Higher FY27 Borrowing to Pressure Bond Yields; RBI Support Crucial

• Government's FY27 gross market borrowing target of Rs 17.2 lakh crore, a 16% increase, is higher than expected.
• This elevated supply of dated securities is likely to put upward pressure on bond yields in the near term.
• Net market borrowing is set at Rs 11.7 lakh crore to finance a 4.3% fiscal deficit, largely in line with expectations.
• Bond market participants emphasize the critical role of RBI support, including open market operations, to manage yields.
• The 10-year bond yield may open 4-5 bps higher on Monday, with expectations of it hovering between 6.65% and 6.75%.

Why It Matters: Increased government borrowing for FY27 will likely push bond yields higher, making RBI intervention vital.