The FY27 borrowing plan pushes G-Sec interest rates higher; The rupee recovers after RBI intervention

Market participants said the central bank’s dollar sales and swap operations helped stabilize the currency and manage liquidity, amid pressure from higher borrowing plans. | Photo credit:

The Union Budget for FY27, announced on February 1 (Sunday), has pegged the government’s gross market borrowing higher at ₹17.2 lakh crore, compared to ₹14.8 lakh crore in FY26.

10-year benchmark

The yield on the 10-year benchmark G-Sec (6.48 percent 2035GS) reached an intraday high of 6.78 percent, the highest level in about a year, to close at 6.77 percent, up 7 basis points from the previous close.

The price of the aforementioned G-Sec fell by around 50 paise to close at ₹98.09, down from the previous closing price of ₹98.59. Bond yields and prices are inversely correlated and move in opposite directions.

Expert view

Ajay Manglunia, executive director of Capri Global Capital, noted that borrowings for FY27 are higher even as the fiscal deficit of 4.3 percent is 10 basis points lower (versus the FY26 level of 4.4 percent).

“There has been constant intervention in the currency by the RBI to curb volatility in the USD/INR pair. This is also drying up the liquidity of the rupee. The borrowing program has been smooth only because the RBI has injected a lot of liquidity.

“Going forward, yields are likely to move in the 5-10 basis point range on both sides. The G-Sec rate hike can be contained as the government has a massive borrowing plan next year,” Manglunia said.

Rupee rebound

Meanwhile, the rupee recovered smartly to close 48 paise stronger after the RBI’s apparent intervention in the offshore and spot markets. The Indian currency closed at 91.5125 per US dollar, down from the previous close of 91.99.

Intraday, the rupee traded between 91.4325 and 91.8325 per USD.

Forex Review

Abhishek Goenka, Founder and CEO of IFA Global, noted that overall, today’s move underlines that USDINR remains heavily policy-driven around key psychological levels, especially during periods of heightened fiscal and market sensitivity.

“While underlying global and domestic pressures persist, the RBI’s intervention ensured an orderly adjustment, anchoring near-term sentiment for the rupee even as fixed income markets digested fiscal borrowing signals,” he said.

Goenka noted that the decisive RBI intervention dominated the post-Budget price action in the forex market. The currency strengthened by around 40-42 paise, supported by dollar selling around the 91.80 level, which can largely be attributed to the central bank stepping in to smooth out volatility after the Union Budget announcement, he added.

Goenka assessed that the RBI’s medium-term USD/INR buy-sell swaps helped manage liquidity under bond market pressure.

“With the government set to borrow a record Rs 17.2 lakh crore, bond yields have risen, but the RBI’s swap operations helped smooth rupee liquidity and prevent spillover stress in the foreign exchange market. This strengthened confidence that the central bank remains proactive in managing both currency stability and system liquidity,” he said.

Published on February 2, 2026