Govt to borrow ₹8.2 trillion, 51% of full year aim in April-September, cuts ultra-long bond supply

The government will raise ₹8.2 trillion through gilts in the first half of the financial year 2026–27, accounting for 51% of its full-year borrowing programme. This is marginally lower than the 54% share seen in the first half of 2025–26, suggesting a deliberate attempt to avoid excessive pressure on the bond market in the early part of the year.

The April–September borrowing calendar also signals a slightly less front-loaded issuance pattern and a shift in maturity strategy. The total borrowing target for 2026–27 has also been revised lower from the initial budget estimate of ₹17.2 trillion to ₹16.09 trillion after a series of bond switch operations.

The first-half borrowing will be carried out through 26 weekly auctions, broadly in line with earlier calendars. As in previous years, the issuance will be spread across a wide maturity range, from 3-year to 50-year securities, ensuring the government taps both short-term and long-term investor demand. Similar borrowing structures in earlier years have also relied on 26 weekly auctions and a diversified maturity mix to ensure smooth absorption by the market.

One of the key features of the 2026–27 calendar is a clear tilt towards shorter-dated and benchmark securities. The share of the 10-year bond has been raised to around 29% of total issuance, while the proportion of ultra-long-term bonds such as 30-year to 50-year papers has been reduced significantly compared with last year. This reflects the government’s effort to prevent excessive upward pressure on long-term yields.

Gaura Sen Gupta, Chief Economist at IDFC First Bank, said the structure implies a build-up of gross issuance in the second half of the year, especially as state governments typically raise around 60% of their borrowings in that period. She added that one possible reason could be expectations that geopolitical risks in the second half may be lower.

She also noted that the concentration in ultra-long bonds has been reduced and shifted towards the 3-year to 5-year segment, where market appetite has been stronger. According to her, duration demand in 2026–27 could improve as supply pressure eases and pension investment patterns normalise after institutions met their enhanced equity investment limits.

At the same time, the slightly lower front-loading suggests the Centre expects better market conditions later in the year, especially if global uncertainties ease and domestic liquidity improves.