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Informist, Thursday, Jun. 25, 2026

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended higher Thursday following better-than-expected cut-off prices at the weekly gilts auction, dealers said. A fall in Brent crude oil price to pre-war levels also buoyed sentiment, they said. However, bond prices retreated as traders took profits on their holdings at levels seen to be attractive, dealers said. Some traders also trimmed their positions on caution ahead of the extended weekend, they said.

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 101.21, up from INR 101.11 Wednesday. The yield on the bond settled at 6.7690%, against 6.7832% at the end of the previous trading session. The yield on the 10-year benchmark bond fell to the day's low of 6.7488% following the release of the weekly auction result. The total turnover in the gilt market was INR 775.70 billion, down from INR 898.15 billion Wednesday. 

 

Bond prices rose sharply after the release of the auction result, dealers said. The 50-year benchmark 7.43%, 2076 bond got good bids from insurers and pension funds, dealers said. Insurance companies are likely to have bid for the 2076 paper as they look to lock in yields that they may not get later as yields are expected to fall, dealers said. Demand at the auction was also firm because of some forward-rate agreements in the paper, dealers said. The 50-year benchmark gilt's cut-off price was INR 98.64, against the expected cut-off of INR 98.50. The RBI set the cut-off price on the 6.68%, 2040 bond at INR 96.71, against the cut-off of INR 96.60 expected in an Informist Poll.

 

Demand for the 6.68%, 2040 bond was also robust at the auction from banks and corporations, dealers said. Of the total notified amount of INR 170 billion of the gilt, INR 169.90 billion was swept off in just four bids, data showed. The demand was also driven by expectations of foreign inflows in the bond after its inclusion in the Fully Accessible Route, dealers said. Traders also covered short positions in the 15-year benchmark bond placed ahead of the auction, dealers said.

 

"Today's (Thursday's) auction was surprising for us as we didn't expect the cut-off (prices) to be this high, but some traders bid very low and there was good demand for this bond (6.68%, 2040 bond)," a dealer at a state-owned bank said. "Profit booking was seen at 6.75-6.76% level (10-year benchmark yield)... I think we will need something strong to fall below 6.75%."

 

In the secondary market, the 15-year benchmark 6.68%, 2040 bond recorded the second-highest trading volume as traders looked to cover their short bets, dealers said. Almost 27% of the total trade volume on  the day was concentrated in the 6.68%, 2040 bond. Demand was strong as traders added duration to their portfolios, betting on potential capital gains. Some favour longer-tenure bonds because supply is relatively limited, and they expect prices to rise because of foreign inflows. Short-term paper, meanwhile, saw little interest, with traders seeing limited scope for price gain there as the yield on these bonds has already fallen over 20 basis points since the RBI's monetary policy decision Jun. 5.

 

Foreign investors' interest in Indian government bonds is expected to improve after the government exempted them from capital gains and withholding tax earlier this month. The RBI also added the 6.68%, 2040 gilt, 7.24%, 2055 gilt, and 7.71%, 2066 gilt to the Fully Accessible Route, which has no limits for foreign investment.

 

Market sentiment was largely positive after comments from the RBI governor Wednesday eased fears of a rate hike, dealers said. While most traders do not see a rate hike in 2026, some expect the Monetary Policy Committee to raise the repo rate by 50 basis points in the financial year ending March, dealers said. Others expect a 25 bp rate hike in the current calendar year. Traders expect the central bank's rate-setting panel to be data-dependent, dealers said.

 

With Brent crude oil price falling, most traders are focusing their attention on inflation data for June, which is likely to show the impact of a rise in global energy prices, dealers said. Traders fear the inflation print may be higher than expectations, which will nudge the RBI's rate-setting panel to ponder over a rate hike, they said. Some traders also fear that inflation will rise in the coming months due to the 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.

 

Some traders now expect the yield on the 6.94%, 2036 bond to fall to 6.68?ter which it is likely to encounter strong resistance, dealers said. Some traders also expect the yield to fall to 6.60% in August due to foreign inflows and the unlikelihood of a rate hike in the current calendar year, they said. However, some traders said a fall in the yield on the 10-year benchmark bond below 6.75% will require a strong trigger.

 

"I think there is more capacity for a rally in the market, it should go to 6.65–6.70% (yield on the 6.94%, 2036 bond)," a dealer at a private-sector bank said. "I think market is capped because they are waiting for the Bloomberg inclusion (inclusion of Indian government bonds in Bloomberg’s Global Aggregate Index)."

 

OUTLOOK

Markets are shut Friday on account of Muharram. Monday, 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. Some traders, on the other hand, shifted their focus to domestic cues, with the price of Brent crude oil easing to almost pre-war levels. Further, they do not expect any major escalation in West Asia, dealers said.

 

Later Monday, bond prices are likely to take cues from the result of the INR 300-billion buyback auction, dealers said. The buyback should relieve market supply pressures and improve system liquidity, which will support bond prices, they said. Traders expect firm participation at the auction since most of the securities are "in the money" or profitable for banks to sell back. The RBI Tuesday said the government will buy back four gilts worth INR 300 billion Monday. The bonds are the 7.33%, 2026 bond, the 5.74%, 2026 bond, the 8.15%, 2026 gilt, and the 8.24%, 2027 bond. No separate buyback amount has been announced for each security.

 

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, dealers said. Some expect it to be in line with the borrowing quantum in the June quarter while others believe it will be slightly higher than the borrowing in the September quarter a year ago. Traders expect the borrowing to be between INR 2.60 trillion and INR 3.30 trillion, dealers said. The Treasury bill calendar released after market hours showed INR 3.36 trillion of T-bill issuances scheduled for the September quarter.

 

Traders remain optimistic that Indian bonds will 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.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	97.8500	6.7944%	97.7875	6.8035%
6.94%, 2036	101.2050	6.7690%	101.1050	6.7832%
6.36%, 2031	99.7250	6.4271%	99.7350	6.4243%
6.68%, 2040	96.9300	7.0275%	96.4500	7.0829%
6.90%, 2065	92.7500	7.4740%	92.4200	7.5021%

 

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India Gilts: Erase most gains on profit booking; lower crude oil prices help

 

	1554 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.1825	101.35	101.12	101.24	101.11
YTM (%)	6.7722	6.7488	6.7809	6.7641	6.7832

 

MUMBAI--1554 IST–-Prices of government bonds erased most gains as traders booked profit on their holdings at levels seen as attractive, dealers said. Some traders also trimmed their positions due to caution ahead of the extended weekend, they said. Bond prices had earlier risen sharply after the cut-off yield at the INR-280-billion weekly gilt auction was lower than expected, dealers said. Overall, market sentiment remained positive as Brent crude oil prices remained down, dealers said.

 

"There is profit booking at these levels... it is a good level for those who had entered around 7% yield (on 6.94%, 2036 bond) to book profits," a dealer at a private sector bank said. "Also, traders must be selling as it is almost the end of the June quarter."

 

Brent crude oil futures for August delivery were at $72.74 per barrel, lower than $75.21 per barrel at the end of Indian trading hours Wednesday. This is the lowest level since the war began. The RBI set the cut-off price for the 6.68%, 2040 bond at INR 96.71, sharply higher than the INR 96.60 seen in the Informist Poll. The cut-off price on the 50-year benchmark 7.43%, 2076 gilt was INR 98.64, up from INR 98.50 in the Informist Poll. The cut-offs were sharply higher than market expectations, which buoyed prices, dealers said. 

 

At 1522 IST, the total volume in the government securities market was INR 687.20 billion, slightly higher than INR 680.10 billion at 1530 IST Wednesday, according to data from the RBI's Negotiated Dealing System. The 10-year benchmark 6.94%, 2036 bond is seen in a 6.75-6.78% range for the rest of the day, dealers said. However, some traders expect the yield on the 6.94%, 2036 bond to fall to 6.72-6.73% near the end of trading Thursday, though most do not expect yields to fall to such levels, as traders will continue to book profit at levels seen as attractive, they said.  (Janwee Prajapati)

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India Gilts: Up as auction result better than view; profit booking caps gains

 

	1447 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.2325	101.35	101.18	101.24	101.11
YTM (%)	6.7652	6.7488	6.7725	6.7641	6.7832

 

MUMBAI--1447 IST–-Prices of government bonds rose further after the cut-off prices at the weekly gilt auction were better than expected, dealers said. At the day's high, levels were seen as attractive to book profits after a sharp rise in gilt prices this week and ahead of a long weekend, they said. 
 

The RBI set the cut-off price on the 6.68%, 2040 bond at INR 96.71, against the INR 96.60 cut-off seen as median of an Informist Poll. The 50-year benchmark 7.43%, 2076 gilt's cut-off price was INR 98.64, against the expected cut-off of INR 98.50. Public and private sector banks bought the 15-year security to add to their held-to-maturity books, while pension funds and other long-term investors were seen buying the 50-year bond to lock in the yield above 7.50%, dealers said.

 

Following the strong investor demand at the auction, the yield on the 6.94%, 2036 bond dipped below the psychologically crucial 6.75% mark, the lowest intraday for the 10-year benchmark gilt yield since Mar. 20. The broader market sentiment remained positive due to the decline in Brent crude oil prices, which continued to support government bond prices, dealers said. However, it was at this level that some traders booked profit while others placed fresh short sales, they said.

 

"The auction was better than expected. The benchmark yield has moved to 6.75%, and if it sustains below that level, it could head towards 6.70%. There is a lot of positive news in the market right now—investors are awaiting Bloomberg's inclusion of Indian bonds, oil prices are lower, the RBI is supporting liquidity through FCNR (B) flows, and OIS (overnight indexed swipe) rates have also softened," a dealer at a private-sector bank said.

 

Dealers also pointed to improving foreign investor interest in Indian government bonds after the government exempted them from capital gains and withholding tax earlier this month. The RBI also added the 6.68%, 2040 gilt, 7.24%, 2055 gilt, and 7.71%, 2066 gilt to the Fully Accessible Route, which have no limits for foreign investment. "In the longer term, foreign portfolio investor flows are looking encouraging. We have seen a significant improvement in demand for bonds following their inclusion under the FAR framework," the dealer said. 

 

At 1447 IST, the total volume in the government securities market was INR 597.70 billion, lower than INR 630.15 billion at 1430 IST Wednesday, according to data from the RBI's Negotiated Dealing System. The 10-year benchmark 6.94%, 2036 bond is seen in the range of 6.75-6.78% for the rest of the day, dealers said.  (Shumaila Firoz) 

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India Gilts: Remain up; demand for 6.68%, 2040 paper at auction seen firm

 

	1221 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.245	101.29	101.18	101.24	101.11
YTM (%)	6.7634	6.7579	6.7725	6.7641	6.7832

MUMBAI--1221 IST--Prices of government bonds remained up as Brent crude oil prices continued to trade at pre-West Asia war levels, dealers said. However, profit-taking near 6.76% yield on the 10-year benchmark 6.94%, 2036 gilt capped the rise in bond prices, dealers said. Some traders also maintained caution ahead of the result of the INR-280-billion weekly gilt auction Thursday, they said.

 

The government invited bids to sell INR 170 billion of the 6.68%, 2040 bond and INR 110 billion of the 7.43%, 2076 bond Thursday. Demand at the auction was seen firm from banks and insurers, dealers said. The cut-off yields at the auction are likely to lend cues to the market during the day, dealers added. 

 

Traders likely covered short positions in the 6.68%, 2040 bond, which pushed up the price of this bond in the secondary market, dealers said. Robust demand was seen at the auction from both state-owned and private sector banks for the 15-year paper as traders look to capture capital gains in slightly longer tenure bonds, dealers said. Some traders had expected a new 15-year bond at the auction this time around, with outstanding on the 2040 paper crossing INR 2.11 trillion. The government issues a new bond when the outstanding amount on a bond crosses INR 2.00 trillion to avoid the burden of one-time repayment, dealers said.

 

For the 50-year 7.43%, 2076 bond, demand at the auction was seen firm due to some forward-rate agreements in the paper, dealers said. Insurance companies likely bid for the 2076 paper as they look to lock in yields which they may not get later as they expect the yields to fall, dealers said. The Reserve Bank of India is likely to set a cut-off of INR 98.50 or 7.55% yield on the 7.43%, 2076 gilt at the auction Thursday, according to an Informist poll. Meanwhile, for the 2040 paper, the cut-off is seen at INR 96.60 or 7.07% yield, as per the poll.

Traders will closely track weekly gilt auction results as the cut-offs are expected to lend cues to the market during the day, dealers said. A lower-than-expected cut-off yield at the auction may push bond prices up, dealers said. The benchmark 10-year 6.94%, 2036 bond is seen in the range of 6.75-6.80% during the day, dealers said. 

 

Some traders booked profits when the yield on the 10-year 2036 bond remained near 6.76%, while others pared bets ahead of an extended weekend on no clarity over a final peace deal between the US and Iran, dealers said. The Indian gilt market will be shut Friday on account of Muharram. At 1221 IST, the total turnover in the government securities market was INR 285.50 billion, significantly lower than INR 436.95 billion at 1230 IST Wednesday, data from Clearing Corp. of India showed.  (Diksha Tripathy)

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India Gilts: Up on overnight fall in crude oil prices; profit-booking weighs

 

	0936 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.21	101.28	101.21	101.24	101.11
YTM (%)	6.7683	6.7586	6.7683	6.7641	6.7832

 

MUMBAI--0936 IST--Prices of government bonds were up, tracking an overnight fall in prices of Brent crude oil, dealers said. However, the rise in bond prices was limited as traders booked profits when the yield on the 10-year benchmark 6.94%, 2036 bond was near 6.76%, they said. 

 

The total turnover in the government securities market was subdued as traders maintained caution ahead of the weekly gilt auction, dealers said. At 0936 IST, the total volume in the market was INR 58.50 billion, lower than INR 67.55 billion at 0930 IST Wednesday, data from Clearing Corp. of India showed.

 

The government will sell INR 170 billion of the 6.68%, 2040 bond and INR 110 billion of the 7.43%, 2076 bond Thursday. Demand at the auction is seen firm from banks and insurers, dealers said. The cut-off yields at the auction are likely to lend cues to the market during the day, dealers added. Thursday, some traders also pared bond holdings ahead of the extended weekend amid no clarity on a finalised peace deal between the US and Iran, dealers said. The Indian gilt market will be shut Friday on account of Muharram. 

 

"The market opened higher only, and it will remain up throughout the day (Thursday), a dealer at a state-owned bank said. "At 6.76% (yield on the 10-year benchmark 6.94%, 2036 bond) there is some profit booking due to which yields are not falling more."  

                

An overnight fall in prices of Brent crude oil helped bond prices Thursday, dealers said. Brent crude oil futures for August delivery were at $72.48 per barrel at 0936 IST, down from $75.25 per barrel at the end of Indian gilt market hours Wednesday. 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 6.75-6.80% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen up as oil prices tumble; gilt auction result to lend cues

 

MUMBAI – Prices of government bonds are seen opening higher Thursday, with crude oil prices falling to their lowest level since the beginning of the US-Iran war, dealers said. Volume in the market is expected to remain high throughout the day as traders may buy bonds at levels seen as attractive by them, with the yield on the 10-year benchmark 6.94%, 2036 bond falling below 6.80%, they said. Some traders are likely to refrain from placing aggressive bets ahead of the INR-280-billion gilt auction, results of which are expected to lend cues to the market, dealers said.       

 

The 10-year benchmark 6.94%, 2036 bond is seen opening near 6.75% and moving in a range of 6.75-6.80%, dealers said. The benchmark bond Wednesday 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. Some traders expect the yield on the 10-year benchmark bond to fall to 6.70%, as it is the next psychologically crucial level, while a few others believe profit-taking near 6.75% levels may prevent the yield from falling further. 

 

Traders, especially state-owned banks, are likely to book profits when the yield on the benchmark 10-year 2036 bond remains near 6.75-6.78%, dealers said. Public sector banks have net sold bonds worth INR 155.03 billion so far this week, data from Clearing Corp. Of India showed. They are likely to continue their streak Thursday as well, dealers said. 

 

With no clarity over a final peace agreement between the US and Iran, some traders may trim their bond holdings Thursday ahead of the extended weekend, which is likely to weigh on bond prices, dealers said. Traders may also trim positions ahead of the weekly gilt auction to make space in their portfolio, which may limit gains on bond prices, dealers said. 

 

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 is expected to be robust for both the papers at the auction, dealers said. The 15-year 2040 bond may see firm demand from banks, while the 50-year paper is likely to be picked up by insurers at the auction, dealers said. 

 

Bond prices are likely to be supported by an overnight fall in Brent crude oil prices, which tumbled to its lowest level since the beginning of the US-Iran war, dealers said. Brent crude oil futures for August delivery were at $72.32 per barrel at 0800 IST, as against $75.25 per barrel at the end of Indian gilt trading hours Wednesday. 

 

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, which is likely to be released 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. Reserve Bank of India Governor Sanjay Malhotra's comments in an interview with ET NOW on Wednesday were also seen as positive by market participants, they said. Traders pared bets of a rate hike in the current calendar year after RBI Governor Malhotra 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. (Diksha Tripathy)  End

 

US$1 = INR 94.3950 

Edited by Rajeev Pai

 

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