RBI cash injection boosts short bond investments in India

India's central bank's decision to inject Rs 2.5 trillion into the banking system is expected to boost investment in short-term bonds. This move is anticipated to further steepen the yield curve. The Reserve Bank of India's liquidity injection, starting in September, may lead lenders to favor shorter-term securities. Investors like UTI Asset Management and PGIM India Asset Management are already planning to shift towards shorter-tenor bonds. This trend is fueled by expectations of abundant liquidity and attractive yields in shorter-term corporate bonds. While some anticipate further gains, others believe the curve may stabilize, leading to repositioning by market participants.