FY27 borrowing plan pushes G-Sec yields higher; rupee recovers on RBI intervention

Market participants said the central bank’s dollar sales and swap operations helped stabilise the currency and manage liquidity amid pressure from higher borrowing plans.
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Government Securities (G-Sec) yields rose on Monday following the Union Budget’s proposal for increased government borrowing in FY27. Meanwhile, the rupee regained strength amid reports of Reserve Bank of India intervention in foreign exchange markets.

The Budget revealed a significant increase in gross market borrowing to ₹17.2 lakh crore for FY27, up from ₹14.8 lakh crore in the previous fiscal year.

10-year benchmark

The 10-year benchmark G-Sec (6.48% 2035GS) yield climbed to an intraday peak of 6.78% – its highest level in approximately one year – before settling at 6.77%, marking a 7 basis point increase from Friday’s close.

This security’s price declined nearly 50 paise to ₹98.09 from its previous closing of ₹98.59, demonstrating the inverse relationship between bond prices and yields.

Expert view

Ajay Manglunia, Executive Director at Capri Global Capital, observed the borrowing increase despite a marginal 10 basis point improvement in the fiscal deficit target to 4.3% for FY27.

“The RBI has maintained consistent forex market intervention to manage USD/INR volatility, which has concurrently affected rupee liquidity. The current borrowing program’s smooth execution owes much to substantial liquidity infusions by the central bank,” Manglunia commented.

He anticipates G-Sec yields to fluctuate within a 5-10 basis point range in the near term, noting that the government’s borrowing requirements could limit significant yield moderation.

Rupee rebound

The domestic currency appreciated 48 paise against the US dollar, closing at 91.5125 following reported RBI activity in both offshore and spot markets. The rupee traded within a range of 91.4325 to 91.8325 during the session.

Forex assessment

IFA Global’s Founder and CEO Abhishek Goenka noted the RBI’s proactive measures ensured orderly currency movements during post-Budget market adjustments. “Central bank sales near the 91.80 level provided crucial support, highlighting policy management around key psychological thresholds during fiscally sensitive periods,” he stated.

Goenka emphasized the RBI’s strategic use of mid-term USD/INR swaps helped stabilize liquidity conditions despite bond market pressures. “As the government prepares for record borrowing, swap operations effectively contained potential spillover effects into currency markets while maintaining confidence in systemic liquidity management,” he added.

Published on February 2, 2026