.png)
23 hours ago
23
Indian government bonds are set to extend their decline at the start of the week, as heavy state debt issuance scheduled for the next session weighs on sentiment after the central bank refrained from offering liquidity support last week.
The benchmark 6.48% 2035 bond yield is likely to move in the 6.73%-6.80% band on Monday, according to a private bank trader. The yield ended at 6.7363% on Friday.
Indian states aim to raise 486.15 billion rupees ($5.37 billion) through bond sales on Tuesday, a quantum that is 60 billion rupees higher than scheduled and the largest issuance so far this financial year.
"With no signalling for bond purchases from the Reserve Bank of India, we should see a sharp spike in bond yields and cannot even fathom where the cutoff for state debt will come," the trader said.
Indian bond markets have been fighting the pressure from continuous supply, with purchases across investor segments easing, which forced the RBI to intervene aggressively.
The RBI kept its key repo rate unchanged on Friday, supported by a positive economic outlook. While the rate pause was widely anticipated, traders had expected the central bank to announce measures to ease liquidity.
Banks had been pushing the RBI to tweak some of its liquidity regulations to ease a deposit shortfall amid rising bond yields as well as credit growth, five treasury officials said.
The RBI has cut rates by 125 bps since February 2025, yet the 10-year government bond yield remains near levels seen last year. Banks have struggled to pass on the rate cuts, as deposit growth continues to lag behind credit demand.
India's overnight index swap rates are expected to move higher, tracking an anticipated spike in bond yields.
The one-year OIS rate ended at 5.53%, while the two-year rate ended at 5.70%. The longer-duration five-year OIS rate had jumped 10 bps to end at 6.19% on Friday.
Published on February 9, 2026
English (US) ·