Indian Bonds Edge Higher as RBI Steps Up Debt Purchases After Sell-Off

India, Jan 28 : Indian sovereign bonds traded slightly higher on Wednesday after the Reserve Bank of India advanced its schedule for open market bond purchases, encouraging traders to pare back bearish positions in early deals.

The benchmark 10 year government bond yield was quoted at 6.7083 per cent around 11:00 am IST, easing from Tuesday’s close of 6.7194 per cent, which marked its highest level in nearly 11 months. Bond prices and yields move in opposite directions.

The RBI on Tuesday announced that it would bring forward its open market operations by a week, committing to buy bonds worth ₹1 trillion in two phases scheduled for January 29 and February 5. The move was earlier expected at a later date.

Market participants said the announcement led to some short-covering, but cautioned that the relief may not last long. Concerns over heavy bond supply and expectations of a record borrowing programme in the next financial year continue to weigh on sentiment.

“The RBI’s decision triggered short covering, but the next move will largely depend on the Union Budget,” a trader at a primary dealership said, adding that a sustained drop below the 6.70 per cent level on the 10 year yield would be key for further easing.

Meanwhile, the government is set to auction ₹320 billion worth of the 6.48 per cent 2035 bond on Friday, just ahead of the Budget presentation on Sunday. Analysts broadly expect borrowing for FY27 to be in the range of ₹16–17.5 trillion, the highest ever for a fiscal year.

Traders are also keeping an eye on the treasury bill auction scheduled later in the day, especially amid rising short-term interest rates.

Rates

Overnight index swap (OIS) rates declined in early trade as liquidity expectations improved following the RBI’s announcement. The one year OIS fell 2 basis points to 5.58 per cent, the two-year slipped 2 basis points to 5.75 per cent, and the five-year eased 2 basis points to 6.16 per cent.