Indian government bonds experienced a slight uptick Wednesday, buoyed by expectations of continued central bank support as the market anticipates a significant increase in supply in the coming fiscal year. The benchmark 10-year 6.48% 2035 bond yield closed at 6.6972%, a decrease of 5 basis points from Tuesday's close of 6.7245%. This follows Monday's spike to a year-high yield. On February 4, 2026, the yield on India's 10-Year Bond eased to 6.71%, which is a 0.02 percentage point decrease from the previous session.

The Reserve Bank of India (RBI) is scheduled to purchase 500 billion rupees ($5.53 billion) worth of bonds on Thursday, including the liquid former benchmark 6.33% 2035 paper. This purchase is viewed as a signal of the central bank's comfort with current yield levels. The market will be closely watching the cutoff yield of this paper for further signals from the RBI. This is also the last scheduled open market operation (OMO) for this fiscal year, bringing the aggregate bond purchases to a record 6.7 trillion rupees.

The RBI's monetary policy decision, due Friday, is widely expected to maintain the current rate. The focus, however, remains on the central bank's commentary regarding banking system liquidity, which it manages through bond purchases. According to ANI, the policy decision will be announced on Friday by RBI Governor Sanjay Malhotra.

Market participants are anticipating liquidity-boosting measures in Friday's monetary policy decision. Even though a rate action is not expected, bond investors are hoping for positive guidance and measures on liquidity management, which may include additional bond purchases. According to a private bank trader, investors would aim to break the 6.70% yield level on the 10-year benchmark bond on Thursday.

The central bank has reduced the policy repo rate by a cumulative 125 basis points since February of last year. The Monetary Policy Committee (MPC) cut the repo rate by 25 basis points to 5.25% at its previous meeting. Experts anticipate a pause in rate cuts following the Union Budget and a trade deal.

Looking ahead, the government's gross borrowing is projected to reach a record 17.2 trillion rupees next fiscal year, intensifying the focus on demand-supply dynamics. The Economic Affairs Secretary stated the government intends to employ various instruments, including bond switches, to manage its borrowing in the next fiscal year without disrupting the market or increasing yields.

Vikas Garg, head of fixed income at Invesco Mutual Fund, stated that further rate cuts from the RBI are not expected at this stage. However, he anticipates the RBI to sustain its growth-supportive stance and provide adequate durable liquidity through continued OMOs.

The yield on India's 10-year G-Sec climbed to around 6.76%, the highest level in a year, as government bonds face pressure amid a record borrowing plan for the upcoming fiscal year.

Concerns have been raised by SEBI chairman Tuhin Kanta Pandey regarding the lack of awareness about corporate bonds among Indian investors, compared to the higher awareness of crypto currency. He emphasized the need to increase awareness of corporate bonds, highlighting the benefits for both companies and retail investors.