India 10Y Yield Edges Lower

The yield on India’s 10-year G-Sec edged lower to around 6.7%, easing slightly from an over one-week high in the previous session, as supportive RBI measures helped absorb near-term supply pressures. Recent bond switch operations and liquidity injections reduced redemption-related stress, allowing yields to ease modestly despite elevated issuance. Still, heavy debt supply capped further declines. State governments are set to raise about INR 445 billion this week, alongside a INR 320 billion auction of the benchmark 10-year bond, keeping upward pressure on the market. Persistent issuance overhang has reinforced expectations that yields will struggle to move materially lower. Yields remain sensitive to global developments and oil market pressures, which continue to influence sentiment. Looking ahead, traders expect the benchmark to remain within a 6.65%–6.78% range, with upcoming auctions and demand absorption key to direction.

The yield on India’s 10-year G-Sec rose to around 6.73%, extending gains for a second session to reach a week high, as investors weighed government borrowing pressures and tight banking-sector liquidity. In recent weeks, yields on short-term certificates of deposit issued by Indian banks surged past 7%, reflecting strong credit growth and slower deposit accumulation, which contributed to tight funding conditions. Meanwhile, foreign banks actively purchased these short-term instruments, providing some relief to domestic liquidity stress. To support orderly market conditions, the Reserve Bank of India conducted bond purchases, leaving the financial system with a surplus of nearly INR 3 trillion. Additionally, investors also digested the RBI’s latest debt-switch announcement. Under the plan, the RBI will buy back bonds maturing in fiscal 2027 and issue longer-dated papers, aiming to reduce gross borrowing in the next financial year and provide support to the debt market.

The yield on India’s 10-year G-Sec fell to around 6.68%, slipping further to its lowest level in three weeks, following the government’s debt switch. The authorities bought back INR 755 billion of FY27-maturing bonds and issued INR 694 billion of 2040 securities, easing near-term redemption pressure and reducing gross borrowing needs. At the same time, January inflation came in at 2.75%, within the RBI’s 2%-6% tolerance band and above expectations, limiting upward pressure on yields. Supportive liquidity conditions and small declines in short- and medium-term OIS rates also helped stabilize prices. Meanwhile, the fall was partially countered by profit-taking after a four-day rally and caution ahead of the weekly debt auction. Looking ahead, investors remain attentive to upcoming auctions and broader market developments for signals on the near-term direction of yields.