Bond yields rise as states ramp up borrowing plans
Bond yields moved higher after 14 states bumped up their borrowing plans to about ₹486 billion — the largest auction this fiscal year — for the February 10 auction.
This surprise move came after market hours on February 6, shaking up traders' positions.
At the same time, the RBI rolled out draft rules for new ways to trade and hedge corporate bonds, asking for feedback by February 27.
Why are yields climbing?
States like Karnataka, Madhya Pradesh, and Maharashtra are leading a borrowing spree, while the Centre is also planning significant borrowings.
With both state and central governments tapping markets hard—state bond sales alone are set to rise this quarter—demand can't keep up, so yields are climbing.
What's the RBI's draft all about?
The RBI has released a draft framework proposing to allow participation by big players—non-retail users with a minimum turnover of about ₹10 billion—to offer credit derivative products and trade total return swaps on corporate bonds.
This means more tools to manage risk and potentially smoother trading in India's bond market.
What does this mean for you?
More government borrowing could mean higher costs down the line (think: loans getting pricier), but the RBI's draft rules could make India's financial markets more flexible and open for global players;
the draft is open for feedback until February 27.
If you're curious about how money moves or what shapes interest rates, this is one of those behind-the-scenes shifts worth knowing about.