The central government will borrow Rs 6.77 tn and Rs 5.69 tn on gross and net basis respectively in H2 FY26.
Download ReportQuantEco Research || H2 FY26 g-sec borrowing calendar: Reprieve at the long end
The borrowing includes Rs 100 bn issuance of sovereign green bond. Issuances in H2 will constitute ~46% of gross issuances in FY26. With this, the FY26 gross and net issuances got chipped by Rs 100 bn to Rs 14.72 tn and Rs 10.76 tn respectively. Max issuances on net basis is seen in Oct, Dec, and Feb at Rs 1200 bn each. Min issuance is seen in Nov at Rs 200 bn. In line with the recommendations made by market participants, the share of long dated securities is set to drop considerably to 29% in H2 FY26 from 39% in H2 FY25. As such, the share of short and medium tenor securities will increase by 4 ppt and 5 ppt to 20% and 51% in H2 FY26 from H2 FY25 respectively.
A comfortable cushion on real yield differentials, index inclusion inflows, and India’s sovereign ratings upgrade could retain FPI interest. While we expect the RBI to cut repo rate by 25 bps in Oct-25, it is unlikely to impact yields, as this could potentially be the final rate cut in the cycle. However, maintenance of a comfortable liquidity surplus should aid sentiment along with a lower inflation trajectory post the GST rate rationalization. We retain our 10Y g-sec yield call of 6.30% by Mar-26.