Indian Bond Yields Rise to 6.75% as Traders Eye ₹48,615-Crore Auction

Indian bond yields edged higher on February 10 as traders positioned themselves ahead of a ₹48,615-crore state government bond auction, the largest weekly issuance so far this year. The heavy supply outlook weighed on sentiment in the Indian bond market, pushing yields up despite expectations of policy support.

The 10-year benchmark yield was trading around 6.7469%, compared with 6.7559% at the previous close, as market participants remained cautious about the market’s ability to absorb the supply.

Bond Auction Impact on Yields Keeps Traders Cautious

The bond auction impact on yields remained the key driver, with supply continuing to outweigh demand. A steady flow of state and central government bond issuances has kept pressure on the yield curve.

The scale of the upcoming auction has raised concerns that yields could move higher if demand does not improve meaningfully.

Indian Bond Market Adjusts After RBI Policy Signals

Traders had earlier expected the Reserve Bank of India (RBI) to announce additional liquidity operations in last week’s monetary policy review. However, the absence of fresh bond-buying signals led markets to reassess near-term expectations.

A prolonged supply glut has forced the RBI to step in repeatedly to prevent yields from rising sharply. The central bank has already purchased nearly ₹7 trillion in bonds this financial year, which has helped cap yields during periods of stress.

RBI Rate Cuts Fail to Lift Bond Yields Sentiment

Despite the RBI having cut policy rates by 125 basis points since February 2025, sentiment in India’s bond market remained cautious.

RBI Governor Sanjay Malhotra stated that adequate steps had been taken to maintain system liquidity. However, the lack of additional liquidity measures or explicit bond-buying guidance weighed on government securities.

“The RBI has already stepped in aggressively this financial year, purchasing nearly ₹7 trillion worth of bonds, which helped cap yields. However, with no additional bond-buying signals or liquidity support in the policy, markets are now recalibrating expectations,” said Kunal Sodhani, Head of Treasury at Shinhan Bank.

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Bond Market Analysis for Investors and Market Outcome

Bond yield refers to the return an investor earns on a bond, expressed as a percentage. When yields rise, bond prices typically fall, and vice versa.

From a bond market analysis perspective, near-term yield movement will remain sensitive to:

• The outcome of large state and central bond auctions
• Demand trends from banks and long-term investors
• Any renewed liquidity operations by the RBI

At current levels near 6.75%, even small changes in demand, supply, or RBI policy can have an outsized impact on bond yields and portfolio valuations.

Source: https://www.moneycontrol.com

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