India’s bond yield curve steepened as shorter bonds rallied more than longer-tenor debt after the central bank revised investment guidelines for lenders. The new rules make it harder to sell longer-tenor debt in the secondary market while boosting demand for shorter bonds. This development came after the RBI required its approval for any changes in the classification of bond holdings to improve banks’ financial reporting. The spread between 10 and 5Y yields has been below five bps this quarter and even turned negative late last week as investors priced in a long pause by the central bank.