New Delhi, Dec. 22 -- Despite a 125-basis-point rate cut by the Reserve Bank of India (RBI) in 2025, government bond yields have refused to cool off, leaving a growing disconnect between the bond market and policy actions.

Since the beginning of February, RBI's Monetary Policy Committee has cut the policy repo rate by 125 bps. While yield on the benchmark 10-year government bond has fallen from a high of 6.72% in February to 6.24% in May, it reversed those gains to 6.50% levels since late August when the US slapped 50% tariffs on Indian goods.

On Friday, yield on the 10-year government bond-the most liquid paper-ended at 6.60%, 10 bps higher since the rate-setting panel announced its latest 25 bps cut in repo rate on 5 December.

At the...