Indian government bonds witnessed a shift in sentiment on Thursday, February 12, 2026, as investors reacted to the first set of data released under India’s newly revised inflation series. The benchmark 10-year G-Sec yield was last quoted at approximately 6.72%, reflecting a market that is finding its footing after a period of volatility following the Union Budget. A primary driver for the current market action is the January inflation reading, which came in at 2.75%. This figure was slightly higher than some economist projections of 2.4% but notably returned to the Reserve Bank of India’s (RBI) target band of 2% to 6%. This print is the first to use the new 2024 base year, which notably reduced the weight of food in the consumer basket to 36.8% from the previous 45.9%. Market participants are currently unwinding short positions as the 2.75% print eased immediate fears of a runaway spike in prices. While food inflation stood at 2.13% and housing at 2.05% under the new metrics, a significant surge in personal care and miscellaneous goods—which reached 19.0%—has kept traders cautious. The broader backdrop for the bond market remains influenced by the RBI’s February 2026 policy decision, where the Monetary Policy Committee (MPC) unanimously voted to keep the repo rate unchanged at 5.25%. This followed a 25-basis-point cut in December 2025. The central bank has maintained a neutral stance, emphasizing a "wait and watch" approach as it evaluates the impact of previous cuts and the new inflation data series. Supply-side pressures continue to cap a more aggressive rally in bond prices. The government’s proposed gross market borrowing of 17.2 lakh crore for the upcoming fiscal year has kept yields near eleven-month highs. Additionally, state government bond auctions have been heavy, with states recently raising 486 billion rupees—the largest weekly auction of the current financial year. Liquidity in the banking system remains in a surplus of roughly 70,000 crore per day, supported by earlier RBI interventions and open market operations. However, global headwinds, including a rise in the US 10-year Treasury yield toward 4.18% and a weakening Rupee—which recently hit levels near 91 per dollar—have limited the domestic market’s ability to sustain lower yields. The 10-year 6.48% 2035 bond, a key focus for long-term investors, has seen its yield settle into a range around 6.72%. While the lower-than-feared inflation print provided a temporary reprieve, the market remains balanced between a benign domestic inflation trajectory and the persistent pressure of high government borrowing needs. [India 10-Year Bond Yield Analysis](https://www.youtube.com/watch?v=z01RGOV-ZNw) This video provides an expert analysis of the latest borrowing impacts and inflation dynamics affecting the Indian debt market. http://googleusercontent.com/youtube_content/0