Indian bonds fell as the minutes of the Reserve Bank of India's latest policy meeting revealed a more hawkish stance than previously indicated, spurring concerns over potential interest rate hikes. The benchmark 10-year yield rose 4 basis points to 6.86%, while five-year notes saw yields jump as much as 8 basis points. The Aug. 3-5 meeting minutes, released after Wednesday, showed policymakers emphasizing inflation risks, prompting traders to reassess expectations of prolonged rate stability.

Deputy Governor Poonam Gupta suggested a case for rate hikes could emerge during the year, while Governor Sanjay Malhotra indicated that broad-based price pressures might warrant tighter policy. Sonal Varma, chief economist at Nomura Holdings Inc., noted the minutes were surprisingly hawkish, with members debating potential policy tightening within existing forecasts. The commentary contradicted the RBI's earlier dovish tone from its Aug. 5 policy statement, where inflation pressures were described as muted.

Gopal Tripathi, head of treasury at Jana Small Finance Bank, said the market will now reverse both duration trades and short-end rallies, projecting a yield range of 6.80-7.00% for the 10-year bond.