The trend is likely to continue as institutional investors seek assets that can match their long-term liabilities.
Market participants said that the demand-supply balance in the long-duration G-sec segment has improved this year, with the share of long-duration securities in the issuance calendar lower than the previous year.
The share of 15-year bonds in total issuance stood at 14.5 per cent in H1FY27, compared with 14 per cent in H1FY26, while the share of 30-year bonds fell to 7.3 per cent from 10.5 per cent. The share of 40-year bonds declined to 8 per cent from 14 per cent, while 50-year bonds accounted for 9.6 per cent of issuance, against 10.5 per cent a year earlier.
In the current financial year, long-tenor government bond yields have declined across maturities, with the 15-year segment witnessing the sharpest fall. The yield on the 15-year bond has fallen 51 basis points to 6.94 per cent as on Friday from 7.45 per cent on March 31. Over the same period, the 30-year, 40-year and 50-year yields have declined by 39, 37 and 26 basis points, respectively.
“Demand-supply dynamics in the G-sec market look better and more balanced this year, with the share of long-duration supply lower than last year. At the same time, factors that diverted demand away from government securities last year are no longer present, with some of the demand that had moved towards equities returning to government and state government bonds,” said a debt fund manager at an insurance company.
The demand for longer-duration government bonds is also being supported by expectations of a prolonged pause in interest rates.
Market participants said investors had reduced exposure to long-term bonds after the RBI shifted its policy stance to neutral in June 2025. With expectations now building around an extended pause, investors could gradually rebuild duration, supporting demand for longer-tenor government securities.
Further, the National Bank for Financing Infrastructure and Development's (NaBFID's) 15-year bond issue received bids aggregating ₹8,291.49 crore, nearly 2.8 times the ₹3,000 crore issue size on Friday.
Market participants said that the strong demand highlights the appetite among institutional investors for long-duration, high-quality paper, particularly at a time when the supply of long-tenor bonds remains relatively limited.
With demand for such securities remaining strong, larger issuers could tap the market with longer-tenor bonds to take advantage of the available investor appetite. The recent response suggests that supply, rather than demand, could be the constraint in the long-duration segment.
“With long-term bond issuances remaining relatively limited, such strong demand is hardly surprising. There is clearly a sizeable pool of institutional investor appetite for long-duration, high-quality paper. It would be encouraging to see more large issuers come forward with long-term bond issuances and make the most of this demand,” said Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP.
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