The Indian government bond market is navigating a complex period of transition as participants weigh the impact of recent debt management operations against long-term borrowing pressures. Market yields recently retreated from near one-year highs following a significant debt switch conducted by the government and the Reserve Bank of India (RBI). In this operation, the government bought back securities worth **755.04 billion rupees** maturing in the 2026-27 fiscal year, issuing longer-dated **2040 bonds** totaling **694.36 billion rupees** in exchange. The move was designed to ease immediate redemption pressures. However, the initial gains in bond prices have proven fragile. The benchmark 10-year bond yield currently hovers around **6.67%**, having hit a three-week low on February 13, 2026. While the debt switch provided temporary relief, traders remain cautious as the government prepares for a record gross borrowing target of **17.2 trillion rupees** for the upcoming 2026-27 fiscal year. Liquidity remains a primary concern for the market. While system liquidity has stayed in a surplus of approximately **70,000 crore rupees**, participants argue that further central bank support is necessary to cool yields permanently. Specifically, there is high demand for more frequent buyback auctions or Open Market Operation (OMO) purchases to absorb the heavy supply of state and central government debt. Economic indicators are adding to the cautious sentiment. January inflation returned to the RBI's target band at **2.75%**, slightly higher than some market expectations. This uptick, combined with the RBI maintaining its "neutral" stance and holding the repo rate at **5.25%** in its February meeting, suggests that interest rate cuts are not imminent. Additional pressure is stemming from the state development loan (SDL) segment. Indian states recently conducted their largest weekly auction of the fiscal year, raising **486 billion rupees**. This massive supply has kept the 10-year yield from breaking below the **6.65%** resistance level. Market participants are now looking for a clearer roadmap on further buybacks. Without consistent intervention to manage the supply-demand mismatch, many analysts expect yields to remain sticky at current levels, despite the successful execution of the recent debt switch.