2 min readMumbaiUpdated: Feb 3, 2026 07:16 AM IST
The bond market reacted sharply on Monday as the benchmark 10-year government bond yield climbed to its highest level in over a year, a day after Finance Minister Nirmala Sitharaman presented the Union Budget, announcing a record gross borrowing plan for FY27.
The 10-year yield rose by as much as 8 bps to 6.78%, its highest since January 17, 2025, and marked the steepest intraday rise since August 29, 2025.
Over the past month, the yield has increased by 17 bps. The yield closed with a gain of 6.77%, still up by 7 bps. Rising yields signal falling bond prices, reflecting selling pressure from investors. The sell-off followed Sitharaman’s announcement on Sunday of a larger-than-expected gross market borrowing of Rs 17.2 lakh crore through dated securities for FY27, a 17% increase over the previous year. “The higher gross borrowing target of Rs 17.2 lakh crore is the key variable to watch and could keep government bond yields under mild pressure in the near term until supply dynamics become clearer,” said Saurav Ghosh, co-founder of Jiraaf, a bond market platform.
Trigger for the surge
Higher yields indicate rising funding costs across the financial system. As yields climb, the Centre must offer higher returns to attract investors, increasing its borrowing costs. This puts upward pressure on interest rates across the banking system, affecting loans, deposits, and overall liquidity conditions. Analysts say the rise in yields reflects expectations of sticky inflation and a possibility of interest rates remaining elevated or rising further.
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