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Informist, Monday, Jul. 13, 2026

By Cassandra Carvalho

MUMBAI – Government bond prices ended lower Monday, tracking a rise in crude oil prices after the US and Iran resumed strikes in West Asia over the weekend. However, value-buying by state-owned banks and other domestic players limited the fall, dealers said. Bond prices were little changed after inflation data for June, released near the end of trade, did not alter rate hike expectations, they said.

Headline inflation in June rose to an 18-month high of 4.38%, topping the Reserve Bank of India's 4% inflation target for the first time since January 2025. Some traders were concerned about food inflation rising to 5.32% in June, but traders largely continue to expect one rate hike by the RBI's Monetary Policy Committee by the end of 2026. Traders were pricing in an inflation print of about 4.0-4.5% in June amid elevated crude oil prices, they said. 

The 10-year benchmark bond ended at INR 101.47, down from INR 101.60 Friday but off the day's low of INR 101.40. The yield on the bond rose to 6.7309% from 6.7139% at the end of the previous session. A rise in overnight indexed swap rates also weighed on bond prices, though some traders executed bond-swap trades by buying gilts and paying fixed swap rates, dealers said.

"RBI will be watchful now. We're still expecting a quarter-basis hike given the US will hike by December end," a dealer at a state-owned bank said. "Maybe in the near future, not this policy (August), the next (in October), we can see them change the stance (to withdrawal of accommodation)."

Tracking a rise in crude oil prices, foreign portfolio investors sold gilts in small amounts, dealers said. As of 1800 IST, foreign portfolio investors net sold gilts worth INR 2.89 billion through the Fully Accessible Route Monday, according to data from Clearing Corp. of India.

Foreign portfolio investors are likely to have net sold gilts in a session for the first time since Jun. 3, as per CCIL data. The sales were low in quantum and were likely a knee-jerk reaction to the rise in oil prices, dealers said. Structurally, FPIs are likely to remain net buyers of gilts in the near-term, dealers said.

Traders also bought gilts Monday on bets of the inclusion of Indian gilts in Bloomberg's flagship Global Aggregate Index, with some expecting the announcement as early as Tuesday. Several dealers, however, expect the announcement in late July or even in August or September. 

The five-year benchmark 6.36%, 2031 bond was the second-most traded paper on the RBI's Negotiated Dealing System Order Matching platform Monday, as traders, especially those from private-sector banks and primary dealers, purchased the bond and paid fixed rate contracts in the five-year OIS rate, dealers said. The 2031 bond ended 6 paise lower at INR 99.82, while the five-year OIS ended 7 basis points higher at 6.24% Monday.

"The flow in bonds was very strong, because bonds held up very well even as OIS was paid," a dealer at a private sector bank said.  

At market open, a rise in US Treasury yields also weighed on bond prices, dealers said. The yield on the 10-year US Treasury note was 4.58% at 1700 IST, inching lower from 4.59% at 0900 IST and up from 4.55% at the end of gilt market hours Friday. Brent crude oil futures for delivery in September were $78 a barrel at 1700 IST, up from $76.84 at the same time Friday. 

The total turnover in the government securities market was INR 556.30 billion Monday, down from INR 704.10 billion Friday, data from Clearing Corp. of India showed.

OUTLOOK

On Tuesday, traders will track Brent crude oil prices and US Treasury yields at the open, even as they are not pricing in a rise in Brent crude above $80 per barrel, dealers said. Any escalation in the war in West Asia would pull down prices and push the yield on the 10-year benchmark bond to 6.80%, dealers said. Domestically, the focus will be on any news regarding the inclusion of Indian gilts in Bloomberg's flagship index and foreign capital inflows following measures announced by the RBI last month. Most traders expect an inclusion, though some technical difficulties for foreign portfolio investors purchasing bonds persist, dealers said. The depreciation of the rupee against the dollar is a concern for some traders, as the fall comes despite the RBI deploying various measures to prevent it. Traders will also track monsoon rainfall, as deficient southwest monsoon rainfall will contribute to higher inflation, they said.

The 10-year 2036 bond is seen moving between 6.68% and 6.78%, with 6.78% seen as the next crucial level for the gilt on the upside, with some dealers betting on a fall to 6.68% on the downside, dealers said.

India Gilts: Little changed after Jun CPI inflation rises to 18-mo high

MUMBAI--1614 IST-–Government bond prices were little changed after the release of India's CPI inflation data for June, as the reading came broadly in line with market expectations even as headline inflation rose to an 18-month high. Dealers said traders had already priced in the likelihood of higher inflation as the US-Iran conflict had driven up crude oil prices. Meanwhile, optimism over the possible inclusion of Indian sovereign bonds in Bloomberg's Global Aggregate Index continued to cap losses, dealers said. 

India's CPI inflation rose to 4.38% in June, broadly in line with traders' expectations, but rose above the Reserve Bank of India's 4% inflation target for the first time since January 2025. According to an Informist Poll of 11 economists, inflation was seen rising 4.3% in June, while traders had expected it to be between 4.0% and 4.5%. 

"It (inflation) was expected to be on the higher side because of the West Asia war, that's why the market has not reacted much," a dealer at a private sector bank said. "... waiting for the Bloomberg inclusion news, the yield (on the 10-year benchmark bond) might move 2-3 basis points after that." The print did little to alter traders' expectations of rate hikes by the RBI's Monetary Policy Committee, they said, with most still expecting one rate hike by the end of 2026.

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to trade in a range of 6.70-6.75% for the rest of the day. Dealers expect the yield to move towards 6.78% in the coming sessions if the US-Iran war continues. The total trade volume in the government securities market at 1614 IST was INR 478.05 billion, lower than INR 648.10 billion at 1640 IST Friday, data from Clearing Corp. of India Ltd. showed. (Shumaila Firoz)

India Gilts: Recover some losses on intraday fall in oil, likely FPI sales

MUMBAI--1428 IST--Prices of government bonds recovered some losses tracking an intraday fall in Brent crude oil prices, dealers said. Bond prices remained down as fear of an escalation in the West Asia war weighed on market sentiment, dealers said. Foreign portfolio investors also likely sold gilts, which pulled down bond prices, dealers said. However, hopes of Indian sovereign bond inclusion in Bloomberg's Global Aggregate Index limited the fall in bond prices, dealers said.  

Brent crude oil for September delivery fell to $77.37 per barrel, down from the day's high of $79.80, but up from $76.86 per barrel at the end of Indian trading hours Friday.

Public sector banks likely bought bonds as they considered the levels attractive, dealers said. These banks likely bought bonds after trimming their portfolios Friday, dealers said. Public sector banks sold INR 49.64 billion worth of gilts on the secondary market Friday, according to data from Clearing Corp. of India Ltd. Foreign portfolio investors, on other hand, likely sold gilts amid an escalation in the West Asia war, dealers said. FPIs net sold gilts worth INR 3.77 billion through the fully accessible route Monday, according to data from Clearing Corp. of India at 1505 IST.

"Public sector banks are likely buying...they must be taking some intraday positions,' a dealer at a primary dealership said. "FPIs are likely selling because of US-Iran escalations."

Traders also await the release of India's June CPI data, which is likely to be around 4.3%, according to market expectations. While some traders expect inflation to be higher than 4.3% due to higher energy prices, others expect it to be near 4%, which will lead to a rise in bond prices, dealers said. 

Traders also remain hopeful of Indian sovereign bond inclusion in Bloomberg's Global Aggregate Index, with some expecting such an inclusion in the next week and others expecting it in September, dealers said. Traders expect any news on the inclusion front to pull down the yield on the 10-year benchmark bond to 6.66-6.68% immediately, dealers said. 

The yield on the 10-year benchmark 6.94%, 2036 bond hovered near 6.73% throughout the day as traders await clarity over the ongoing US-Iran conflict, dealers said. The bond is expected to trade in a range of 6.70–6.76% during the day. Some dealers said the yield could move towards 6.78% in the coming days if tensions in West Asia continue and crude oil prices remain elevated.

Traders concentrated nearly 69% of their trading activity on the most liquid 10-year benchmark paper amid uncertainty, dealers said. The total trade volume in the government securities market at 1506 IST was INR 399.90 billion, lower than INR 585.60 billion at 1530 IST Friday, data from Clearing Corp. of India Ltd. showed.  (Janwee Prajapati) 

India Gilts: Remain down; Bloomberg index inclusion hope limits losses

MUMBAI--1125 IST--Prices of government bonds were little changed intraday and remained down from the previous close due to negative market sentiment following the escalation in the US and Iran conflict, dealers said. Higher crude oil prices due to the geopolitical tensions also weighed on bond prices. However, hopes that Indian sovereign bonds could be included in Bloomberg's flagship Global Aggregate Index limit losses, dealers said. 

"Hope of Indian bond inclusion in the Bloomberg index is supporting the market," a dealer at a private sector bank said. "... Otherwise, the yield (on the 10-year benchmark 6.94%, 2036 bond) would have been 1-1.5 basis points higher." Bond prices will take cues from any news about the inclusion of Indian government bonds in Bloomberg's Global Aggregate Index, which is expected by Jul. 15. Most traders expect an inclusion, though some technical difficulties for foreign portfolio investors purchasing bonds persist, dealers said.

Some dealers said public sector banks were selling bonds as they expect the bond prices to fall given escalations in west Asia conflict. However, foreign portfolio investors were seen buying bonds, which limited the fall in bond prices. Some dealers said FPIs preferred the 6.36%, 2031 bond, while others said FPIs were purchasing the 10-year benchmark bond to lock in attractive yields.

Later in the day, bond prices will take cues from India's June consumer price inflation data, due at 1600 IST. According to an Informist poll, inflation is expected at 4.3%, while some traders expect the print to come in between 4.3% and 4.5%. Dealers said traders were avoiding large positions ahead of the data. 

Trade volumes remained moderate despite the US-Iran war as the conflict has not yet turned into a full-scale war, dealers said. Market participants are waiting to see how the situation develops over the next few days before taking aggressive positions. 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to trade in a range of 6.70-6.76% during the day. Some dealers said the yield could move towards 6.78% in the coming days if tensions in West Asia continue and crude oil prices remain elevated. The total trade volume in the government securities market at 1125 IST was INR 205.45 billion, higher than INR 152.10 billion at 1130 IST Friday, data from Clearing Corp. of India Ltd. showed.  (Shumaila Firoz) 

India Gilts: Dn on rise in Brent crude oil, US yld, caution ahead of Jun CPI

MUMBAI--0944 IST--Government bond prices were down, tracking a rise in Brent crude oil prices to over $79 per barrel amid further escalation of the war in West Asia, dealers said. A rise in US Treasury yields also weighed on bond prices, dealers said. Traders remain cautious ahead of the release of India's June CPI data, which will lend cues to bond prices, dealers said. 

"Bond prices are down because of geopolitical tensions," a dealer at a state-owned bank said. "We can go to 6.76%, but there will be a strong resistance at 6.75%... even breaking current levels (6.73% on the 10-year benchmark bond) will require some news." Traders will also track purchases from foreign participants after they net bought INR 46.65 billion of gilts Friday. Any such purchases will support bond prices, dealers said.  

Brent crude oil for September delivery rose to over $79 per barrel, up from $76.86 per barrel at the end of Indian trading hours Friday. Despite pledging to keep talks going, the US carried out strikes on Iran this weekend. Iran hit back at US bases in neighbouring states. The attacks disrupted shipping in the Strait of Hormuz, which weighed on crude oil prices. The yield on the 10-year benchmark US Treasury note also rose to 4.59%, up almost 4 basis points from the end of Indian trading hours Friday.

Later in the day, bond prices will take cues from India's June inflation data, which is expected to be at 4.3%, according to an Informist poll. Some traders expect the print to be between 4.3–4.5%. Traders expect bond prices to rise if June inflation is near 4%, dealers said. Some traders expect the yield on the 10-year benchmark bond to fall to 6.70% Monday if the inflation data is lower than expected, dealers said. Significantly higher-than-expected inflation will lead to a rise in the 10-year benchmark yield to 6.80%.

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to trade in a range of 6.70-6.76% for the day. However, traders expect strong resistance at 6.75% yield. Public sector banks will likely step up purchases near 6.75%, which will prevent the yield on the 10-year benchmark 6.94%, 2036 bond from rising above the crucial level, dealers said.   

The total trade volume in the government securities market at 0944 IST was INR 87.30 billion, higher than INR 34.15 billion at 0930 IST Friday, data from Clearing Corp. of India Ltd. showed. Traders remain hopeful of the inclusion of Indian sovereign bonds in Bloomberg's flagship Global Aggregate Index. If such an inclusion happens, the yield on the 6.94%, 2036 bond could fall to 6.60%, dealers said. (Janwee Prajapati)

India Gilts: Seen down on rise in crude oil; caution ahead of Jun CPI data

MUMBAI – Government bond prices are likely to open lower Monday, tracking a rise in Brent crude oil prices amid escalating tensions in West Asia, dealers said. The rise in 10-year benchmark US Treasury yields will also pull down bond prices, dealers said. Traders are likely to book profits amid caution ahead of India's June inflation data and uncertainty over the US-Iran peace deal, dealers said. Trading volumes are expected to remain subdued as the market awaits inflation numbers due at 1600 IST Monday, dealers said.

Brent crude oil for September delivery rose to over $79 per barrel, up from $76.86 per barrel at the end of Indian trading hours Friday. The US carried out strikes on Iran over the weekend despite saying talks with Tehran would continue. Iran responded by targeting American bases in neighbouring countries. The attacks have again disrupted shipping through the Strait of Hormuz. Iran's Islamic Revolutionary Guard Corps said the vital waterway was closed, while US Central Command, which oversees West Asian operations, said it remained open. The escalation points to further disruption in energy supplies and pushed oil futures higher on Monday. Brent crude prices also rose as Iran widened strikes to include Qatar and the United Arab Emirates over the weekend. The back-and-forth has raised doubts over any interim US-Iran deal amid an already fragile truce. Following the escalation in West Asia, the yield on the 10-year benchmark US Treasury note also rose to 4.59%, up almost 4 basis points from the end of Indian trading hours Friday.

Back home, the 10-year benchmark 6.94%, 2036 is seen opening near 6.73% Monday and is expected to

oscillate between 6.70-6.76% during the day. The 6.94%, 2036 bond had ended at INR 101.60 Friday, up from INR 101.33 Thursday. The yield was 6.7139% Friday, down from 6.7517% Thursday. Bond prices ended sharply higher Friday due to purchases from foreign participants. Better-than-expected cut-off prices at the INR-320-billion weekly gilts auction Friday also supported bond prices. Foreign banks bought INR 46.65 billion of gilts Friday. Traders will closely track purchases from foreign participants, which will support bond prices on Monday. 

Traders await the release of India's June inflation data, which is widely expected to be on the higher side, reflecting a rise in energy prices due to the war in West Asia. India's CPI inflation is seen rising to 4.3% in June from 3.93% in May, according to an Informist Poll. Traders expect the print to be between 4.3-4.5%. A sharp rise in inflation could pressure bond prices and may push the 10-year benchmark yield to 6.80%, dealers said. Heightened tensions in West Asia have kept traders cautious, leading them to avoid large directional bets and focus largely on the most liquid 10-year benchmark, the 6.94% 2036 bond, they added. The 15-year benchmark 6.68%, 2040 bond is also likely to be in favour due to attractive levels, dealers said.

Bond prices are also likely to take cues from any news about the inclusion of Indian government bonds in Bloomberg's Global Aggregate Index, which is expected by Jul. 15. Some traders have pushed back the expected announcement date to the end of this month or even August or September, from earlier expectations of next week, they said. Most traders expect an inclusion, though some technical difficulties for foreign portfolio investors purchasing bonds persist, dealers said.  (Janwee Prajapati) 

End

US$1 = INR 95.6200

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

Edited by Saji George Titus

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