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Informist, Tuesday, Aug. 11, 2026

 

By Diksha Tripathy

 

MUMBAI – Prices of government bonds recovered in the latter half of the day to end off the day's low on Tuesday after Brent crude oil futures and US Treasury yields fell intraday, dealers said. However, bond prices still ended lower as Brent crude oil continued to trade above the psychologically crucial level of $85 per barrel, dealers said. Bond prices were supported due to purchases by banks, which likely used the fall in prices as an opportunity to deploy foreign currency non-resident deposit-related funds into the government securities market, dealers said. 

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 101.12, down from INR 101.23 on Monday. Its yield settled at 6.7791%, higher than 6.7643% Monday. During the day, the 10-year benchmark bond moved between 6.78% and 6.80%. Traders expect Indian bond yields to remain up, tracking crude oil prices. However, market participants see 6.82% yield on the 10-year 2036 bond as a technical level at which state-owned banks will step up bond purchases, limiting further rise in bond yields, dealers said.

 

"Yields are going to remain up for some time despite FCNR flows," a dealer at a state-owned bank said. "US yields are likely to remain up with chances of rate hikes, inflation figures in the US will also be higher and therefore our (Indian bond) market will also be impacted."

 

 

Tuesday, bond prices were down tracking an overnight rise in Brent crude oil prices amid no clarity over the US-Iran peace deal, dealers said. Brent crude oil prices briefly went above $90 per barrel, which weighed on bond prices, dealers added. Brent crude oil futures for October delivery were at $87.79 per barrel at the end of Indian gilt market hours Tuesday, up from 84.46 per barrel at 1700 IST Monday.

 

An overnight rise in US Treasury yields also weighed on bond prices, dealers said. The yield on the 10-year benchmark US Treasury note was 4.72% at 1700 IST, sharply higher than 4.67% at 1700 IST Monday. 

 

"Market is tracking crude and UST (US Treasury yields) only for now," a dealer at another state-owned bank said. "Some recovery is because of a big foreign bank and a few large private banks are active in the market today (Tuesday)...they are actively buying across tenures." 

 

Private sector banks were likely net buyers Tuesday, dealers said. State-owned banks also likely bought bonds when the yield on the 10-year 2036 bond remained neared 6.80%, dealers said. Foreign banks likely bought bonds in the 5–7 year segment, dealers added. This supported the trade volume in the market Tuesday. The total turnover in the government securities market at 1700 IST was INR 518.45 billion, as against INR 386.90 billion at 1700 IST Monday, data from the Clearing Corp. of India Ltd. showed.

 

Bond prices did not react much to the result of the INR-153-billion auction of state government securities, as it was largely along expected lines, with robust demand from long-term investors, dealers said. The Reserve Bank of India accepted single-digit bids for some long-term state bonds at the auction, since several investors were unable to get their hands on fresh stock of the long-term bond at the auction Friday, and only INR 100 billion of supply will be sold at this week's auction, dealers said.

 

Bond prices also did not react to RBI Governor Sanjay Malhotra's comments at the FIBAC 2026 conference, where he said inflation is more on less in check. The remark from the governor comes a day before the release of the July CPI inflation print, which is expected to remain above 4%, the RBI's medium-term inflation target. 

 

OUTLOOK

On Wednesday, gilt prices may take direction from developments in the war in West Asia and their impact on crude oil prices and US Treasury yields, dealers said. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.72% and 6.82% Wednesday, dealers said. Any significant movement in the rupee and swap rates will also lend cues, dealers said. 

 

Traders also await the release of CPI inflation data for July in India and in the US on Wednesday for cues on the interest rate trajectory in the two economies, dealers said. India's headline inflation is likely to remain unchanged at 4.4% in July, according to an Informist poll. CPI inflation in the US is seen at 3.4% on year in July, as per a survey compiled by The Wall Street Journal. Traders may maintain caution ahead of the inflation data, which may keep volumes low, dealers said. 

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.1200	6.7791%	101.2250	6.7643%
6.48%, 2035	98.0000	6.7752%	98.0900	6.7616%
6.36%, 2031	99.9500	6.3726%	100.0100	6.3571%
7.06%, 2041	100.6875	6.9847%	100.7600	6.9769%
7.24%, 2055	97.9800	7.4101%	98.1500	7.3955%

 

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India Gilts: Pare some losses as banks deploy FCNR(B) flows; oil price eases

 

	1600 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.05	101.12	100.94	101.10	101.23
YTM (%)	6.7889	6.7791	6.8044	6.7819	6.7643

 

MUMBAI—1600 IST--Prices of government bonds pared some losses as banks receiving foreign currency non-resident (bank) deposits deployed these inflows into gilts, dealers said. Traders estimate inflows from these deposits to have hit about $45 billion as of this week from Jun. 8. Foreign banks were likely purchasing gilts, dealers said, while domestic banks' asset and liability managers also picked up bonds, they said. Foreign portfolio investors also purchased gilts in thin volumes, dealers said. FPIs have net bought gilts for two consecutive sessions Friday and Monday, according to data from Clearing Corp. of India.  

 

Traders closely tracked the movement of Brent crude oil prices, which eased from the day's highs. Now, the focus is on US and India's CPI inflation data for July, both due Wednesday. Traders expect India's headline print at 4.4%, the same as the median of an Informist poll. Core inflation is seen at 3.9% in July, as per the poll, down from 4.1% in June. While headline inflation is the Reserve Bank of India's Monetary Policy Committee's target, RBI Governor Sanjay Malhotra's focus on core inflation at the policy outcome last week will also keep trading closely tracking the metric, they said. 

 

The five-year 6.36%, 2031 bond was off the day's low at INR 99.94, from a low of INR 99.87. The bond was sharply down earlier in the session, while it was cushioned from a sharp fall in recent sessions due to banks purchasing it to deploy inflows from FCNR(B) deposits, dealers said. The result of the INR-153-billion state bond auction was largely along expected lines, with robust demand from long-term investors. The RBI accepted single-digit bids for some long-term state bonds at the auction, since several investors were unable to get their hands on fresh stock of the long-term bond at the auction Friday, and only INR 100 billion of supply will be sold at this week's auction, dealers said. "I think long-term bonds will outperform for one or two weeks," a dealer at a primary dealership said.  

 

The total trade volume in the government securities market at 1600 IST was INR 408.70 billion, higher than INR 339.25 billion at 1630 IST Monday, according to data from Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.76–6.82% for the rest of the day. (Cassandra Carvalho) 

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India Gilts: Fall more as crude, US ylds rise on fading hope of US-Iran truce

 

	1310 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.97	101.12	100.95	101.10	101.23
YTM (%)	6.8002	6.7791	6.8030	6.7819	6.7643

 

NEW DELHI--1310 IST--Government bond prices fell further as crude oil prices and US Treasury yields rose more in European trade, adding to a sharp overnight increase as hopes of a quick US-Iran truce faded, dealers said. Purchases by state-owned banks near 6.80% yield on the 10-year benchmark 6.94%, 2036 gilt limited losses near the psychologically crucial level.

 

Brent crude futures for October delivery neared $90 per barrel, up over 2% from 0900 IST. Gilt traders have closely been tracking oil futures as a rise in the key commodity's price is seen making the case for tighter monetary policy in India due to higher imported inflation, dealers said. Meanwhile, the 10-year US Treasury yield inched up to 4.73% from 4.71%. Though conversation through intermediaries was ongoing, comments from US and Iranian leaders suggested they were far apart on a deal, dealers said. 

 

"Gilts are playing catch-up after ignoring the rise in crude yesterday (Monday), and when something like this happens, it happens quickly," a dealer at a foreign bank said. "So, all of this move right now is driven by offshore cues and there is nothing domestic playing out in the market." Despite a rise in crude prices Monday, gilt prices had ended flat.

 

Comments by Reserve Bank of India Governor Sanjay Malhotra did not have any impact on gilt prices in spite of his statement that inflation is more on less in check, dealers said. The remarks come a day before the government releases the July CPI inflation reading, which is expected to remain above 4%, the RBI's medium-term inflation target.

 

As risk appetite was squeezed due to global triggers, some traders trimmed their holding of long-term bonds first, dealers said. The view on gilts maturing in 10 years and above had improved due to a hefty liquidity surplus in the banking system. With such short-term trades unwinding, long-term bonds also fell sharply, as did the interest-rate sensitive five-year benchmark. However, traders have not changed their expectations yet that the RBI's Monetary Policy Committee will keep the policy repo rate at 5.25% at its next meeting in October, dealers said.

 

The total trade volume in the government securities market at 1310 IST was INR 251.00 billion, similar to INR 257.50 billion at 1330 IST Monday, according to data from Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.76–6.82% during the day. (Aaryan Khanna) 

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India Gilts: Sharply down as Brent crude tops $85/bbl, US yields rise

 

	1000 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.07	101.12	101.04	101.10	101.23
YTM (%)	6.7858	6.7791	6.7907	6.7819	6.7643

 

NEW DELHI--1000 IST--Government bond prices were sharply down tracking a rise in crude oil prices and US Treasury yields overnight with hopes of a peace deal between the US and Iran fading, dealers said. Traders did not bet on prices falling further from current levels on the view that state-owned banks will step up purchases at the psychologically crucial 6.80% yield on the 10-year benchmark 6.94%, 2036 gilt, even if their activity was scant in early trade.

 

Brent crude for October delivery was at $87.56 per barrel at 0945 IST, up around 4% from 1700 IST Monday. The 10-year US Treasury note settled at 4.71% Monday, also up overnight for India's gilt market. Dealers said their risk appetite, which had improved due to consistent large liquidity surpluses in the banking system, fell slightly on caution over the West Asia war continuing. Further developments during Indian market hours may lend direction to gilt prices amid lack of significant domestic cues, dealers said. 

 

"The market dynamics have changed since Brent is above $85 (per barrel)," a dealer at a primary dealership said. "It is still early in the session so let's see where the market goes. It (10-year gilt) should find support around 6.80%-odd levels." State-owned banks were keen to pick up the 6.94%, 2036 gilt in the INR 100.00-INR 100.05 band, dealers said.

 

The five-year benchmark 6.36%, 2031 bond also fell sharply in early trade, though its losses are seen limited through the day as domestic and foreign banks prefer the gilt to match their three-to-five year foreign currency non-resident (banks) deposit inflows, dealers said. Traders look ahead to Reserve Bank of India Governor Sanjay Malhotra's comments at 1040 IST at an event in Mumbai for further cues on interest rates. Several traders were also cautious in taking large bets before the release of India's CPI inflation for July on Wednesday, which is seen above the RBI's 4% target for the second straight month.

 

Demand for state bonds at the INR-153-billion auction at 1030-1130 IST is seen robust from investors as yields rise. While long-term bonds should see aggressive bidding from life insurers and pension funds, banks would look to stock up on bonds maturing in under 10 years at spreads they consider attractive, dealers said. The supply would sail through due to its small size, they said. 

 

The total trade volume in the government securities market at 1000 IST was INR 93.80 billion, lower than INR 164.25 billion at 1030 IST Monday, according to data from Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.76–6.82% during the day. (Aaryan Khanna)

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India Gilts: Seen down as crude, US yields rise; losses seen limited

 

NEW DELHI – Government bond prices are seen opening lower tracking an overnight rise in crude oil prices and US Treasury yields as tensions between the US and Iran mounted, even as military inaction continued, dealers said. Losses are seen limited due to firm demand from banks near the 6.80% yield on the 10-year benchmark 6.94%, 2036 gilt. 

 

The 2036 bond is expected to open around 6.78% Tuesday and move between 6.76% and 6.83% through the day, dealers said. Monday, the bond had ended at INR 101.23 or 6.7643% yield. After initial volatility, gilt prices traded in a thin band Monday as firm bank appetite due to a rise in foreign currency non-resident (banks) deposits offset the impact of a rise in oil prices.

 

Iranian officials said Tehran would not conduct peace talks with US President Donald Trump, vowing to keep the Strait of Hormuz closed as long as the US blockades the vital waterway. Iran also demanded compensation for US attacks since February and the unfreezing of its assets, as laid out in an interim agreement in June. In response, Trump demanded compensation from Iran. 

 

Brent crude futures for October delivery were near $88 per barrel in Asian trade Tuesday from $84.46 per barrel at the end of Indian gilt trading hours Monday. Typically, a rise in crude oil prices increases the risk of imported inflation in India, putting pressure on the Reserve Bank of India to tighten monetary policy. As the tension mounted and ahead of CPI inflation data, the 10-year US Treasury yield also rose to 4.71% from 4.67% at 1700 IST. Despite the adverse triggers, the reaction in domestic gilt prices is likely to be muted due to a lack of interest rate cues on the domestic front, dealers said. 

 

"The market is showing resilience," a dealer at a private-sector bank said. "It will hang on to these small ranges but gradually break higher (in terms of yields) once the flows dissipate and the hunger for bonds is filled." While banks with deposit growth are buying three-to-five year gilts, sellers of those bonds – especially state-owned banks – are picking up gilts of 10-year maturity or more, effectively capping yields across the curve, dealers said.

 

Traders await the release of CPI inflation data for July, both in India and in the US, on Wednesday, for clues on the interest rate trajectory in the two economies, dealers said. India's headline inflation is seen unchanged on month at 4.4% in July, according to the median of an Informist poll of 12 economists. CPI inflation in the US is seen rising 3.4% on year in July, as per a survey compiled by The Wall Street Journal.

 

Before that, Reserve Bank of India Governor Sanjay Malhotra's remarks at an event in Mumbai will be closely watched. Malhotra is scheduled to speak at 1040 IST Tuesday and some traders fear he may make remarks highlighting the RBI's focus on curbing inflation to push back at the reaction that his outlook on the economy was too "dovish" last week following the Monetary Policy Committee decision to leave rates unchanged, dealers said. The five-year benchmark 6.36%, 2031 bond will be in focus during the speech after its yield fell 9 basis points Wednesday following the governor's "dovish" remarks. However, the governor is scheduled to speak on the topic "Winning in the AI Era: The New Playbook for Indian Banks" and may not allude heavily to market-moving topics, other dealers said.  (Aaryan Khanna)

 

End

 

US$1 = INR 95.44

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

 

Edited by Avishek Dutta

 

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