India Bond Yield Hits 1-Year High on Record Borrowing Plan

Ukadike Micheal

Economic

Traders' Opinions

Central Bank

Bond

Summary:

India's bond yields climbed on record borrowing, rattling markets ahead of the RBI's policy decision.

India's 10-year bond yield surged to its highest level in over a year on Monday, as the government's larger-than-expected borrowing plan unsettled the market ahead of a key central bank policy meeting.

The benchmark 10-year 6.48% 2035 bond yield closed at 6.7662%, a notable increase from Friday's 6.6963% and its highest point since January 17, 2025. This year alone, the 10-year yield has climbed approximately 18 basis points, reflecting mounting concerns over debt supply that have now been amplified by the new budget.

Record Government Borrowing Rattles Markets

The primary driver behind the market's reaction was the federal budget's announcement of a record gross borrowing of 17.2 trillion rupees ($187.99 billion) for the 2026–27 fiscal year. This figure significantly overshot the 16.3 trillion rupees that analysts had forecasted in a Reuters poll.

According to rating agencies, the budget signals a slower, more gradual approach to fiscal consolidation. The government has set the following targets for the next fiscal year:

• Debt-to-GDP Ratio: 55.6%

• Fiscal Deficit: 4.3% of GDP

This increased borrowing plan has intensified pressure on the bond market, adding to existing worries about high levels of state debt.

Traders Shift Strategy, Eye Short-Term Notes

In response to the budget, traders began adjusting their portfolios by trimming positions in longer-duration bonds.

Simultaneously, there has been a clear pivot towards shorter-term debt, specifically 1-to-3-year notes. This move is based on the expectation that the Reserve Bank of India (RBI) will continue its liquidity operations, which are anticipated to keep a cap on short-end yields.

All Eyes on RBI Amid Liquidity Support

Market participants are closely watching for further liquidity measures from the RBI. The central bank has already been active, purchasing 126.55 billion rupees of bonds from the secondary market in the week ending January 23. Furthermore, the RBI has included liquid papers and the former benchmark 6.33% 2035 bond in this week’s 500 billion-rupee bond-buying plan.

The consensus among traders is that the RBI will hold interest rates steady at its policy decision this Friday.

"The budget is positive for growth and neutral for inflation, so we do not expect this to materially influence the RBI at its next MPC meeting on 6 February, where we expect repo rate to be left unchanged," stated analysts at Nomura in a research note.

OIS Curve Steepens as Long-Term Rates Climb

The Overnight Indexed Swap (OIS) curve steepened on Monday, reflecting the broader trends in the government bond market.

Longer-end swap rates climbed, while short-term swaps saw increased receiving interest due to the RBI's ongoing liquidity support. The one-year OIS rate fell by 1 basis point to 5.5450%. In contrast, the two-year rate rose 1.25 bps to 5.72%, and the five-year OIS rate climbed 3.25 bps to 6.1950%.

To stay updated on all economic events of today, please check out our Economic calendar

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Ukadike Micheal

Russia-Ukraine Conflict

Remarks of Officials

Political

Dmitry Medvedev, a top Russian security official, has sounded the alarm over the imminent expiration of the last major nuclear arms control treaty between Russia and the United States. He warned that letting the New START treaty lapse without a clear path forward could accelerate the symbolic "Doomsday Clock."

The treaty, which Medvedev himself signed in 2010 as Russia's president, is set to expire on Thursday. Without a last-minute agreement, the constraints on strategic nuclear arsenals will be removed.

Dmitry Medvedev, Deputy Chairman of Russia's Security Council, warns of rising global tensions as a key nuclear arms treaty expires.

In an interview with Reuters, TASS, and Russian war blogger WarGonzo, Medvedev cautioned against complacency. "I don't want to say that this immediately means a catastrophe and a nuclear war will begin, but it should still alarm everyone," he stated.

Referring to the symbolic gauge of global existential risk, he added, "The clocks are ticking and they obviously have to speed up."

Washington's Gamble on a "Better Agreement"

U.S. President Donald Trump has signaled he is prepared to let the treaty expire. Moscow had offered to voluntarily extend the treaty's caps on strategic nuclear weapon deployments, but Trump appears to be holding out for a different deal. "If it expires, it expires... We'll just do a better agreement," Trump told the New York Times last month.

The U.S. has also pushed for China, the world's third-largest nuclear power, to be included in arms control negotiations. However, Beijing has shown no interest in participating.

Russia's Stance Amid Strained Relations

Medvedev, 60, is a close ally of President Vladimir Putin and currently serves as the deputy chairman of Russia's Security Council. His comments are often viewed by foreign diplomats as a reflection of hardline thinking within the Russian elite.

Although relations with the U.S. were severely strained by the conflict in Ukraine, they have seen some improvement since Trump returned to the White House last year, with American envoys working to mediate an end to the fighting.

When asked about Trump, Medvedev stated that Moscow respects the American people's choice of president and noted that increased contact with Washington was encouraging.

Despite this, he described the world as a dangerous place but clarified Russia's intentions. "We are not interested in a global conflict," Medvedev said. "We're not crazy." In contrast, he was fiercely critical of European leaders, labeling them a "gang of dimwits" who he claimed had damaged their own economies in a failed attempt to defeat Russia.

A Pivot to Military and Technological Strength

Addressing Russia's military capabilities, Medvedev said that while specific production figures for artillery and drones are classified, output has surged "many times" since the war in Ukraine began. He asserted that Russia has adapted effectively to the demands of modern drone warfare.

"I believe that our defence industry is working like clockwork today," he said. "We have increased production volumes very quickly."

Looking beyond military hardware, Medvedev, who positioned himself as a modernizer during his 2008-2012 presidency, stressed that Russia cannot afford to lag in critical technologies. He identified generative Artificial Intelligence, synthetic biology, and quantum computing as key areas of focus.

"We are in this race with the others," he said. "The main thing here is not to fall far behind. There was a period in our country when, due to the collapse of the (Soviet) Union, we didn't do much research - we just tried to survive."

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Isaac Bennett

Remarks of Officials

Palestinian-Israeli conflict

Middle East Situation

Political

U.S. Special Envoy Steve Witkoff is at the center of diplomatic efforts in the Middle East.

Senior U.S. envoy Steve Witkoff is scheduled to travel to Israel for high-level meetings with Prime Minister Benjamin Netanyahu and the country's top military chief, according to two senior Israeli officials. The visit is expected to begin on Tuesday.

High-Stakes Agenda: Gaza War and Iran

Witkoff's trip comes at a critical time, with regional tensions escalating over Iran and the Trump administration actively pursuing its plan to resolve the Gaza war.

The diplomatic push occurs as both Washington and Tehran signal a willingness to restart negotiations. The focus is on reviving talks to address the long-standing nuclear dispute and reduce the risk of a wider regional conflict.

Coordinating Strategy Ahead of Potential Talks

According to a third Israeli official, Witkoff's discussions are designed as preparatory sessions before any potential resumption of talks with Iran.

The meetings will also build on recent military coordination, following a weekend meeting in Washington between Israeli military chief Eyal Zamir and his American counterpart, General Dan Caine.

Tense Backdrop of Military Buildup

The geopolitical situation remains tense, underscored by a recent U.S. military buildup in the region. This follows a violent crackdown on anti-government protests in Iran last month, which marked the most severe domestic unrest in the country since its 1979 revolution.

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Warren Takunda

Stocks

U.S. futures and world shares skidded on Monday as worries over President Donald Trump’s nominee to be the next Federal Reserve chair amplified jitters over a possible bubble in the artificial intelligence boom.

South Korea’s exchange, which is heavily influenced by tech-related developments, briefly suspended trading as its benchmark Kospi bounced, closing 5.3% lower at 4,949.67. Samsung Electronics gave up 6.3%, while chip maker SK Hynix sank 8.7%.

The Kospi has been forging records for weeks as big tech companies piggybacked on the AI craze with deals with major players like chip maker Nvidia and OpenAI.

In early European trading, Germany’s DAX edged less than 0.1% lower to 24,528.57. The CAC 40 in Paris shed 0.2% to 8,108.56, while Britain’s FTSE 100 declined 0.3% to 10,195.88.

The future for the S&P 500 sank 0.7%, while that for the Dow Jones Industrial Average fell 0.4%.

Markets took a hit as investors considered how Kevin Warsh, Trump’s nominee to lead the Federal Reserve after Fed Chair Jerome Powell’s term ends in May might handle interest rates.

Warsh’s nomination requires Senate approval. But financial markets fear the Fed may lose some of its independence because of Trump, who has pushed hard for more and faster rate cuts. That fear has helped catapult skyward the price of gold and weaken the U.S. dollar’s value over the last year.

“People do not get handed the keys to the most powerful central bank on earth because they plan to drive in the opposite direction of the people who gave them the keys,” Stephen Innes of SPI Asset Management said in a commentary.

Early Monday, the price of gold fell 1.9%, while silver bounced back slightly, gaining 0.2%. Both plunged Friday as record runs in precious metals markets ground to a halt.

On Friday, the price of gold dropped 11.4%, suddenly losing momentum after a tremendous rally where it roughly doubled over 12 months. It topped $5,000 for the first time on Jan. 26 and was around $5,600 at one point on Thursday.

Silver, which had been on a similar, jaw-dropping tear, plunged 31.4%.

U.S. benchmark crude oil lost $3.46 to $61.75 per barrel, while Brent crude, the international standard, fell $3.47 to $65.85 per barrel.

Speaking to reporters during the weekend, Trump said Iran should negotiate a “satisfactory” deal to prevent the Middle Eastern country from getting any nuclear weapons.

“I don’t know that they will. But they are talking to us. Seriously talking to us,” he said.

That comment apparently assuaged some worries over potential disruptions to oil supplies that had pushed prices higher, analysts said.

In Tokyo, the Nikkei 225 gave up early gains, sinking 1.3% to 52,655.18.

Hong Kong’s Hang Seng dropped 2.2% to 26,775.57, while the Shanghai Composite index sank 2.5% to 4,015.75.

In Australia, the S&P/ASX 200 fell 1% to 8,778.60.

Taiwan’s Taiex lost 1.4%.

On Friday, the S&P 500 dropped 0.4% and the Dow lost 0.4%. The Nasdaq composite lost 0.9%.

The Fed chair has a big influence on the economy and markets worldwide by helping to dictate where the U.S. central bank moves interest rates. That affects prices for all kinds of investments, as the Fed tries to keep the U.S. job market humming without letting inflation get out of control.

A report released Friday showed U.S. inflation at the wholesale level was hotter last month than economists expected. That could put pressure on the Fed to keep interest rates steady for a while instead of cutting them, as it did late last year.

The longtime assumption has been that the Fed should operate separately from the rest of Washington so that it can make moves that are painful in the short term but necessary for the long term. To get inflation down to the Fed’s goal of 2%, for example, may require the unpopular choice to keep interest rates high and grind down on the economy for a while.

In other action early Monday, the dollar fell to 154.88 Japanese yen from 154.94 yen. The euro was unchanged at $1.1853.

Source: AP

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Adam

Stocks

European stocks started the trading week in negative territory as concerns over artificial intelligence and volatility in precious metals haunted global markets.

The pan-European Stoxx 600 pared losses from this morning to trade just below the flatline, with sectors in mixed territory. Mining stocks led the losses. Europe’s basic resources index slumped 3.3% after the open — its biggest daily drop in nearly 10 months. It was last trading 1.5% lower. Mining stocks Glencore and Anglo American shed 1.7% and 1.8% respectively.

Major bourses also pared their losses. The U.K.’s FTSE index and France’s CAC 40 were last trading just above the flatline, and Germany’s DAX was last up 0.2%.

European semiconductor stocks were also lower. Chip giant ASML was near the bottom of Stoxx 600, down 4%. Be Semiconductor and ASM International were down 4% and 3.7%, respectively.

The sharp declines in Europe on Monday come amid similar moves in global markets.

Silver, which has more than doubled over the past 12 months, plunged around 30% on Friday. That marked the metal’s worst one-day performance since 1980. Spot gold lost around 4.5% to $4,648 per ounce on Monday, and silver was last seen down 6.5% at $79 per ounce.

Asia-Pacific markets fell overnight with South Korean benchmarks leading declines, as investors monitored gold and silver prices after Friday’s sharp declines. Meanwhile, U.S. stock futures fell on Sunday night as traders kept an eye on bitcoin after a weekend sell-off.

Bitcoin on Saturday dropped below $80,000 for the first time since April, a sign investors were taking more risk off the table following Friday’s sharp declines in precious metals.

Wall Street also turned its attention to Nvidia as questions over the artificial intelligence boom loomed. Nvidia’s plans to pour $100 billion into OpenAI have stalled, with chipmaker execs expressing doubt about the deal, The Wall Street Journal reported, citing people familiar with the matter.

Earnings in Europe come from Julius Baer Group today, while German retail sales and Spanish new car sales are due data-wise.

Source: cnbc

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James Riley

Middle East Situation

Remarks of Officials

Political

Analysts at Raymond James are cautioning that President Donald Trump's potential military options against Iran lack the possibility of a "quick win," elevating the risk of a prolonged and complex conflict.

In a recent note, analysts including Ellen Ehrnrooth and Ed Mills stated that a U.S. strike on Iran is "more likely than not" unless a diplomatic breakthrough occurs soon. This assessment comes as officials from Turkey, Egypt, and Qatar attempt to mediate a meeting between Washington and Tehran.

The diplomatic push follows Trump's threat to attack Iran if it refuses to negotiate a deal on its nuclear weapons program. The president, who has already sent what he termed an "armada" to the region, has also demanded Iran halt its nuclear activities and its crackdown on anti-government protestors.

White House Weighs Military Scenarios

According to the Raymond James analysis, the White House is contemplating several escalatory actions. These potential operations include:

• Targeted strikes on Iranian security forces or senior officials.

• Commando missions or further strikes to degrade nuclear infrastructure.

• Attacks on Iran's ballistic missile programs or related facilities.

These aggressive postures are consistent with Trump's approach since returning to office in January 2025.

A Departure From Past Operations

President Trump has demonstrated a willingness to use military force in specific situations. Last year, the U.S. executed airstrikes against Iran's nuclear infrastructure. In a separate operation in early January, American forces captured Venezuelan leader Nicolas Maduro. While both events increased geopolitical tensions, neither resulted in sustained fighting.

However, the Raymond James analysts argue that the current options for Iran are fundamentally different. "The operations for Iran now being considered do not present a 'quick win' like those the administration was able to obtain" previously, they wrote, highlighting the increased "complexity and risk of entering into prolonged conflict."

Oil Markets React to Mixed Signals

Despite the escalating military rhetoric, Trump has also suggested that progress is being made on the diplomatic front. He recently stated that Iran was "seriously talking" with Washington and that arrangements for negotiations were in progress.

His comments prompted a drop in oil prices on Monday, as investors eased their concerns about potential supply disruptions from Iran, an OPEC member. Analysts at ING, including Ewa Manthey and Warren Patterson, noted that the downward move in oil was also influenced by "a broader correction across financial markets."

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Adam

Economic

Futures linked with the major U.S. stock averages dip, with a precipitous slide in gold and silver denting investor sentiment ahead of a busy week of consequential corporate earnings and economic data. Bitcoin also extends its own drop after the cryptocurrency fell below $80,000 over the weekend. Elsewhere, Oracle outlines plans for new fundraising, while rumored executive changes at Walt Disney swirl around its upcoming quarterly returns.

Futures slip

U.S. stock futures pointed lower on Monday, suggesting an extension to declines in the prior session to begin the new trading week.

By 03:11 ET (08:11 GMT), the Dow futures contract had fallen by 323 points, or 0.7%, S&P 500 futures had slipped by 62 points, or 0.9%, and Nasdaq 100 futures had slumped by 291 points, or 1.1%.

Investors are keeping tabs on a river of quarterly corporate earnings in the coming days, as well as a fresh monthly job market report. Together, company returns and new data could offer a glimpse into the state of the American economy, and test the staying power of a bull market in stocks that is now in its fourth year.

Along with the ongoing speculation around the longevity of a boom in enthusiasm around artificial intelligence, traders are also assessing the impact of President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve Chair. Should he be confirmed by the Senate, Warsh would bring his longstanding calls for a monetary policy "regime change" to the world’s most influential central bank.

Gold and silver keep tumbling

A steep decline in both gold and silver, extending an historic tumble logged on Friday, was also clouding over sentiment. The impact of the collapse was especially notable in Asia, where equities broadly retreated.

After a nearly 10% drop late last week, spot gold had decreased by 4.9% to $4,626.80 per ounce by 03:27 ET -- well below a $5,000 level it had topped only days ago. Silver, until recently a beneficiary of speculative investments and burnished by its practical applications in a range of industries, was also under pressure.

Analysts have suggested that the metals have been hit by a combination of a firmer dollar and mass profit-taking in the wake of a sharp climb in recent months.

Markets also fretted over Warsh being potentially hawkish in the long term. While the nominee -- who formerly served as a Fed governor -- has aligned with Trump’s calls for sharply lower interest rates, he has also balked at the Fed’s asset buying operations.

“Warsh is considered the toughest on inflation among the candidates for the role, lessening the likelihood of a dramatic easing of monetary policy. This triggered a wave of selling, with gold suffering its biggest slide in four decades,” ANZ analysts wrote in a note.

Bitcoin extends slide

The risk-off feeling was apparent in cryptocurrencies as well, with Bitcoin in particular shedding more than 2% to $76,892.4.

On Saturday, the world’s most popular digital asset fell below the $80,000 level, extending a slide notched on Friday. Some investors fretted over whether Warsh would advocate for a smaller Fed balance sheet, which could tighten the amount of cash in the financial system.

Larger balance sheets have tended to bolster cryptocurrencies, plugging liquidity into money markets that in turn offer support for more speculative assets.

The latest dip marks a fresh leg lower for Bitcoin after it touched an all-time high last October. The token’s value, once buoyed by hopes for a surge in cash flows and a more friendly regulatory climate under Trump, has since fallen by a third.

Given the ructions in everything from stocks and commodities to crypto, the last few days have been "unusually hectic [...] for financial markets," said Jonas Goltermann, Deputy Chief Markets Economist at Capital Economics, in a note.

Oracle outlines new fundraising plans

Oracle Corporation on Sunday evening outlined its plans to raise fresh funds in 2026 that it will deploy towards building out its AI and cloud infrastructure, amid growing demand for more computing capacity.

The company said it expects to raise between $45 billion and $50 billion of gross cash proceeds in 2026, through a mix of debt and equity financing.

Roughly half of the funding will be through a combination of equity derivatives and common equity, the company said in a statement.

Its debt funding will be done through a single, one-time issuance of investment-grade senior unsecured bonds in early 2026. Oracle does not expect to issue any additional debt after this issuance.

"The most notable part of the announcement is that approximately half this amount will come via the issuance of equity-linked securities, including a $20B ATM (at-the-market) common equity program," analysts at Vital Knowledge said in a note.

"As far as the overall AI industry, Oracle’s $20 [billion at-the-market] is the first time a tech giant has been forced to raise equity since the AI boom kicked off and if this marks the start of a trend whereby the industry becomes a bit more fiscally prudent, it could mean a slightly slower pace of aggregate spending."

Disney to report

On the earnings front, entertainment giant Walt Disney is due to report before the opening bell on Wall Street on Monday.

While Disney’s ongoing push into its streaming service will be in focus, along with its ever-crucial parks and studios units, succession at the top of the firm could dominate much of the conversation.

Disney CEO Bob Iger has told his associates that he plans to step down from the role and pull back on his daily management activities prior to the end of his contract on December 31, the Wall Street Journal has reported, citing people familiar with the matter.

Board members are reportedly set to meet soon to vote on Iger’s replacement at the helm of Disney, the WSJ said. Several media reports have suggested that experiences division chair Josh D’Amaro is the front-runner to take Iger’s place.