H2FY26 borrowing calendar: G-sec yields set to fall as weekly supply eases

RBI's borrowing calendar extends weekly issuances into March and trims ultra-long supply, with the 10-year yield expected to open below 6.50 per cent on Monday

Government bond yields are expected to soften following the release of the borrowing calendar for the second half of the current financial year, after the Reserve Bank of India extended weekly issuances into March instead of closing them in February, reducing supply pressure, dealers said. The central bank also trimmed the allocation of ultra-long 30- to 50-year bonds by 5.5 per cent, increasing the share of shorter-tenure securities with three- and five-year maturities.

 

The yield on the benchmark 10-year government bond is expected to open below 6.50 per cent on Monday, compared with Friday’s close of 6.52 per cent, according to dealers.

 

Gross market borrowing of ₹6.77 trillion is scheduled to be completed through 22 weekly auctions until March 6, 2026.

 

“The calendar is according to the demand made by the banks. The yield curve was bear steepening, now it will flatten as they have reduced the allocation in the longer-tenure,” said a senior executive at a private bank. “The extension of the auction period is also a breather. There is not a drastic reduction in weekly supply, but it is positive for the market.” 

 

Market participants said the calendar aligns with prevailing investor appetite. Borrowing via government securities in the first half was spread across 3-year (5.3 per cent), 5-year (11.3 per cent), 7-year (8.2 per cent), 10-year (26.2 per cent), 15-year (14.0 per cent), 30-year (10.5 per cent), 40-year (14.0 per cent), and 50-year (10.5 per cent) maturities, with the highest share concentrated in the 10-year segment.

 

In the second half, the share of borrowing (including green bonds) under different maturities will be: 3-year (6.6 per cent), 5-year (13.3 per cent), 7-year (8.1 per cent), 10-year (28.4 per cent), 15-year (14.2 per cent), 30-year (9.2 per cent), 40-year (11.1 per cent), and 50-year (9.2 per cent).

 

“The yield (benchmark 10-year bond) will open below 6.50 per cent,” said the treasury head at a private bank. “Now the market will eye the outcome of the Monetary Policy Meeting for further cues,” he said.

 

Bond yields have climbed across the board despite a 100 basis-point reduction in the policy repo rate since February, which included a front-loaded 50 basis-point cut in the June monetary policy review.

 

A combination of factors -- oversupply of long-duration bonds, fading expectations of further policy easing, and short positions by investors -- has reversed monetary transmission in the bond market.

 

Since the 50 basis-point rate cut in June, benchmark bond yield has risen by 26 basis points.