Macro and Government Bond Commentary: Yields edge lower with global benchmarks, reports of FY26 fiscal deficit below 4.5%; INR continues to depreciate on talks of more flexible exchange rate management. 10Y benchmark (7.10 GS 2034) opened mildly lower at 6.88% tracking a fall in treasury yields overnight (on reports of more gradual tariffs by the upcoming administration). Yields quickly edged higher in the morning session, with continued weakness in INR. Multiple Media reports flashed the RBI’s comfort around letting INR depreciate with EM peers and intervene only when warranted. The spot INR was at a fresh all-time high of 86.66 at 3:30pm. IGB yields were steady early in the noon, but started drifting lower early in the afternoon on reports that the GOI may target fiscal deficit for the upcoming financial year below 4.5% of GDP. The 10Y point closed trade at 6.86% vs 6.89% prev.
