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Investors are positioning for a rally in Indian bonds on bets the central bank will go for more interest-rate cuts this year to power the economy.

The nation’s benchmark 10-year yield may drop to 6.4% by June, according to SBM Bank (India) Ltd. Trust Mutual Fund predicts a decline to as low as 6.25% by December. The yield was at 6.69% on Friday.

After its first easing in five years last month, the Reserve Bank of India may deliver another 25 basis points cut in April, followed by at least one more reduction this year, according to swaps pricing. That, along with its bond purchases to inject liquidity into the financial system, falling US yields and lower net borrowing by the government will prepare the ground for a decline in yields.

“Even a modest growth in demand from banks, insurance and pension funds would lead to demand outpacing supply in the government bond market,” said Pankaj Pathak, a fund manager at Quantum Asset Management Co. Pvt. He sees the 10-year bond yield below 6.5% in the second half of the year.

India’s 10-year bond yields have declined by about 18 basis points from the high of 6.87% in January. Bond traders have been betting on an extended rally in 2025, with last year’s performance the best in four years.

A decline in the benchmark yields will not only lower borrowing costs for the government but also help the corporate sector raise money cheaper to support India’s massive infrastructure push. That becomes crucial as the nation’s annual growth slows to a four-year low at a time when US tariffs and global volatility are making investors look for safer bets.

The economy is forecast to grow at 6.5% in the fiscal year ending March 31. That’s well below the 8% pace required for Prime Minister Narendra Modi to fulfill his pledge of becoming a developed nation by 2047. An easing of inflation is making it easier for RBI to cut rates to support growth. Data due this week will show consumer price gains falling below its 4% target in February, according to economists surveyed by Bloomberg.

“With the comfort of a more predictable inflation trajectory aligned to the target range, the need to support both consumption and investment-led growth will take center stage,” said Mandar Pitale, head of treasury at SBM.