Market Brief: India Debt Performance India's longer-duration government bonds recorded gains on Wednesday, underpinned by sustained interest from long-term institutional investors. Insurance companies and pension funds continue to absorb longer-dated paper, driven by a stable domestic inflation outlook and a favorable interest rate environment. The benchmark **10-year** bond yield settled slightly higher at **6.69%**, compared to the previous close of **6.68%**. Yields saw early downward pressure during the session, touching intraday lows of **6.67%**, but ultimately flattened as traders balanced healthy demand against an upcoming supply of central government debt. Primary Market Dynamics The market successfully absorbed a higher-than-expected supply from state governments this week. On Tuesday, Indian states raised **46,100 crore** through the weekly State Development Loans (SDL) auction. This amount exceeded the planned notified value of **44,550 crore**, signaling deep liquidity and a strong appetite for sovereign-backed debt despite the increased volume. Attention is now shifting toward the central government’s scheduled auction on Friday. The Reserve Bank of India is set to offer **32,000 crore** of the **10-year** benchmark security. This issuance is a critical component of the government’s borrowing program and will serve as a definitive test for market pricing. Economic and Policy Context Market sentiment remains supported by the Reserve Bank of India’s steady policy stance. In its February 2026 meeting, the Monetary Policy Committee maintained the repo rate at **5.25%** and retained a neutral stance. This follows a cycle where the central bank cut rates by a cumulative **125 basis points** through 2025 to support growth. Inflationary pressures are currently viewed as manageable. The headline CPI for January was reported at **2.75%**, staying well within the central bank's tolerance band. Projections for the first half of the next fiscal year suggest inflation will hover between **4.0%** and **4.2%**, providing a predictable backdrop for fixed-income participants. Global and Currency Factors Domestic yields are also navigating global volatility. The **U.S. 10-year** Treasury yield rose to **4.06%** on Wednesday as markets reacted to new global tariff structures. While global yields rose, the Indian rupee remained resilient, trading near **90.88** against the U.S. dollar. In the secondary market, the yield curve continues to benefit from a recent debt-switch operation. The government recently bought back **755 billion** of near-term maturities and issued securities maturing in **2040**, a move that has effectively reduced immediate redemption pressures and encouraged investment in longer durations.