Indian government bonds are experiencing a notable upward trend, underpinned by a surge in demand and strategic liquidity management. The benchmark 10-year G-Sec yield recently eased to **6.68%**, a significant move from levels above **6.73%** seen earlier in February. This price appreciation reflects a shift in market sentiment as yields and bond prices move in opposite directions. A primary driver for this rally is the aggressive participation of the "others" investor category. This segment, which includes insurance companies, pension funds, and provident funds, has been actively absorbing supply. Their long-term investment horizon provides a stable floor for prices, especially as they look to lock in yields before potential future rate cuts. Liquidity conditions in the banking system have turned favorable, currently maintaining a surplus of nearly **3 trillion INR**. The Reserve Bank of India has been instrumental in this shift, adopting a "proactive and pre-emptive" approach to liquidity management. By conducting bond buybacks and debt-switch operations—such as the recent buyback of **755 billion INR** in bonds maturing in 2027—the central bank is effectively reducing near-term redemption pressures. Monetary policy remains a key anchor for the debt market. In its February 2026 meeting, the RBI maintained the repo rate at **5.25%** with a neutral stance. While the rate was held steady, the decision followed a **25-basis point** cut in December 2025, signaling that the tightening cycle has peaked. Inflation remains well-contained at **2.75%**, comfortably within the target range, which further supports the bullish outlook for fixed-income assets. Global factors are also playing a decisive role. Indian sovereign bonds continue to benefit from their inclusion in major global indices, attracting steady passive inflows estimated at **2 billion to 3 billion USD** per month. Although Bloomberg recently deferred the inclusion of Indian bonds into its Global Aggregate Index, the market remains resilient, focusing on the strong domestic fundamentals and the anticipated inclusion in other diversified indices later this year. Looking ahead, the market anticipates the 10-year benchmark yield to trade within a range of **6.65% to 6.78%**. While heavy supply from state government auctions—totaling approximately **445 billion INR** this week—may cap sharp gains, the combination of healthy forex reserves at **723.8 billion USD** and consistent domestic institutional buying suggests a sustained positive trajectory for the bond market.