to this positive outlook. Meanwhile, investors are worried about US Treasury bonds due to supply concerns. India’s bonds look more stable and rewarding in comparison.

Jefferies adds:
“These bonds are still beating G7 government bonds—another sign of change from the old Bretton Woods system.”

A Bright Future for Indian Bonds

With low inflation, good real interest rates, and a stable economy, India is becoming a top choice for global bond investors. In a world where G7 bonds seem risky, India offers a better option. It combines higher yields, growth potential, and clear policies.

For global investors looking for safety and good returns, India’s bond market is shining bright.

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