• On Tuesday, the 10-year benchmark government bond (6.48% GS 2035) opened flat at 6.67% on lack of fresh domestic or global cues. • Over the day, 10Y yields dropped to 6.62% on speculation that the Reserve Bank of India was buying gilts on-screen. Also, market participants covered their short positions. • The state bond auction worth ~INR 337.20 Bn witnessed mixed cut-off. There was tepid demand with tailish cut-off seen in some 10Y and below papers. RBI offered 10Y Maharashtra at 7.3467%, 10Y Tamil Nadu at 7.4206%, 10Y Karnataka at 7.42%, 10Y Rajasthan at 7.54%. While, the 10Y point closed 4 bp lower at 6.63% vs 6.67%. • The latest banking system liquidity remained in deficit at around INR 548.5 bn. The RBI conducted two overnight VRR auctions; the former, for INR 750 bn, was fully subscribed at 5.26%, while the latter, for INR 500 bn, was partially subscribed at the same rate. • Post market hours, to manage liquidity conditions RBI announced an OMO purchase of INR 2000 Bn in four tranches starting from Dec 29, 2025, to Jan 22, 2026, and USDINR Buy/Sell Swap auction of USD 10 Bn for 3 years to be held on Jan 13, 2026.
