Debt Fund Strategy 2025: Balancing Returns and Risk

After the Reserve Bank of India (RBI) unexpectedly cut interest rates by 50 basis points and reduced the cash reserve ratio in early June 2025, it is likely to pump a massive `2.5 lakh crore into the banking system. This was a big move and signalled that the RBI might have done most of its rate cuts upfront. The result? Shortterm government bond yields dropped quickly, especially in the 2- to 5-year range. However, longerterm bonds didn’t move much, indicating the market had already expected the RBI’s softer tone.