Indian government bonds gained momentum on Tuesday, February 24, 2026, as robust buying interest drove yields lower across the curve. The rally was primarily concentrated in longer-duration securities, fueled by optimistic projections for the upcoming fiscal year. The benchmark 10-year bond yield eased to 6.67%, dropping from the previous session's close of 6.72%. This movement reflected a broader cooling of yields as market participants reacted to favorable domestic supply dynamics and stabilized global cues. A key catalyst for the day's performance was a high-demand auction for state development loans. Sixteen Indian states successfully raised 461 billion rupees, surpassing the initial target of 445.50 billion rupees. Despite the higher volume, cut-off yields for most states remained lower than market expectations, signaling strong institutional appetite. Investor sentiment remains bolstered by expectations of reduced long-term debt issuance in the next fiscal year. Market participants are positioning for a lighter supply of longer-maturity notes, which has incentivized insurance companies and pension funds to increase their holdings at current levels. The Reserve Bank of India also played a vital role in stabilizing the environment. The central bank recently maintained the repo rate at 5.25% with a neutral stance, emphasizing a "wait and watch" approach. This stability, paired with a surplus in banking system liquidity of nearly 3 trillion rupees, has provided ample funds for banks to replenish their portfolios. Global factors added a layer of support as U.S. Treasury yields softened, making domestic debt relatively more attractive. While geopolitical tensions and oil price volatility remain on the radar, the immediate focus is on the federal government’s upcoming sale of 320 billion rupees in benchmark bonds scheduled for later this week. Traders expect the 10-year benchmark to trade within a range of 6.65% to 6.78% in the near term. The focus now shifts to final inflation data and the conclusion of the current fiscal year’s borrowing calendar in March, which continues to shape favorable demand-supply dynamics for the sovereign debt market.