The yield on India’s 10-year G-Sec rose to around 6.67%, approaching the ten-month highs touched last week, as supply concerns continued to outweigh support from the central bank liquidity measures. The rise in yields was driven primarily by fresh bond supply, with state governments raising INR 398 billion through bond sales, reinforcing concerns that issuance continues to outpace demand. Although the amount was lower than earlier planned, market participants had been expecting a deeper cut, following a sharp reduction in state borrowing announced last week. Investors also remained cautious ahead of key fiscal signals, including expectations of elevated government borrowing in the upcoming budget. Support from the Reserve Bank of India’s liquidity measures, including an INR 1 trillion bond purchase, a USD 10 billion FX swap, and a 90-day variable rate repo operation of INR 250 billion, helped limit the upside in yields, but was insufficient to fully offset supply-related pressures.
