More Stories

Informist, Wednesday, Jun. 24, 2026

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended sharply higher Wednesday as Brent crude oil prices fell and traders pared bets of a rate hike in the current calendar year following the Reserve Bank of India Governor Sanjay Malhotra's comments earlier Wednesday, dealers said. Brent crude oil prices fell to an intraday low of $75.37 per barrel, the lowest level since the war in West Asia began. A fall in overnight indexed swap rates also supported bond prices, dealers said.    

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 101.11, up from INR 100.73 Tuesday. The yield on the bond settled at 6.7832%, the lowest closing level since Mar. 20, down from 6.8364% at the end of the previous trading session. Traders expect the yield on the 10-year benchmark bond to now fall to 6.70%, as it is the next psychologically crucial level, while some expect the yield to touch 6.60% by August, dealers said. 

 

The total turnover in the gilt market rose to INR 898.15 billion, up nearly 33% from INR 675.90 billion on Tuesday. Trade volume was up sharply from Tuesday, as overall market sentiment remained positive amid hopes of foreign inflows, dealers said. Moreover, Malhotra expressed confidence that India's Fully Accessible Route bonds would be included in the Bloomberg Global Aggregate Index, boosting market sentiment.

 

Traders also pared bets on a rate hike in the current calendar year after RBI Governor Malhotra, in an earlier interview with ET Now, said it was too early to discuss repo rate hikes in the coming months. He noted that policymakers had deliberately kept the policy stance "neutral" in June to avoid signalling any rate increases. He also said the RBI was still uncertain about any second-round inflation effects from the West Asia conflict, describing the price rise due to disruptions in crude oil supply as a one-time event. Even so, the rate-setting panel will continue to base decisions on incoming data, the governor said.

 

"The governor could not have been more dovish... even the 15–20% of the market participants who were expecting a rate hike in August do not see it happening this calendar year after his (RBI governor's) comments," a dealer at a private sector bank said. "Crude oil has also fallen some $20 per barrel since the policy (Monetary policy committee meeting on Jun. 5)."

 

While most traders do not see a rate hike in the current financial year, some expect the RBI's MPC to raise the policy rate by 25 basis points, dealers said. Traders expect the central bank's rate-setting panel to be data dependent, dealers said. Some traders fear inflation will rise in the coming months due to deficient rainfall, they said. Moreover, the rise in global interest rates is also likely to influence the Monetary Policy Committee's decision on policy rates, they said.

 

"The market is not expecting a rate hike this year as the RBI governor's commentary was also dovish (Wednesday)," a dealer at a public-sector bank said. "... But to manage the inflation and high crude oil prices, the US will hike rates this year and so will India do following US's steps."
 

At Wednesday's Treasury bill auction, cut-off yields largely matched market expectations, with the 364-day T-bill coming in stronger than anticipated, dealers said. The entire INR 60-billion 364-day supply was absorbed in just two competitive bids. The cut-off yield on the longest-tenure T-bill was at 5.64%, down 15 basis points from last week and below 5.70% in the Informist poll. The RBI set cut-off yields at 5.25% for the 91-day T-bills and 5.45% for the 182-day T-bills.

 

Apart from the 10-year benchmark 6.94%, 2036 bond, the 15-year benchmark 6.68%, 2040 bond was in favour as it was the second most-traded bond in the secondary market on Wednesday. The 15-year bond prices were up sharply as traders covered their short positions placed ahead of the weekly gilt auction Thursday, dealers said. Traders covered their short positions as they expected the prices to rise going ahead, dealers said. Some traders expect the cut-off on the 6.68%, 2040 bond at the auction Thursday to be near the secondary market level. Some traders also picked up the 15-year bond, as they considered the spread between the 15-year benchmark and the 10-year benchmark attractive. Traders also expect foreign investors to purchase this bond once it is added to the fully accessible route, which will further support bond prices.        

 

Dealers said the government's plan to buy back INR 300 billion in bonds will ease market supply and improve liquidity in the system, thereby supporting bond prices. Traders expect participation in the auction to be firm as most of the papers are "in the money" or profitable for banks. The RBI said Tuesday that the government will buy back four gilts worth INR 300 billion on Monday. The securities to be bought back are the 7.33 26bond, the 5.74 26bond, the 8.15 26bond, and the 8.24 27bond. No individual amount has been notified for each security in the buyback.

 

OUTLOOK

On Thursday, government bond prices will track overnight movements in crude oil prices and any significant development in the peace negotiations between the US and Iran, dealers said. Given that the overall global scenario remains unchanged, traders expect the yield on the 10-year benchmark 6.94%, 2036 gilt to remain in the range of 6.75-6.85%, dealers said. 

 

However, traders are likely to refrain from placing aggressive bets ahead of the weekly gilt auction, dealers said. On Thursday, the government will sell INR 170 billion of the 6.68%, 2040 bond and INR 110 billion of the 7.43%, 2076 bond. Demand at the auction is likely to be robust, as these are traders' preferred-duration papers for their portfolios, dealers said.

 

Traders also await the release of the state borrowing calendar for the September quarter. Higher-than-expected state government borrowing will pull down bond prices, dealers said. Traders are divided on the size of state borrowing in Jul-Sept. Some expect it to be broadly in line with the borrowing quantum in the June quarter, dealers said. Others expect it to be slightly higher than the borrowing in the September quarter a year ago. Traders expect the borrowing in the calendar to be released on Thursday or Friday, to be between INR 2.60 trillion and INR 3.30 trillion, dealers said.

 

Traders remained optimistic that Indian bonds would be added to Bloomberg's flagship Global Aggregate Index. If the inclusion proceeds, they expect India's Fully Accessible Route bonds to account for 0.8-1.0% of the index. Bloomberg had said in its September consultation note that a weight of 0.7% was under consideration.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.1050	6.7832%	100.7250	6.8364%
6.36%, 2031	99.7350	6.4243%	99.5050	6.4825%
6.68%, 2040	96.4500	7.0829%	96.0275	7.1321%
6.90%, 2065	92.4200	7.5021%	91.7400	7.5604%

 

---

India Gilts: Sharply up; 2026 rate hike fears ebb after RBI governor remarks

 

	1544 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.993	101.02	100.76	100.76	100.73
YTM (%)	6.7989	6.7951	6.8314	6.8314	6.8364

 

MUMBAI--1544 IST--Government bond prices remained sharply higher as traders increasingly believed the Reserve Bank of India's Monetary Policy Committee would not hike the repo rate in 2026 following Governor Sanjay Malhotra's comments earlier Wednesday, dealers said. The fall in Brent crude prices to an intraday low of $75.37 per barrel, the lowest level since before the war in West Asia began on Feb. 27, added to the benign outlook for interest rates. The yield on the 6.94%, 2036 bond fell to 6.7951% Wednesday, the lowest level for a 10-year benchmark gilt since Mar. 23.

 

Earlier in the day, Malhotra said it was premature to talk about repo rate hikes by the MPC in the coming months and said policymakers had taken a conscious decision not to signal rate hikes by keeping the policy stance at 'neutral' at the June monetary policy review. The RBI also remained unsure about the second-round inflationary impact of the war in West Asia, calling the rise in prices from the hit to crude oil supply "one-time." However, the rate-setting panel will remain data-dependent, Malhotra said in an interview with the television channel ET Now.

 

Some traders were expecting the rate-setting panel to hike the policy repo rate by October, but now they do not see any action till the end of 2026. Dealers now expect the MPC to first change its stance before taking any action on the repo rate. A few dealers said the comments showed the RBI and government were not worried about CPI inflation averaging around 5% in FY27 since it was within the central bank's 2-6% tolerance band.

 

The easing of fears of rate hikes also translated into a fall in cut-off yields on Treasury bills at the auction. The INR 60-billion supply of the 364-day T-bill was swept in only two competitive bids. The cut-off yield on the longest-tenure T-bill was set at 5.64% Wednesday, 15 basis points lower than a week ago, and well below the 5.70% cut-off expected in an Informist poll.

 

Bond prices continued to rise despite profit-booking by state-owned entities, as traders expected large bond purchases from asset-liability management desks and foreign portfolio investors following the RBI's recent steps, dealers said. Malhotra expressed confidence that India's Fully Accessible Route bonds would be included in the Bloomberg Global Aggregate Index, boosting market sentiment. Moreover, traders expect inflows of over $50 billion into foreign-currency, non-resident, dollar-denominated bank deposits by Sept. 30. Banks are likely to invest a portion of these inflows in bonds, particularly those maturing in under five years, to generate income on the liabilities, dealers said. 

 

"FCNR (B) flows just started, and yes, it is very low currently. But in the next two months, we can see real flows and each bank has an estimation of what they will be receiving (through these deposits)," a dealer at a state-owned bank said. Despite rising yields on US Treasuries and global uncertainty, sustained purchases from foreign portfolio investors are keeping Indian bond prices high, dealers said. 

 

At 1544 IST, the total volume in the government securities market was INR 704.60 billion, higher than INR 680.10 billion at 1530 IST Tuesday, according to data from the RBI's Negotiated Dealing System. The 10-year benchmark 6.94%, 2036 bond is seen in a 6.78-6.82% range for the rest of the day, dealers said.  (J. Navya Sruthi)  

---

India Gilts: Up more on hopes of foreign inflows, Bloomberg index inclusion

 

	1302 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.965	100.98	100.76	100.76	100.73
YTM (%)	6.8027	6.8013	6.8314	6.8314	6.8364

 

MUMBAI-–1302 IST--Prices of government bonds were up more on hopes of foreign inflows as traders expect the Indian bonds to be included in the Bloomberg's Global Aggregate index, which is likely in the next couple of weeks, dealers said. The fall in Brent crude oil prices to near pre-war levels also supported the rise in bond prices, they said. 

 

"There is a lot of positivity in the market right now...people are waiting for Bloomberg inclusion news...oil is down, OIS is also soft, and the buyback will take out supply from the market, which is supportive for bond prices," a dealer at a private-sector bank said.

 

Brent crude oil futures for August delivery were at $76.14 per barrel, down from $77.89 per barrel at the end of Indian trading hours Tuesday. A decline in crude oil prices and easing in overnight indexed swap rates also supported bond prices, dealers said.  

 

Additionally, the government's buyback announcement of INR 300 billion worth of bonds is expected to reduce supply in the market, thereby improving demand-supply dynamics and supporting prices, they said. The government will buy back four gilts worth INR 300 billion on Monday, the Reserve Bank of India said Tuesday. The gilts up for buyback are the 7.33%, 2026 bond; the 5.74%, 2026 bond; the 8.15%, 2026 bond; and the 8.24%, 2027 bond. There is no notified amount for each of the individual securities up for buyback.

 

At the treasury bills auction Wednesday, the government will raise INR 240 billion through the sale of 91-day, 182-day, and 364-day T-bills. Banks likely preferred the 182-day and 364-day t-bills to manage their asset-liability management books, while mutual funds likely picked up the 91-day T-bill at the auction, dealers said.

 

"Banks will go for longer tenure for ALM (asset-liability profiles) management, while mutual funds will prefer shorter tenure papers just to cash things up," a dealer at another private-sector bank said.

 

Market participants expect the yield on the 10-year benchmark 6.94%, 2036 bond to ease further during the day amid the positive sentiment. Some traders see the yield falling lower than the key psychological 6.80% level in the near term, although sustaining below that level will depend on fresh triggers. "The 10-year bond yield may come down to 6.75% in the coming days due to the positive sentiment around Bloomberg index inclusion," the dealer quoted above said.

 

At 1302 IST, the total volume in the government securities market was INR 516.50 billion, higher than INR 319.20 billion at 1330 IST Tuesday, according to data from the RBI's Negotiated Dealing System. The 10-year benchmark 6.94%, 2036 bond is seen in the range of 6.80-6.84% for the rest of the day, dealers said.  (Shumaila Firoz) 

---

India Gilts: Up as crude prices fall; volume up on hopes of more FPI inflows

 

	0933 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.8075	100.85	100.76	100.76	100.73
YTM (%)	6.8248	6.8188	6.8314	6.8314	6.8364

 

MUMBAI--0933 IST--Prices of government bonds were up, tracking an overnight fall in prices of Brent crude oil, dealers said. Traders bought bonds at levels seen attractive on hopes of higher inflows from foreign portfolio investors, following clarity by the Reserve Bank of India on foreign currency non-resident bank deposits, dealers said. 

 

The 10-year benchmark 6.94%, 2036 bond opened at INR 100.76 Wednesday, up nearly 4 paise from Tuesday's close. In early trade, it gained 9 paise to touch the day's high of INR 100.85 on fresh purchases by traders, dealers said. At 0930 IST, the total turnover in the government securities market was INR 70.45 billion, up from INR 25.20 billion at 0930 IST Tuesday, data from Clearing Corp. of India showed. The volume is expected to rise during the day as market participants remain optimistic about an increase in inflows from foreign portfolio investors, dealers said. 

 

On Tuesday, the RBI released responses to frequently asked questions on its swap facility for FCNR deposits, external commercial borrowings and overseas foreign currency borrowings, which was introduced on Jun. 8. The much-awaited clarification has fuelled hopes of FPI inflows gathering pace, dealers said. Higher foreign inflows are expected to improve liquidity conditions in the banking system and lend support to government bond prices, dealers said.

 

"RBI finally released the FAQs on FCNR and people were waiting for clarity on the leverage part, so now that clarity has come," a dealer at a private sector bank said. "Inflows are likely to go up and that's why there is a positive movement in the market today (Wednesday)."   

 

A fall in prices of Brent crude oil also helped bond prices Wednesday, dealers said. Brent crude oil futures for August delivery were at $76.27 per barrel at 0930 IST, down from $77.79 per barrel at the end of Indian gilt market hours Tuesday. Traders will closely track any development related to the US-Iran war during the day. The benchmark 10-year 6.94%, 2036 bond is seen in the range of 6.80-6.86% during the day, dealers said.  (Diksha Tripathy)

---

India Gilts: Seen up on overnight fall in crude, hopes of more FPI inflows

 

MUMBAI – Prices of government bonds are seen opening higher Wednesday due to an overnight decline in Brent crude oil prices and improved sentiment following the Reserve Bank of India's clarification on foreign currency non-resident bank deposits, dealers said.

 

The RBI on Tuesday released responses to frequently asked questions on its swap facility for FCNR deposits, external commercial borrowings and overseas foreign currency borrowings, which was introduced on Jun. 8. The clarification allows banks greater flexibility in deploying FCNR deposits, making the instrument more attractive for both lenders and depositors, dealers said.

 

The central bank had announced a series of measures on Jun. 5 to attract foreign capital into India. However, treasury officials told Informist that FCNR deposit inflows remained subdued in the first two weeks after the swap facility became operational due to uncertainty over how banks could utilise the funds. With the RBI now providing clarity, dealers expect inflows to gather pace. Higher foreign inflows are expected to improve liquidity conditions in the banking system and lend support to government bond prices, dealers said.

 

The 10-year benchmark 6.94%, 2036 bond is seen opening near 6.83% and is likely to move between 6.83% and 6.88%, dealers said. The bond ended at INR 100.73, up from INR 100.65 Monday. The yield on the bond settled at 6.8364%, against 6.8473% at the end of the previous trading session. 

Dealers noted that the yield on the benchmark bond has failed to sustain a move below the key technical level of 6.83% over the past three trading sessions, as traders booked profits at those levels. Profit-taking is likely to continue if the yield again approaches 6.83% Wednesday, they said. State-owned banks, which had bought the bond when the yield was above 7.10%, booked profits in the last two trading sessions, dealers said. State-owned banks have net sold bonds worth INR 111.08 billion, data from Clearing Corp. of India Ltd. showed.

Bond prices are expected to closely track movements in crude oil prices during the day. Brent crude oil futures for August delivery were at $76.60 per barrel at 0800 IST, down from $77.79 per barrel at the close of Indian gilt market hours on Tuesday. The decline in crude oil prices is expected to support bond market sentiment as lower energy costs ease inflation concerns, dealers said.

Traders will also monitor the INR 240-billion Treasury bill auction scheduled Wednesday. A higher-than-expected cut-off yield could weigh on bond prices, dealers said. However, most market participants expect cut-off yields to remain broadly in line with those seen at last week's auction, given the limited likelihood of an immediate rate hike by the RBI.

Looking ahead, traders will closely track the outcome of the government's buyback auction scheduled for Monday. The RBI announced on Tuesday that the government will buy back four gilts totalling INR 300 billion. The securities eligible for buyback are the 7.33%, 2026 bond; the 5.74%, 2026 bond; the 8.15%, 2026 bond; and the 8.24%, 2027 bond. The government has not specified the amount to be repurchased under each security. As all four bonds mature in FY27, the operation effectively amounts to pre-payment of near-term debt.

Market participants also await the state borrowing calendar for the September quarter. A higher-than-expected borrowing amount could put pressure on bond prices, dealers said. Views remain divided on the likely size of state borrowings. Some traders expect borrowing to remain broadly in line with the June-quarter level, while others anticipate it could exceed the amount raised in the corresponding quarter last year. Dealers expect the calendar to be released on Thursday or Friday, with total borrowing likely to be in the range of INR 2.60 trillion to INR 3.30 trillion, they said.

Traders are also watching developments related to the possible inclusion of Indian government bonds in Bloomberg's flagship Global Aggregate Index. If Indian government bonds are included, market participants expect India's Fully Accessible Route bonds to account for 0.8%-1.0% of the index. In its September consultation note, Bloomberg indicated that a weight of 0.7% was under consideration. (Diksha Tripathy) 

 

End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Saji George Titus

 

End

 

US$1 = INR 94.67

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.