India sells INR110B 6.68% 2033 bond at 6.708% cut-off yield

India sells INR110B 6.68% 2033 bond at 6.708% cut-off yield

India Issues INR110 Billion 6.68% 2033 Bond at 6.708% Cut-Off Yield

On February 20, 2026, the Indian government successfully auctioned its INR110 billion 6.68% 2033 bond, with a cut-off yield of 6.708%. This yield reflects a marginal increase from the previous week's 10-year benchmark bond yield of 6.6833%, indicating persistent pressure on long-term debt amid evolving market dynamics.

The auction follows a period of volatility driven by mixed signals from inflation data and government debt management strategies. Earlier in February, India's consumer inflation under the new base-year series (2024) rose to 2.75% in January 2026, returning to the RBI's 2%-6% target band for the first time since August 2025. While the reading eased short-term inflation concerns, traders noted that the RBI's revised inflation projection of 2.1% for the current fiscal year and expectations of a 4% year-on-year rise in CPI next year have limited the scope for further rate cuts, supporting bond yields.

Market participants also highlighted structural challenges in the bond market. A recent government debt switch operation—replacing INR755 billion of short-term debt with long-term notes—temporarily boosted yields by altering supply-demand dynamics. Analysts argue that without additional measures such as bond buybacks, elevated yields may persist. "Supply remains a critical concern," said VRC Reddy of Karur Vysya Bank, emphasizing that buybacks could alleviate pressure on future borrowing.

The 6.708% cut-off yield for the 2033 bond aligns with broader expectations of a tightening yield curve. Experts anticipate the 10-year benchmark yield could rise to 6.80% by March 2026, driven by heavy government borrowing and weak investor demand. Meanwhile, the spread between the 10-year bond yield and the RBI's repo rate has widened to over 150 basis points, up from 15 bps a year earlier, signaling heightened risk premiums for long-duration debt.

With the RBI's policy easing cycle nearing completion and U.S. Treasury yields influencing global capital flows, Indian bond markets remain in a delicate balancing act between inflation control and liquidity management. Traders will closely watch upcoming auctions and potential government interventions to gauge the trajectory of yields.