New Delhi, Feb. 3 -- The yield on India's 10-year government bond rose to 6.78% on Monday from 6.70% on Friday, its biggest intraday rise since late August. What appears to have put investors off is the 18% increase announced on Sunday in the government's gross market borrowing plan for 2026-27, although the rise in net borrowing is much less dramatic.

In the budget's run-up, expectations were rife of a fiscal deficit reduced by more than what turned out to be the case, implying more-than-expected bond issuance.

As market borrowings by state governments have been on the rise, fears may have arisen of bond oversupply. Weaker bond prices imply higher yields, which tend to put upward pressure on the rates of interest that private borrowers...