**Market Brief: Indian Bond Yields & RBI Policy Watch** **Current Status: Yields at 1-Year Highs** Indian bond markets are trading with heightened caution today, Feb 5, 2026, as the benchmark 10-year government bond yield tests **6.78%** — its highest level in over a year. The sharp upward movement follows the Union Budget's announcement of a record **₹17.2 trillion** gross borrowing target for FY27, a figure significantly above street estimates of ₹16.5 trillion. **The Catalyst: Supply Concerns** The unexpected surge in projected bond supply has triggered a sell-off, pushing yields up by approximately **8 basis points** this week. Market participants fear the heavy issuance calendar will outstrip demand without active intervention. The fiscal deficit target has been pegged at **4.3%** of GDP, signaling continued consolidation, yet the sheer volume of debt hitting the market remains the primary friction point. **Investor Focus: RBI MPC Decision Tomorrow** All eyes are now on the Reserve Bank of India’s Monetary Policy Committee (MPC) meeting, which concludes tomorrow, **Friday, Feb 6**. While the consensus expects the repo rate to remain unchanged (currently **5.25%** after 125 bps of cuts since early 2025), the market's priority has shifted entirely to liquidity management. **Liquidity & OMO Expectations** Investors are positioning for a distinct signal on **Open Market Operations (OMOs)** or bond buybacks. The banking system recently returned to a surplus of ~**₹0.6 lakh crore**, but the "impending bond acquisition" mentioned in market chatter refers to widespread hopes that the RBI will announce tactical bond purchases to cap yields. Without explicit support or a "Operation Twist" style intervention, analysts warn yields could drift toward **7.0%** in the near term. **Key Watchlist for Tomorrow** * **Repo Rate:** Pause expected. * **Stance:** Likely "Neutral" but with a dovish undertone on liquidity. * **Yield Curve Control:** Any announcement of specific OMO tranches to absorb the FY27 borrowing shock. ... [CNBC-TV18: RBI Liquidity & OMO Operations](https://www.youtube.com/watch?v=9fx-8_xhUzo) ... This video provides essential context on the RBI's recent use of Open Market Operations (OMOs) to manage liquidity, which is the central mechanism investors are hoping will be deployed again in tomorrow's policy update. http://googleusercontent.com/youtube_content/0