The Indian sovereign bond market is facing a period of intense volatility this Tuesday, February 10, 2026. A massive influx of state-level debt has collided with a cautious stance from the central bank, driving benchmark yields toward one-year highs and dampening investor appetite. Market participants are currently absorbing the largest weekly state-bond auction of the current financial year. Indian states are aiming to raise **486.15 billion rupees** ($5.37 billion) through today's bond sales. This quantum is roughly **60 billion rupees** higher than originally scheduled, significantly increasing the supply pressure on a market already struggling with limited liquidity. The benchmark 10-year government bond yield has responded sharply to these pressures, climbing to approximately **6.76%**. This marks a notable spike from previous sessions and reflects a broader trend of rising borrowing costs. Yields on the 6.48% 2035 bond have also trended upward, recently touching the **6.7609%** mark as traders adjust to the heavy issuance. Sentiment remains fragile following the Reserve Bank of India’s (RBI) monetary policy decision on February 6. The central bank opted to maintain the repo rate at **5.25%** and held its "Neutral" stance. While the rate hold was expected, the market was disappointed by the lack of fresh liquidity support measures. With the RBI refraining from additional debt buying, private bank traders indicate that yields may continue to face upward pressure until a new equilibrium is found. Domestic banking institutions, the primary buyers of government debt, are currently exhibiting limited demand. Lenders are grappling with a deposit shortfall and tight rupee liquidity, partly driven by the central bank's previous interventions to stabilize the currency. The rupee has recently weakened beyond the **90 per dollar** mark, further complicating the outlook for interest rate cuts in the near term. Economic indicators suggest a complex backdrop. While the RBI has nudged its FY26 GDP growth forecast to **7.4%**, inflation projections for the final quarter have been adjusted to **3.2%** due to rising precious metal prices and base effects. Investors are now looking toward upcoming economic releases, including January inflation data due later this week, for signals on the next policy move. For now, the combination of heavy supply and a "prolonged pause" from the RBI suggests that the bearish trend in bond prices—and the corresponding rise in yields—is likely to persist through the remainder of the quarter.