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Informist, Tuesday, Aug. 18, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended off the day's lows Tuesday on purchases by some traders and domestic banks with the view that inflows through the foreign currency non-resident (banks) deposits of three- to five-year tenors will be robust this month as banks are likely to ramp up mobilisation after the Reserve Bank of India decided to close the FCNR(B) concessional swap facility early, dealers said. Bonds were lucrative to buy with the 10-year benchmark 6.94%, 2036 bond yield hitting 6.85%, its highest level since Aug. 3, dealers said.

 

Prices were sharply down earlier in the day as Brent crude oil price topped $90 per barrel overnight, with the fear growing that there is no quick end in sight to the war in West Asia. Focus on global triggers has increased after the RBI cut short its window on FCNR(B) deposits, with traders paring expectations of inflows, limiting a rise in domestic yields in September.  

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.78, down for the second consecutive session, from INR 100.92 Monday but off the day's low of INR 100.62. Its yield rose to 6.8269%, up from 6.8071% Monday. During the day, the 10-year benchmark bond moved between 6.81% and 6.85%.

 

"There will be a huge amount of inflows, because of that liquidity, market (bond prices) will be supported, so there could be buying that comes in," a dealer at a state-owned bank said. "Which is why traders are seeing that 84-85 (6.84-6.85% yield on the 10-year benchmark) is a good opportunity to buy. After that (the FCNR(B) window ends) yields will go up, that concern is also there, but for now traders and banks will step in here."

 

Traders expect inflows of at least $15 billion by Aug. 31, with some expectations of $30 billion, through FCNR(B) deposits. However, only foreign banks are seen deploying these inflows into short-term gilts, with domestic banks likely to use the flows for credit disbursements and to finance outstanding debt, dealers said. After the FCNR(B) window closes, bond yields are seen rising sharply if the war in West Asia continues, with some traders expecting the yield on the 10-year benchmark to hit 7.00%. Going into the second half of the financial year ending March, traders will also be concerned about bond supply from both the Centre and states.

 

Currently, however, demand for state bonds is robust, with some preferring these quasi-sovereign securities offering higher returns than central government bonds and less risk than corporate bonds, dealers said. Cut-off yields at the INR 202-billion state bond auction were slightly lower than expected for several bonds, though most of the states raising funds were seen as fiscally weak by traders. Appetite from long-term investors has also prevented a sharp fall in prices of long-term bonds this week, dealers said.

 

"We are constructive on the short-end for now," the head of fixed income at a mutual fund said. "Once the flows end, at that time we'll see whether long-term (bond) yields are appealing."

 

However, concern about the RBI's pattern of communication after the unexpected shortening of the FCNR(B) window, just days after the governor had said no such plan was being considered, weigh on sentiment, with traders reassessing commentary from the central bank, adding to the uncertainty. Moreover, geopolitical uncertainty has taken centre stage again, dealers said. Brent crude oil futures for delivery in October rose to $90.88 per barrel at 1700 IST from $89 per barrel at the same time Monday.

 

The total turnover in the government securities market was INR 560.15 billion, up from INR 450.65 billion Monday, data from Clearing Corp. of India Ltd. showed. As of 1700 IST, foreign portfolio investors had net sold gilts worth INR 2.92 billion Tuesday through the Fully Accessible Route, according to CCIL data, likely marking a second consecutive day of sales. This data is updated with a lag.

 

OUTLOOK

On Wednesday, gilts are seen tracking the overnight movement in US Treasury yields and crude oil prices. Traders will also track the release of the minutes of the Monetary Policy Committee's meeting earlier this month, with close attention being paid to commentary on the impact of the war in West Asia on domestic interest rates. The outcome of the meeting was interpreted as unexpectedly "slightly dovish" or less restrictive than dealers had foreseen. However, the minutes could prove otherwise, dealers said. Two rate hikes by the Monetary Policy Committee in the current financial year are still on the table, with the hikes likely in December and February, dealers said. Albeit, India Ratings in a note Tuesday said it expects the committee to keep the repo rate on hold in 2027.

 

Traders will also track the minutes of the US Federal Open Market Committee's recent meeting due Wednesday. Attention will be on the interest rate differential between India and the US as the 10-year benchmark US Treasury yield hit its highest since Jan. 2025 Tuesday.

 

Traders will be on watch for foreign inflows and their impact on systemic liquidity and whether these flows are deployed into gilts. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.72% and 6.85%, dealers said. Any significant movement in the rupee and swap rates will also lend cues, they said.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.7800	6.8269%	100.9200	6.8071%
6.48%, 2035	97.8100	6.8044%	97.9000	6.7907%
6.36%, 2031	99.6100	6.4612%	99.7100	6.4352%
7.06%, 2041	100.5525	6.9991%	100.6625	6.9872%
7.24%, 2055	98.0500	7.4043%	98.1500	7.3958%

 

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India Gilts: Off lows; cut-off ylds at state bond auction in line with view

 

	1553 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.82	100.87	100.62	100.74	100.92
YTM (%)	6.8219	6.8142	6.8503	6.8326	6.8071

 

MUMBAI--1553 IST--Government bond prices were off the day's low Tuesday as private-sector and public-sector banks continued to buy bonds near 6.82% yield on the 10-year 6.94%, 2036 gilt, dealers said. A slight fall in US Treasury yields also supported bond prices, they said. Bond prices reacted very little to the result of the auction of state government securities, as it was broadly in line with market expectations, dealers said. 

 

At the INR 202 billion auction, 12 states raised the entire notified amount. The cut-off yields were largely in line with expectations, except for Assam's 10-year 7.56%, 2036 bond, dealers said. The Reserve Bank of India set a cut-off yield of 7.5950% for the bond, higher than the Informist Poll estimate of 7.55%. Traders had expected cut-off yields to be higher due to weak demand amid rising secondary market yields, dealers said. 

 

Banks likely bid aggressively at Tuesday's auction, dealers said. The long-term bonds at the auction saw traction amid increased investor interest due to better returns than long-term gilts, dealers said. 

 

Public-sector and private-sector banks also bought bonds in the secondary market when the yield on the 10-year 2036 bond remained near 6.82%, which limited the fall in bond prices, dealers said. "Those sales from PDs (primary dealerships), which we saw yesterday, seem to have stopped. Today we saw a bit of it in the morning, but since then, it's been absorbed. Banks' buying has come in at around 85 levels (6.85% yield on 10-year 6.94%, 2036 bond)," a dealer at a state-owned bank said.

 

A slight intraday fall in US Treasury yields also supported bond prices, dealers said. The yield on the 10-year US Treasury note fell slightly to 4.73% at 1530 IST, down from the day's high level of 4.75%. However, Brent crude oil prices hovered near $91 per barrel, which continued to weigh on gilt prices, dealers said.

 

Traders will closely monitor developments in the war in West Asia and their impact on Brent crude oil prices, dealers said. The yield on the 10-year gilt is seen in a range of 6.78–6.85% during the day, dealers said. The total trading volume in the government securities market at 1550 IST was INR 505.50 billion, up from INR 419.15 billion at 1630 IST Monday, according to data from Clearing Corp. of India Ltd.  (Diksha Tripathy) 

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India Gilts: Pare some losses; high gilt ylds may dampen auction demand

 

	1300 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.73	100.78	100.62	100.74	100.92
YTM (%)	6.8336	6.8269	6.8503	6.8326	6.8071

 

MUMBAI--1300 IST--Prices of government bonds recovered some losses after state-owned banks likely bought bonds when the yield on the 10-year benchmark 6.94%, 2036 bond was near 6.45%, dealers said. However, Brent crude oil prices near the day's high levels and a sharp rise in US Treasury yields weighed on Indian bond prices, dealers said. Traders refrained from placing aggressive bets as they await the result of the auction of state government securities Tuesday, they said.

 

Demand at the auction may have been dampened with yields in the secondary market rising, dealers said. Market participants expect the cut-off yields at the auction to be higher this time around, they said. The cut-off yield on Assam's re-issue of its 7.56%, 2036 bond at auction is seen at 7.55%, according to an Informist Poll. Assam, Bihar, Delhi, Jammu and Kashmir, Kerala, Madhya Pradesh, Mizoram, Odisha, Telangana, Uttar Pradesh, Uttarakhand, and West Bengal were the 12 states which offered to raise INR 202 billion in total on Tuesday. The quantum was lower than INR 236.50 billion indicated for this week in the states' indicative calendar for Jul-Sept. Banks and insurers likely bought bonds at the auction for their investment books, dealers said. 

 

"The yields have gone up significantly in the last two days, so there may be some tail in cutoffs," a dealer at a private-sector bank said. "Also, there are all states except the good ones, so overall the cut-offs may be on the higher end."   

 

The fall in bond prices was limited as state-owned banks bought bonds Tuesday at 6.84% yield on the 10-year benchmark bond, dealers said. The yield on the bond had risen to 6.8503%, the highest since Aug. 3 as traders trimmed positions amid no positive cues in the market, they said. They expect the yields to fall further if the West Asia war escalates, they said. No extension of the ceasefire between the US and Iran pushed US yields higher overnight, which weighed on Indian bond prices, dealers said. The yield on the 10-year benchmark US Treasury note Tuesday surged to 4.75%, the highest since January 2025.     

 

Traders will closely monitor developments in the West Asia war and their impact on Brent crude oil prices as it can lend further cues to the market, dealers said. The yield on the 10-year gilt is seen in a range of 6.78–6.85% during the day, dealers said. The total trading volume in the government securities market at 1300 IST was INR 310.40 billion, up from INR 265.75 billion at 1330 IST Monday, according to data from Clearing Corp. of India Ltd.  (Diksha Tripathy)

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India Gilts: Sharply dn as oil price hits 2-wk high; rise in US ylds weighs

 

--Dealers: Gilts sharply down as Brent crude price crosses $90/bbl 

--Dealers: Gilts sharply down on overnight rise in US Treasury yields 

 

	0952 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.67	100.78	100.65	100.74	100.92
YTM (%)	6.8425	6.8269	6.8453	6.8326	6.8071

 

MUMBAI-–0952 IST--Prices of government bonds were sharply down Tuesday as Brent crude oil prices surged past a psychologically crucial level of $90 per barrel, dealers said. An overnight rise in US Treasury yields also weighed on Indian bond prices, dealers said. Traders trimmed positions amid uncertainty around the trajectory of the West Asia war as the US and Iran have not agreed to extend the 60-day ceasefire, they said.      

 

Brent crude oil futures for October delivery hit an over-two-week high of $91.64 per barrel at 0950 IST, which pulled down bond prices, dealers said. US yields also continued to rise during the day, weighing further on bond prices, dealers added. The yield on the 10-year benchmark US Treasury note was at 4.74% at 0940 IST, significantly up from 4.69% at the end of Indian gilt market hours Monday. 

 

"Crude is once again above 90 ($90 per barrel), and US yields have risen sharply overnight and that impact on market is clearly visible," a dealer at a state-owned bank said. "Once the yield (on the 10-year 6.94%, 2036 bond) hits 6.84% level, we might see PSUs' (state-owned banks) buying."

 

The yield on the 10-year 2036 bond hit 6.8453%, the highest since Aug. 3, in early trade as traders trimmed positions, dealers said. The total trading volume in the government securities market at 0950 IST was INR 104.30 billion, up from INR 50.25 billion at 0930 IST Monday, according to data from Clearing Corp. of India Ltd. 

 

Traders will closely monitor any developments in the West Asia war and its impact on Brent crude oil prices as it can lend further cues to the market, dealers said. The yield on the 10-year gilt is seen in a range of 6.78–6.85% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen opening lower as Brent hits $90/bbl, US ylds rise sharply

 

MUMBAI – Prices of government bonds are seen opening lower Tuesday on the back of a sharp overnight rise in Brent crude oil prices and US Treasury yields, dealers said. Traders had feared that a rise in Brent crude oil prices past $90 per barrel would push the yield on India's benchmark 10-year 6.94%, 2036 bond towards the 6.85% level, which is now expected to happen Tuesday, they said.

The 10-year benchmark 6.94%, 2036 bond is expected to open around 6.82% Tuesday and move between 6.78% and 6.85% through the day, dealers said. Monday, the bond ended at INR 100.92, or 6.8071% yield, as traders shed positions after the Reserve Bank of India cut short its concessional dollar-rupee swap facility for foreign currency non-resident (banks) deposits of three- to five-year tenors to Aug. 31 from Sept. 30 earlier.

Tuesday, bond prices are likely to be supported by purchases from state-owned banks if the yield on the 10-year 2036 bond rises past 6.82%, dealers said. These banks had also stepped in Monday to buy bonds in the secondary market after the yield rose past 6.80%. State-owned banks were the largest net buyers of gilts Monday, with purchases worth up to INR 74.54 billion, according to data from Clearing Corp. of India Ltd.

Most traders are likely to maintain caution during the trading session Tuesday amid uncertainty surrounding the war in the West Asia, dealers said. After market hours Monday, US President Donald Trump threatened to bomb Oman if it interfered in negotiations between the US and Iran. Brent crude oil prices rose overnight, with neither the US nor Iran providing clarification on the extension of the ceasefire. Near-month Brent crude oil futures crossed the psychologically crucial level of $90 per barrel overnight and were at $91.08 per barrel at 0730 IST, up from $89.12 per barrel at 1700 IST Monday.

Following the rise in Brent crude oil prices, US Treasury yields also rose overnight. The yield on the benchmark 10-year US Treasury note was 4.73% at 0730 IST, significantly up from 4.69% at the end of Indian gilt market hours Monday. The rise in US yields is likely to weigh on Indian bond prices Tuesday, dealers said. 

Tuesday, traders will also track the result of the auction of state government securities, dealers said. A total of 12 states will raise INR 202 billion through the sale of bonds between 1030 IST and 1130 IST. Negative sentiment in the market amid uncertainty around the US-Iran war, high Brent crude oil prices, and elevated yields may dampen demand at the auction, dealers said.

Demand is seen firm from banks, pension funds and insurers, dealers said. Also, the amount that states have offered to raise is lower than the indicated amount of INR 236.50 billion. The lower supply may help the auction sail through, dealers added. However, higher-than-expected cut-off yields at the auction may pull down bond prices, dealers said. (Diksha Tripathy) 

 

End

 

US$1 = INR 95.68

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

 

Edited by Rajeev Pai

 

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