**Indian Bond Market Brief | Wednesday, February 4, 2026** **Market Overview** Indian government bonds extended gains for a second consecutive session on Wednesday, supported by positive sentiment ahead of key central bank operations. The market stabilized after recent volatility triggered by the Union Budget’s record borrowing announcement. **Key Yield Movements** * The benchmark **10-year bond yield (6.48% 2035)** eased to close at **6.6972%**, down from Tuesday’s close of **6.7245%**. * Yields have retreated from the one-year high of **6.78%** seen earlier in the week, reacting to the government's FY27 gross borrowing target of **₹17.2 trillion**. * Overnight Index Swap (OIS) rates edged lower, with the **1-year rate** hovering around **5.51%**. **Drivers of Momentum** Sentiment improved significantly following the announcement of a new **India-US trade agreement**, which reduced reciprocal tariffs on Indian goods to **18%**. This development helped offset concerns regarding the heavy supply of sovereign debt expected in the coming fiscal year. **Upcoming RBI Action** Market focus has now shifted to the Reserve Bank of India’s (RBI) scheduled interventions: 1. **Debt Purchase (Thursday):** The RBI is set to conduct an Open Market Operation (OMO) to buy back bonds worth **₹500 billion ($5.53 billion)**, including the liquid 6.33% 2035 paper. This move is widely seen as a signal of the central bank’s comfort with current yield levels. 2. **Monetary Policy (Friday):** The Monetary Policy Committee (MPC) will announce its interest rate decision on **February 6**. While the repo rate is expected to remain unchanged at **5.25%**, investors are awaiting guidance on liquidity management. **Currency Update** The Indian Rupee consolidated gains, trading at **90.54** against the US Dollar on Wednesday. This follows a sharp **1.3%** rally in the previous session—its strongest single-day gain in weeks—driven by the trade deal optimism and robust foreign inflows.