India sells INR110B 6.68% 2033 bond at 6.708% cut-off yield
TL;DR
India auctioned INR110 billion of 6.68% 2033 bonds at a 6.708% yield, slightly higher than previous levels, amid inflation concerns and supply pressures. Market dynamics, including government debt operations and limited rate cut scope, suggest yields may rise further.
India sells INR110B 6.68% 2033 bond at 6.708% cut-off yield
India Issues INR110 Billion 6.68% 2033 Bond at 6.708% Cut-Off Yield
On February 20, 2026, the Indian government successfully auctioned its INR110 billion 6.68% 2033 bond, with a cut-off yield of 6.708%. This yield reflects a marginal increase from the previous week's 10-year benchmark bond yield of 6.6833%, indicating persistent pressure on long-term debt amid evolving market dynamics.
The auction follows a period of volatility driven by mixed signals from inflation data and government debt management strategies. Earlier in February, India's consumer inflation under the new base-year series (2024) rose to 2.75% in January 2026, returning to the RBI's 2%-6% target band for the first time since August 2025. While the reading eased short-term inflation concerns, traders noted that the RBI's revised inflation projection of 2.1% for the current fiscal year and expectations of a 4% year-on-year rise in CPI next year have limited the scope for further rate cuts, supporting bond yields.
Market participants also highlighted structural challenges in the bond market. A recent government debt switch operation—replacing INR755 billion of short-term debt with long-term notes—temporarily boosted yields by altering supply-demand dynamics. Analysts argue that without additional measures such as bond buybacks, elevated yields may persist. "Supply remains a critical concern," said VRC Reddy of Karur Vysya Bank, emphasizing that buybacks could alleviate pressure on future borrowing.
The 6.708% cut-off yield for the 2033 bond aligns with broader expectations of a tightening yield curve. Experts anticipate the 10-year benchmark yield could rise to 6.80% by March 2026, driven by heavy government borrowing and weak investor demand. Meanwhile, the spread between the 10-year bond yield and the RBI's repo rate has widened to over 150 basis points, up from 15 bps a year earlier, signaling heightened risk premiums for long-duration debt.
With the RBI's policy easing cycle nearing completion and U.S. Treasury yields influencing global capital flows, Indian bond markets remain in a delicate balancing act between inflation control and liquidity management. Traders will closely watch upcoming auctions and potential government interventions to gauge the trajectory of yields.
