Bond yields rise when prices fall.
Traders are bracing for Friday’s auction of 320 billion rupees ($3.56 billion) of the 10-year benchmark bond, wary that new supply could flood a market with weak demand.
States are also expected to announce their borrowing calendar for January and March by the end of this week, with the borrowing calendar potentially going up to Rs 5 trillion, a record quarterly amount.
“The supply of government development loans (SDLs) is a concern and that is why the market is not bidding aggressively today,” said Alok Singh, head of finance at CSB Bank.
Indian bonds enter 2026 with a question mark over how much demand there is for a large supply of debt, even after a year in which the central bank leveled the playing field with record debt purchases, liquidity injections and 125 basis point rate cuts, marking the sharpest rate cut since 2019. A rise in US Treasury yields is also weighing on bonds, with US 10-year yields up almost 4%. basic points in the last two sessions. During the previous session, it closed at 4.1530%.
The US debt market is closed for New Year’s.
PRICES
Indian overnight index swap rates were little changed in the initial deals.
The one-year OIS rate was flat at 5.4550%, and the two-year OIS rate was flat at 5.55%. The five-year OIS interest rate was 5.92%. The swap rate fell by 105 basis points, 72 basis points and 28 basis points respectively in 2025. ($1 = 89.9350 Indian Rupees)
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