MUMBAI: Indian government bonds rose in early trading on Tuesday after the finance minister reiterated the government’s commitment to meet its fiscal deficit target, easing fears of heavier debt supply.
The yield on the 10-year benchmark bond was at 6.4503% as of 10:25 a.m. IST, compared with Friday’s close of 6.4651%.
Bond yields move inversely to prices. Finance Minister Nirmala Sitharaman said on Monday that the government will not tweak its borrowing plan.
It is also on track to achieve its fiscal deficit of 4.4% of gross domestic product for this financial year that started in April, she told local media.
Market participants are still eyeing some alterations in the government’s borrowing mix to aid supply-demand dynamics.
Indian lenders and traders have urged the central bank to cut the share of ultra-long federal bonds in the supply schedule and reduce weekly auction sizes, which could stretch the borrowing calendar until next March.
“We think a potential shift in the FY26 H2 borrowings mix could see IGB (Indian government bonds) spreads compress across the curve,” Mitul Kotecha, head of FX & EM macro strategy Asia at Barclays Bank, said in a note.
“Concerns over additional fiscal borrowings are likely to fade and that demand is likely to recover moving into FY26 H2.”
Kotecha expects government bond yields to dip across tenors, and recommends going long on the 10-year bond.
Traders are also eyeing India and US inflation data due later this week.
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