New Delhi, Nov. 9 -- Short-term Indian government bond yields are expected to face upward pressure amid tightening banking liquidity and expectations of further interest rate hikes by the Reserve Bank of India (RBI), potentially widening the gap with longer-term securities.

RBI Rate Hike Expectations Put Pressure On Short-Term Bonds

IDFC First Bank and Deutsche Bank expect the RBI to raise interest rates by up to 75 basis points in the coming months, following a 25-basis-point hike on October 7.

The central bank has also stepped up liquidity withdrawal, reducing the banking system's cash surplus to Rs 2.3 lakh crore as of November 5 from Rs 11 lakh crore in early September, reported the Business Standard.

VRC Reddy, head of treasury, ...