India bonds dip as supply fears carry into 2026

MUMBAI: Indian government bonds fell on the first trading day of 2026, bogged down by supply concerns ahead of Friday’s debt sale and expectations of a sizable state borrowing calendar for the January–March quarter.

The benchmark 10-year yield was at 6.6146% as of 10:20 a.m. IST. It ended at 6.5881% on Wednesday.

Bond yields rise when prices fall.

Traders are bracing for Friday’s 320-billion-rupee ($3.56 billion) auction of the benchmark 10-year bond, wary that fresh supply could swamp a market with thin demand.

States are expected to announce their January–March borrowing calendar by the end of this week too, with borrowing seen at up to 5 trillion rupees, a record quarterly amount.

“Supply of state development loans (SDLs) is a concern and that’s why market is not aggressively bidding today,” said Alok Singh, head of treasury at CSB Bank.

Indian bonds enter 2026 with a question mark over how much appetite there is for large debt supply, even after a year in which the central bank levelled the field with record debt purchases, liquidity infusion and 125 basis points of rate cuts, amounting to the steepest reduction in interest rates since 2019.

An uptick in US Treasury yields is also weighing on bonds, with the US 10-year benchmark yield up nearly 4 basis points in the last two sessions.

It closed at 4.1530% in the previous session.

The US debt market is shut for New Year.