India 10Y Yield Rises Ahead of Fiscal Auction

The yield on India’s 10-year G-Sec rose to around 6.7%, reversing earlier losses, as the market awaited upcoming debt issuance. Attention now turns to supply dynamics, with New Delhi scheduled to sell INR 320 billion of the benchmark 2035 bond on Friday, the final auction of the note for the current fiscal year. The level of demand and the cut-off yield at the auction are expected to set the tone for bond market direction in March. The rise in yields, however, was limited by broader market sentiment, supported by sustained interest in longer-dated securities. Ultra-long bonds, particularly the 30-year and 40-year papers, have seen continued buying from long-term investors, including insurance companies, amid increased inflows in recent weeks. So far this financial year, yields on 30-year and 40-year securities have risen by roughly 45 basis points, compared with a more modest 10-basis-point increase in the 10-year benchmark.

The yield on India’s 10-year G-Sec fell to around 6.67%, retreating from an over one-week high in the previous session, as bond prices firmed on stronger-than-expected demand for state government debt. A recent state bond auction drew robust investor interest, with total issuance exceeding the planned amount and most cutoff yields coming in below market expectations, signaling solid appetite for longer-duration paper. On the other hand, state governments are set to raise about INR 445 billion this week, alongside an 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.