India’s 10 Year Bond Yields Touch 1-Year High After Record FY27 Borrowing

India’s government bond market began the week on a weaker note, with the benchmark 10-year yield climbing to its highest level in more than a year following the borrowing announcement in the Union Budget for FY27. 

As per news reports, the 10-year yield rose by as much as 8 basis points to 6.78% during early trade. This marked the highest level since anuary 17, 2025, and the sharpest intraday rise recorded since August 2025. On a year-to-date basis, the yield is up to 2.63%. 

Record FY27 Borrowing Outlined in Budget 

The movement in yields followed the Budget presentation by Nirmala Sitharaman, which set gross market borrowing through dated securities at ₹17.2 trillion for FY27. 

The borrowing figure is about 18% higher than that of the current financial year. It also exceeded expectations of around ₹16.5 trillion, according to Bloomberg estimates, leading to a reassessment of supply conditions in the bond market. 

Supply Concerns Dominate Market Reaction 

A higher supply of government securities generally results in lower prices, pushing yields higher. The size of the FY27 borrowing programme raised concerns around the market’s capacity to absorb fresh issuance without a rise in yields. 

The Budget did not include specific measures aimed at increasing demand for government bonds. As a result, the immediate focus remained on the scale and timing of issuance rather than medium-term fiscal indicators. 

State Borrowing Adds to Issuance Volume 

Apart from central government borrowing, state-level issuance has also remained elevated. States account for around 40 per cent of total sovereign bond issuance so far in FY26. 

Gross and net borrowing by states is tracking an 18% year-on-year increase. The average maturity of state bond issuances has also been rising, adding a larger share of longer-dated securities to the market. 

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Conclusion 

India’s 10-year government bond yield touched a one-year high after the announcement of record FY27 borrowing. Higher planned issuance by the Centre, combined with rising state borrowings, has increased supply in the bond market, keeping yields elevated in the near term. 

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