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Informist, Tuesday, Aug. 4, 2026

 

By Aaryan Khanna

 

MUMBAI – Government bond prices ended near the day's high as crude oil prices slumped in the last hour of trade on reports that the US and Iran had been presented a draft resolution to end the war in West Asia, which has stretched into its sixth month, dealers said. The sharp and sudden fall in crude oil pushed gilts up even as traders avoided large bets before the Reserve Bank of India's Monetary Policy Committee's decision on interest rates Wednesday, they said.

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.87, up from INR 100.73 Monday. Its yield ended at 6.8152%, down from 6.8343% the previous day. The benchmark gilt traded in the INR 100.68-INR 100.87 band Tuesday.

 

Brent crude for October delivery slumped by over $2 after 1600 IST to $83.66 per barrel by 1700 IST, the end of Indian market hours. Bloomberg reported Qatar saying it had shared a draft resolution with the US and Iran amid continuing mediation efforts. A memorandum of understanding signed in June fell through in July after a series of tit-for-tat attacks by the US and Iran over control over the Strait of Hormuz, which resulted in crude oil prices rising nearly 25%. An intraday rise in crude oil prices had pulled gilt prices off highs just before they started falling, dealers said.

 

"After the flash, crude oil prices have slumped, which is what the market is tracking," a dealer at a private-sector bank said. "The market is already settled into their positions before the policy, which is why the reaction is not as large."

 

Traders spent most of the day being cautious ahead of the Monetary Policy Committee decision even though the decision has been described as a "non-event". The tone of RBI Governor Sanjay Malhotra's statement is likely to be neutral, with no significant measures expected to be announced to move gilt prices, dealers said. Brent crude oil price has fallen more than $10 per barrel since the last policy meeting on Jun. 5 and latest data also showed CPI inflation at 4.38%, well within the central bank's 2-6% comfort band.

 

Bond prices moved in a narrow band in early trade. Some short-covering pulled gilt prices up early in the day as an overnight rise in crude oil prices failed to dampen demand for bonds. At the same time, some banks were taking profit as the 10-year benchmark gilt's yield fell towards 6.82?fore the fall in crude prices helped bring the yield under the crucial level, dealers said.

 

Demand was better than expected for state bonds at the auction, though Gujarat did not accept any bids for its 2035 and 2038 bond reissues. A total of 16 states raised INR 240.86 billion at the auction, lower than INR 268.50 billion that 17 states had offered to raise. The RBI set a cut-off yield of 7.49% and 7.5897% on Tamil Nadu's 10-year bond and Assam's 10-year reissue of a 7.56%, 2036 bond, respectively. The cut-off yield on Tamil Nadu's 10-year bond at the auction was seen at 7.50% while that on Assam's 10-year bond reissue was seen at 7.55%, as per an Informist Poll. Banks bid aggressively at the auction to add to their held-to-maturity books, dealers said.

 

Short-term paper at the auction also saw firm demand, which resulted in lower-than-expected cut-off yields, dealers said. Traders attributed this demand to flows from foreign currency non-resident (banks) deposits, they said. The RBI launched a concessional swap window on Jun. 8 to absorb the entire cost of hedging three- to five-year FCNR(B) deposits, which had drawn $36.72 billion of inflows until Friday.

 

"Until the FCNR(B) flows are coming, we are not worried about demand for bonds," a dealer at a primary dealership said. "Everyone wants spread assets and FRAs (forward rate agreements) against state bonds are also active from end-investors, the levels don't really matter as you are buying the bonds at a healthy spread over G-sec (gilts)."

 

Trade volumes on the RBI's Negotiated Dealing System–Order Matching platform fell to INR 436.75 billion from INR 482.50 billion Monday. There were no trades using the RBI's wholesale e-rupee pilot, which has been the case now for several months.

 

OUTLOOK

Gilt prices may open higher after US Treasury Secretary Scott Bessent told CNBC that a deal with Iran for open navigation through the Strait of Hormuz may be signed by Tuesday or Wednesday. Following the comments, Brent crude futures fell to a three-week low under $81 per barrel, which is likely to reduce fears of imported inflation and potential rate hikes in India later in the financial year 2026-27 (Apr-Mar), dealers said. Any further developments on the geopolitical front during the day will also be keenly watched. 

 

Some traders may avoid aggressive bets before the RBI governor's statement laying out the Monetary Policy Committee's decision. Traders and economists almost universally expect the rate-setting panel to retain the policy repo rate at 5.25%, with June data showing retail inflation remained well within the RBI's 2-6% target band. The policy stance is also seen being retained at "neutral". 

 

The governor's comments on growth, inflation, and liquidity management are expected to lend cues to gilt prices during the day as traders gauge whether the Monetary Policy Committee has set the stage to raise the repo rate from the current 5.25% starting October. Retail inflation is expected to remain above 5% starting August. The pressure on the RBI to tighten monetary policy is expected to mount later in the year, as the US Federal Reserve is expected to increase policy rates in 2026, with a tightening interest rate differential pressuring the rupee.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.8650	6.8152%	100.7300	6.8343%
6.48%, 2035	97.7600	6.8107%	97.6900	6.8211%
6.36%, 2031	99.8150	6.4069%	99.7500	6.4236%
6.68%, 2040	97.1925	6.9980%	97.0175	7.0183%
7.24%, 2055	97.3150	7.4672%	97.3025	7.4682%

 

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India Gilts: Off highs as Brent crude oil rises above $85/bbl

 

	1606 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.76	100.87	100.68	100.70	100.73
YTM (%)	6.8304	6.8145	6.8413	6.8385	6.8343

 

MUMBAI--1606 IST--Prices of government bonds were off the day's high after Brent crude oil price rose above $85 per barrel, dealers said. Bond prices did not react much to the results of the auction of state government securities as they were largely in line with the market view, dealers said.

 

A total of 16 states raised INR 240.86 billion at the auction, lower than INR 268.50 billion that 17 states had offered to raise. Gujarat did not accept any bids at the auction. The Reserve Bank of India set a cut-off yield of 7.49% and 7.5897% on Tamil Nadu's 10-year bond and Assam's 10-year reissue of a 7.56%, 2036 bond, respectively. The cut-off yield on Tamil Nadu's 10-year bond at the auction was seen at 7.50% while that on Assam's 10-year bond reissue was seen at 7.55%, as per an Informist Poll. Banks bid aggressively at the auction to add to their held-to-maturity books, dealers said. 

 

Short-term paper at the auction also saw firm demand, which resulted in lower-than-expected cut-off yields, dealers said. Traders attributed this demand to flows from foreign currency non-resident (banks) deposits, they said. Traders had expected demand to be firm from investors for long-term bonds and were expecting some tail in the short-term papers.

 

"Short-term cut-offs (yields) were at least 5 basis points better," a dealer at a state-owned bank said. "Overall, the auction cut-offs were in line only with what the market had expected. The FCNR flows helped demand for short-term papers, I guess."

 

Tuesday, the rise in bond prices was capped by an intraday rise in Brent crude oil price, dealers said. Brent crude futures for October delivery were near $86 per barrel at 1600 IST, after hovering near $84 per barrel during the day.

      

Most traders maintained caution as they awaited the decision of the bi-monthly meeting of the Reserve Bank of India's Monetary Policy Committee, scheduled for 1000 IST Wednesday, which kept trade volumes lower Tuesday, dealers said. The total turnover in the government securities market was INR 327.50 billion as of 1600 IST, down from INR 433.30 billion at 1630 IST Monday, data from Clearing Corp. of India showed.

 

Traders expect the rate-setting panel to keep the RBI repo rate unchanged at 5.25%, they said. However, the market will track any comments on liquidity in the banking system during RBI Governor Sanjay Malhotra's policy address. "The liquidity has been a little tight for some time due to IPO-related demand, and which is why rates were also high, so now any announcement or remark on that (liquidity) will be key to track," a dealer at a private-sector bank said. Comments on inflation, GDP, and forward guidance will also be tracked by market participants. 

 

With market participants in wait-and-watch mode ahead of the Monetary Policy Committee's decisions, the 10-year benchmark bond is expected to move between 6.80% and 6.84% for the rest of the day, dealers said.  (Diksha Tripathy)

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India Gilts: Up on short covering; volume low on caution before MPC decision

 

	1228 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.85	100.87	100.68	100.70	100.73
YTM (%)	6.8180	6.8145	6.8413	6.8385	6.8343

 

MUMBAI--1228 IST--Prices of government bonds were up as traders likely covered their short positions ahead of the Reserve Bank of India's Monetary Policy Committee's rate decision Wednesday, dealers said. Moreover, the fall in Brent crude oil prices on hope of a potential peace deal between the US and Iran kept the market's sentiments buoyed, traders said.

 

Traders likely covered short positions near the INR 100.74-INR 100.75 price on the 10-year benchmark bond, dealers said. On other hand, some traders likely sold their holdings near the INR 100.83 level, which capped the rise in bond prices, dealers said.

 

Trade volume in the secondary market remained subdued as traders refrained from building aggressive positions ahead of the RBI's MPC meeting decision Wednesday, dealers said. The total trade volume in the government securities market at 1228 IST was INR 167.65 billion, lower than INR 261.25 billion at 1230 IST Monday, data from Clearing Corp. of India Ltd. showed. Traders expect the yield on the 10-year benchmark 6.94%, 2036 bond to move between 6.80% and 6.83% throughout the day.   

 

At the RBI's policy meeting decision Wednesday, traders are largely expecting the rate-setting panel to hold the repo rate steady with a neutral stance, whereas some traders are expecting hawkish comments from the RBI governor. Some traders said the central bank's policy committee is unlikely to hike rates till December as inflation is likely to be within the expected range. The RBI's rate setting panel is also expected to gauge the impact of the war in West Asia and of the El Nio conditions on economic growth and inflation.

 

"It is a hold at this meeting and I do not think there will be a repo rate hike till December," a dealer at a private sector bank said. "Last month's CPI inflation was below what the RBI had expected that too, when the average (crude) oil price was higher...And I think RBI will also wait for the harvest data before deciding on rate hike." 

 

The Brent crude oil price has fallen more than $10 per barrel since the policy meeting on Jun. 5, data showed. At 1230 IST, Brent crude oil futures for October delivery were lower at $84.33 per barrel, down from the day's high of over $85 per barrel. Brent crude oil prices have fallen on hopes of a potential peace deal between the US and Iran as there have been no major overnight escalations in the West Asia war.

 

At the INR-268.50-billion state bond auction, traders expect demand to be firm from investors whereas traders are likely to refrain from placing aggressive bids. Traders expect the central bank to set a higher cut-off yield on the short-term state bonds, dealers said. Traders expect the result of the state bond auction to lend cues to the bond prices.  (Janwee Prajapati)

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India Gilts: Steady before MPC decision Wed; rise in crude weighs slightly

 

	0955 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.71	100.77	100.68	100.70	100.73
YTM (%)	6.8371	6.8286	6.8413	6.8385	6.8343

 

NEW DELHI--0955 IST--Government bond prices were steady on caution ahead of the Monetary Policy Committee's rate decision Wednesday even though the Reserve Bank of India's panel is expected to stand pat on the repo rate, dealers said. Trade volumes were thin ahead of the key event even as an overnight rise in crude oil prices weighed slightly on gilt prices.

 

The total trade volume in the government securities market at 0955 IST was INR 32.65 billion, sharply down from INR 83.10 billion even at 0930 IST Monday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year benchmark 6.94%, 2036 gilt is seen in the 6.82-6.86% range through the day. 

 

At the three-day meeting currently underway, traders expect MPC members to be sanguine on both inflation and growth while keeping the repo rate at 5.25% and the policy stance unchanged at 'neutral'. CPI inflation is seen within the central bank's 2-6% target range on a quarterly basis even if the RBI chooses not to change the full year forecast of 5.1% for 2026-27 (Apr-Mar), above its target of 4%. Meanwhile, State Bank of India's research team projects June quarter GDP growth at 7.0%, above the RBI's forecast given in April. Economic activity has held up and is not seen reducing the case for tighter monetary policy but recent comments from RBI Governor Sanjay Malhotra suggested that inflation was not high enough for the six-member MPC to take rate action, dealers said.

 

"Traders are a little cautious before the policy decision tomorrow (Wednesday), though yields are not seen moving higher from here. There is a lot of buying," a dealer at a state-owned bank said. "All the global cues are negative for us but the MPC is not expected to do much and FCNR (foreign currency non-resident deposit) flows are good, so there is a lot of demand in the market."

 

These deposits have risen by $28 billion between Jun. 5 and Jul. 30 and are expected to translate to demand for bonds as banks park the funds in liquid instruments before deploying it as required for credit offtake, dealers said. This demand from banks offset the rise in oil prices overnight as tensions between the US and Iran even without any fresh fighting reported. Brent crude for October delivery was near $85 per barrel, up from $83.66 per barrel, rising both overnight and since 0900 IST.

 

Some traders still expect the MPC to signal monetary policy tightening and a rate hike in October. The rate hike expectations associated with higher crude oil prices usually have a greater impact on short-term bonds but with the inflows coming in through 3-5 year FCNR deposits, these bonds are "well protected", dealers said. Meanwhile, investors buys limited losses in 6.68%, 2040 and 7.06%, 2041 gilts as they were the most liquid gilts offering yields of over 7%, they said.  (Aaryan Khanna)

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India Gilts: Seen steady on caution ahead of RBI's MPC decision Wed

 

MUMBAI – Government bond prices are seen opening steady Tuesday on caution ahead of the Reserve Bank of India's Monetary Policy Committee meeting decision Wednesday, dealers said. A slight overnight rise in Brent crude oil is likely to weigh on bond prices. However, hopes of a potential peace deal between the US and Iran are likely to keep the sentiment buoyed, dealers said. Traders will also gauge the result of the INR 268.50 billion state government bond auction, dealers said.

 

The 10-year benchmark 6.94 36bond is expected to open around 6.83% Tuesday and oscillate between 6.80% and 6.85% through the day, dealers said. Monday, the 6.94%, 2036 bond ended at INR 100.73, unchanged from Friday. The yield on the bond was 6.8343% Monday, also unchanged from Friday. Traders are likely to refrain from building aggressive positions on caution ahead of the RBI's MPC meeting decision, which will keep the yield on the 6.94%, 2036 bond in a narrow band Tuesday, dealers said. The yield on the bond is unlikely to rise above 6.85% as public sector banks are likely to pick up bonds at these attractive levels, dealers said. The majority of the activity is likely to be confined to the most liquid 10-year benchmark bond, dealers said. 

 

At the RBI's MPC meeting, traders and economists are largely expecting the policy repo rate to be held unchanged at 5.25?ter June retail inflation data came in comfortably within the RBI's 2-6% target range. The policy stance is also likely to stay neutral. Some traders do not expect any significant impact on bond prices if the policy decision is in line with the market expectations. However, pressure on the RBI to tighten later this year could build as the US Federal Reserve is expected to hike rates in 2026, and a widening interest rate gap could put the rupee under pressure. At 0730 IST, the yield on the 10-year benchmark US Treasury note was at 4.69%, slightly higher than 4.68% at 1700 IST Monday.

 

Brent crude oil futures for October delivery were at $84.50 per barrel, slightly higher than $83.66 per barrel at the end of Indian trading hours Monday. Oil prices rose slightly after a sharp drop in the prior session, as worries lingered that the West Asia supply could still be disrupted and a diplomatic end to the US-Iran war that has hit shipments looks unlikely. Prices had fallen after US President Donald Trump said Sunday he was pausing new strikes on Iran while talks continued to end the war and resolve disputes over control of the Strait of Hormuz. However, the Iranian Foreign Ministry spokesperson Esmail Baghaei pushed back on Trump's claim, saying no talks with the US were underway and no meetings had been scheduled.

 

On the domestic front, results from the state bond auction are likely to lend cues to bond prices, dealers said. The central bank said 17 states and Union territories plan to raise INR 268.50 billion through bond sales Tuesday, in line with the Jul-Sept borrowing calendar. The large supply could weigh on gilt prices, though banks want to secure higher-yielding bonds for their held-to-maturity books, dealers said.  (Janwee Prajapati)  End

 

US$1 = INR 95.37

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

 

Edited by Rajeev Pai

 

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