**Market Brief: Indian Sovereign Bond Update** **Date:** January 28, 2026 **Bond Yields & Market Movement** Indian sovereign bonds are witnessing heightened volatility as the benchmark 10-year yield holds steady around **6.70%**, recently touching an 11-month high. Traders have pared back some bearish bets following the Reserve Bank of India’s strategic move to front-load liquidity operations. **Central Bank Action** The RBI has advanced its open market operations (OMO), targeting a **₹1 trillion** bond purchase program. The central bank rescheduled auctions to **January 29** and **February 5**, bringing them forward from original mid-February dates. This proactive step aims to infuse durable liquidity and stabilize yields amid tightening systemic cash conditions. **Supply & Borrowing Concerns** Despite central bank support, upside momentum in bond prices remains capped by heavy supply pressures. * **State Debt:** State government borrowings are surging, with gross issuances projected at **₹12.5 trillion** for the fiscal year, creating competition for investor capital. * **Fiscal Outlook:** Nervousness precedes the Union Budget 2026-27. Market participants are bracing for potentially elevated gross market borrowing targets, estimated between **₹16.3 trillion** and **₹28.9 trillion** (Centre + States) for FY27. **Key Drivers** * **Liquidity:** Banking system liquidity remains in deficit, necessitating the RBI's accelerated intervention. * **Global Cues:** Firming US Treasury yields continue to exert pressure on emerging market debt. * **Inflation:** Domestic inflation remains benign at approximately **1.3%–1.8%**, offering the RBI some policy headroom despite the currency seeing recent lows against the dollar.