India bonds seen range-bound ahead of government debt calendar

Indian government bonds will likely trade in a narrow range on Wednesday, with investors eyeing the borrowing calendar for the second half of fiscal 2026, while sentiment remains supported by strong cutoffs at a recent state debt auction.

The yield on the 10-year benchmark note is expected to move between 6.45%-6.48%, a trader at a private bank said, after closing at 6.4729% on Tuesday.

It eased slightly in the last session after the state debt cutoff yields were lower than expected.


Bond yields move inversely to prices.

The borrowing calendar release at month-end will be a key trigger for the market as investors worry the supply of longer-tenor debt may exceed demand.

Traders also await states' quarterly borrowing calendar, which is also slated for release at the end of the month.

"Everyone is looking for calendar now... We're also keen on liquidity front as it turned into a deficit. Bonds maturity, government spending and CRR cut should bring in flows," a trader at a private bank said.

India's banking system liquidity slipped into a deficit on Monday for the first time this financial year, with a shortfall of 320 billion rupees ($3.61 billion) - the most since March 26.

With the end of July-September quarter around the corner, traders might readjust positions, spurring some selling, traders said.

Lower U.S. Treasury yields will also support bonds, they added.

RATES India's overnight index swaps (OIS) are expected to remain in a narrow range, after a paying session, as traders bought government securities and payed OIS in a spread trade, traders said.

The one-year OIS rate ended at 5.46%, while the two-year OIS rate closed at 5.4325%.

The liquid five-year OIS rate settled at 5.72%.

KEY INDICATORS:

** Benchmark Brent crude futures rose 0.35% to $67.87 per barrel, after rising 1.59% on Tuesday

** Ten-year U.S. Treasury yield at 4.11%; two-year yield at 3.6937%

** RBI will auction treasury bills worth 210 billion rupees ($1 = 88.7420 Indian rupees)