The government sold ₹32,000 crore worth of new 10-year government bonds on Friday. The cut-off yield was set at 6.48 per cent.
The yield on the benchmark 10-year government bond settled at 6.51 per cent, unchanged against Thursday.
“The cut-off yield was along the expected lines. The market was steady on Friday. However, the market will take cues from the movement of US Treasury yields on Monday,” said a dealer at a primary dealership.
The market was cautious ahead of the weekly auction, as last week the RBI cancelled the auction for the seven-year government bond. This was after investors demanded a yield of around 6.5 per cent, higher than the yield on the new 10-year bond, a level the central bank was unwilling to accept.
A combination of factors, excess supply of long-duration bonds, fading expectations of further rate cuts and short positioning by investors have impeded monetary transmission in the bond market.
Despite a cumulative 100-basis-point (bps) reduction in the repo rate between February and June, the 10-year bond yield has not eased in line with policy rates. It has instead inched higher since the 50-bps cut in June.
The yield on the benchmark 10-year government bond has risen by 24 bps since June, while yield on the 10-year US Treasury bond has fallen by 32 bps.
“The cues will be taken from the state bond auction next week,” said a dealer at a state-owned bank.
Seven states raised ₹11,600 crore at the weekly bond auction on Tuesday, lower than the notified amount of ₹13,600 crore.
Maharashtra rejected all bids for the re-issue of its 2050 and 2055 bonds, each worth ₹1,000 crore.
The borrowed amount was significantly less than ₹19,450 crore indicated in the borrowing calendar.
States and Union Territories plan to borrow up to ₹2.81 trillion through state government securities in the third quarter of FY26.
 "government bond, bond market")