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Informist, Thursday, Aug. 27, 2026

 

By Janwee Prajapati

 

MUMBAI – Government bond prices closed sharply lower Thursday as traders placed short bets ahead of Friday's weekly gilt auction, dealers said. Traders also trimmed holdings to make room for INR 340 billion of fresh supply of the 10-year benchmark 6.94%, 2036 bond, putting further pressure on prices. A rise in Brent crude futures prices during the session further weighed on sentiment, while secondary market volumes remained muted as traders awaited clarity on US-Iran developments, dealers said.     

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.34, against INR 100.63 Tuesday. The yield on the bond rose to 6.8901% from 6.8488% at the end of the previous session. This was the highest closing level for the 10-year benchmark yield since Jun. 12.

 

Traders expect the yield on the 10-year benchmark bond to rise to 6.90% Friday. The uptick, however, may not last as public sector banks are expected to step in with firm demand at attractive yield levels, dealers said. These banks were the top net sellers Tuesday, offloading INR 45.45 billion of gilts. Dealers had mixed views on Thursday's activity, with some saying public sector banks sold gilts in early trade, while others said they bought the 10-year benchmark when its yield was around 6.87%-6.88%, which likely limited the decline in bond prices.

 

"Today (Thursday), people (traders) have gone short (placed short bets) because of the auction... and bond prices also followed crude throughout the day," a dealer at a primary dealership said. "Trade volume was low because traders are waiting for the GDP data, and we also have an auction tomorrow (Friday)."

 

Traders place short bets on the 10-year bond as they expect to cover their positions at the auction Friday, dealers said. This is likely to drive the demand for the bond at the auction, they said.  A proxy for tracking short sales on a particular bond is the number of trades on the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 1700 IST showed trades worth INR 82.93 billion in the 6.94%, 2036 gilt. Traders are likely to place their bids near 6.89%-6.90% levels at the weekly gilt auction, dealers said. Some traders expect the yield on the 10-year benchmark bond to fall to 6.85?ter the auction result.     

 

Traders preferred to keep portfolio duration broadly around 10 years, viewing the rally in short-term bonds as largely over, dealers said. Demand for short-term papers is expected to soften after the RBI advanced the closure of the foreign currency non-resident (banks) deposit window to Aug. 31 from Sept. 30.

 

Some traders picked up the 15-year benchmark 7.06%, 2041 gilt while trimming their holdings and short-selling the erstwhile benchmark 6.68%, 2040 gilt. The newer bond's spread over the 2040 gilt of 5 basis points, hit intraday, was lucrative as the spreads are likely to reverse in the coming weeks as the 2041 bond gains liquidity, dealers said. The 6.68%, 2040 bond has outperformed the five-year and 10-year benchmark gilts over the past two months as its fresh supply has been swept by asset-liability managers at state-owned banks and one large private-sector bank, they said.

 

Market sentiment was also dampened by expectations that the RBI may announce measures to absorb surplus systemic liquidity to set the stage for a repo rate hike, dealers said. Some traders expect the central bank to announce a temporary incremental cash reserve ratio, while others anticipate measures such as bond sales through open market operations. However, traders were divided on the effectiveness of an OMO sale in the current market scenario. RBI's net liquidity absorption eased to INR 3.76 trillion on Wednesday from INR 3.81 trillion on Tuesday — the highest since Aug. 18.

 

"I think in the current market scenario, an OMO will do more harm than good," a dealer at a small finance bank said. "Even if the RBI comes up with OMO sales, people would not want to give up their bonds because it is not really in the money for them."       

 

Despite a liquidity surplus, demand for Treasury bills was limited at the INR-240-billion T-bill auction Thursday. The 91-day T-bill was likely bought by the mutual funds, while the 182-day and 364-day T-bills were picked up by primary dealers at the auction, dealers said. The cut-off yields set on the T-bills were higher than what participants had expected, which also weighed on market sentiment, dealers said. The Reserve Bank of India set cut-off yields of 5.26%, 5.62% and 5.80% for the 91-day, 182-day and 364-day T-bills, respectively, compared with 5.26%, 5.56% and 5.74% in an Informist poll.  

 

Trade volumes were low on Thursday, with over 56% of the total trade volume being concentrated in the 10-year benchmark bond. Total turnover on the RBI's Negotiated Dealing System–Order Matching system was INR 471.00 billion Thursday, down from INR 578.25 billion Tuesday. There were no trades using the central bank's e-rupee pilot Thursday, as has been the case in recent months.

 

OUTLOOK

Friday, gilts are likely to open tracking developments in the war in West Asia and Brent crude oil prices, dealers said. Later in the day, bond prices will take cues from the result of the weekly gilt auction, where the government will sell INR 340 billion worth of 6.94%, 2036 bond. Traders will also track the Jackson Hole Economic Policy Symposium to gauge the comments of Fed Chair Kevin Warsh on the economy and long-term US bond yields, dealers said. Gilts will also track movement of US Treasury yields, which are pricing in heavy supply along with inflation fears, dealers said.

 

Traders will also track India's GDP estimates for the June quarter, scheduled for release on Monday. According to the median of an Informist Poll of 14 economists, India's GDP growth is expected to moderate to a one-year low of 7.2% in the June quarter. Expectations of rate hikes in 2026 are seen increasing after the RBI's rate-setting panel focused on the possibility of such hikes at its meeting earlier this month. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.85% and 6.90%, dealers said. Any significant movement in the rupee and swap rates will also lend cues, they said.

 

	THURSDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.3350	6.8901%	100.6250	6.8488%
6.48%, 2035	97.4350	6.8621%	97.6900	6.8233%
6.36%, 2031	99.5025	6.4893%	99.6300	6.4559%
7.06%, 2041	99.9400	7.0656%	100.1275	7.0451%
7.24%, 2055	96.9600	7.4983%	97.2175	7.4759%

 

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India Gilts: Down on shorts bets before Fri auction, high T-bill cut-offs weigh

 

	1423 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.43	100.66	100.42	100.61	100.63
YTM (%)	6.8765	6.8438	6.8787	6.8505	6.8488

 

MUMBAI--1423 IST--Government bond prices fell as traders continued to make space in their portfolios ahead of the weekly gilt auction Friday, dealers said. Moreover, the higher-than-expected cut-off yield on Treasury bills also weighed on the market sentiment, dealers said. Traders maintained caution ahead of any clarity in the US-Iran war, which kept the trade volume low, they said. Brent crude oil futures inched higher intraday but remained lower than the psychologically crucial level of $90 per barrel which limited losses, dealers said.

 

Traders made space in their portfolio ahead of the fresh supply of 6.94%, 2036 bond at its auction Friday, where the government will sell INR 340 billion of this bond, dealers said. Some traders placed short bets as they expect to cover their short positions at the auction at a lower price, dealers said. This will likely lead to robust demand for the bond at the auction, dealers said. Some traders expect the bidding for the bond to be around 6.89-6.90% yield at the auction Friday. However, the yield on the 10-year bond is unlikely to rise above 6.90% as public sector banks will step up their purchases at these levels, dealers said.    

 

The 10-year benchmark was the most traded, with over 65% of total volume recorded on this bond. The total trading volume in the government securities market at 1423 IST was INR 245.25 billion, down from INR 350.15 billion at 1430 IST Tuesday, according to data from the Clearing Corp. of India Ltd. Trade volume is likely to remain subdued Thursday if there is no major trigger, dealers said. Traders will also monitor developments in the war and its impact on Brent crude oil prices as it can lend direction to the market, dealers said. The yield on the 10-year gilt is seen in a range of 6.85–6.89% during the day, dealers said. While some traders expect the yield on the 10-year bond to rise to 6.90% Thursday, others expect the closing yield to be near 6.88%. 

 

"It is auction pressure that people (traders) are placing shorts (short bets)...T-bill (cut-off yield) is also higher," a dealer at a small finance bank said. "Prices are falling, but it is not free-fall, so I do not think we will see 6.90% today."    

 

The cut-off yields set on the Treasury bills were higher than what participants had expected, which also weighed on market sentiment, dealers said. The Reserve Bank of India set a cut-off yield of 5.26%, 5.62% and 5.80% against 5.26%, 5.57%, and 5.74% on 91-day T-bill, 182-day T-bill and 364-day T-bill respectively, according to the median of an Informist poll.  (Janwee Prajapati)

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India Gilts: Near day's low on short-selling; T-bill cut-off ylds seen higher

 

	1220 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.49	100.66	100.48	100.61	100.63
YTM (%)	6.8687	6.8438	6.8701	6.8505	6.8488

 

MUMBAI--1220 IST--Government bond prices fell further to the day's low Thursday as traders continued to place short bets in the secondary market ahead of the INR-340-billion fresh supply of the 6.94%, 2036 bond at an auction Friday, dealers said. Total trade volume in the market remained low as traders maintained caution as they await more clarity on the US-Iran peace talks, dealers said. 

 

The government will sell INR 340 billion of the benchmark 2036 bond at the auction Friday, where traders expect the demand to be robust as they are likely to cover these short bets at the auction, they said. Traders short-sold the 6.94%, 2036 gilt Thursday, which weighed on its price, they said. A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 1230 IST showed trades worth INR 82.93 billion in the 6.94%, 2036 gilt. However, the data comes with a lag. 

 

"It is nothing but the auction pressure that's weighing on the market because all other factors you see are in favour of yields remaining lower," a dealer at a state-owned bank said. "Crude is below 90 ($90 per barrel), UST (US Treasury yields) down, some chances of peace talks as well...so as such nothing negative for now." 

        

Traders also await the results of the auction of Treasury bills which is likely to lend cues to the market, they said. The government invited bids to raise INR 240 billion through sales of 91-day, 182-day, and 364-day T-bills. The Reserve Bank of India is likely to set a cut-off of INR 98.71, or 5.26% yield, on the 91-day T-bill at the auction Thursday, according to an Informist Poll. The cut-off on the 182-day T-bill is seen at INR 97.30, or 5.56% yield, and that on the 364-day T-bill is seen at INR 94.59, or 5.74% yield, as per the poll. At the previous auction, the RBI had set a cut-off yield of 5.26% on the 91-day T-bill, 5.57% on the 182-day T-bill, and 5.74% on the 364-day T-bill at the previous auction.  

 

Some traders expect the cut-off yields to be higher on T-bills amid redemption pressures on mutual funds due to the month-end period, they said. Mutual funds and banks likely placed bids at the auction for the short-term securities but were not that aggressive in their approach, dealers said.

 

"Auction will sail through, but this time we may see some tail in cut-offs (yields)," a dealer at a mutual fund said. "Mutual funds were not that aggressive because there is redemption pressure."  

 

The total trading volume in the government securities market at 1220 IST was INR 136.15 billion, largely similar to INR 135.00 billion at 1230 IST Tuesday, according to data from the Clearing Corp. of India Ltd. Traders will closely monitor developments in the war and its impact on Brent crude oil prices, as it can lend direction to the market, dealers said. The yield on the 10-year gilt is seen in a range of 6.83–6.88% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Down as traders place short bets before gilt auction Friday

 

	0940 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.52	100.66	100.51	100.61	100.63
YTM (%)	6.8644	6.8438	6.8651	6.8505	6.8488

 

MUMBAI-–0940 IST--Government bond prices were down Thursday as traders placed short bets ahead of the fresh supply of the 6.94%, 2036 bond at the weekly auction Friday. However, bond prices were supported due to a fall in Brent crude oil prices and US Treasury yields, dealers said. 

 

Contrary to market expectations, the 10-year 6.94%, 2036 gilt opened lower than Tuesday's closing level as traders short-sold bonds. The 10-year bond is expected to remain under pressure throughout the session Thursday as short sales are likely to continue during the day, dealers said. A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 0930 IST showed trades worth INR 82.93 billion in the 6.94%, 2036 gilt. 

 

"We had expected a higher opening today (Thursday), because there are positive cues in the market," a dealer at a state-owned bank said. "It's Friday's auction (of 6.94%, 2036 gilt) pressure that's dragging the (bond) prices down. People are shorting (placing short positions)."

 

Bond prices were supported by a fall in Brent crude oil prices, dealers said. Near-month Brent crude oil futures were at $87.48 per barrel at 0935 IST, down from $89.67 per barrel at the end of Indian gilt market hours Tuesday. Financial markets administered by the Reserve Bank of India were shut Wednesday for Id-e-Milad. A fall in US Treasury yields also helped bond prices, dealers said. The yield on the 10-year US Treasury note was 4.66% at 0935 IST, slightly lower than 4.67% at 1700 IST Tuesday. 

 

Market volume remained low as traders await clarity on US-Iran peace talks, they said. Qatar Prime Minister and Minister of Foreign Affairs Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani is scheduled to arrive in Tehran Thursday, where he will meet Iranian officials, according to media reports. The market will watch the outcome closely, as a positive response from Iran to a peace deal with the US could provide a favourable cue and improve risk appetite amid uncertainty over when the war in West Asia will end, dealers said.   

 

The total trading volume in the government securities market at 0940 IST was INR 31.55 billion, lower than INR 38.60 billion at 0945 IST Tuesday, according to data from the Clearing Corp. of India Ltd. Traders will closely monitor developments in the war and its impact on Brent crude oil prices, as it can lend direction to the market, dealers said. The yield on the 10-year gilt is seen in a range of 6.83–6.88% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen up as oil remains below $90/bbl; US-Iran peace talks eyed

 

MUMBAI – Government bond prices are seen opening higher Thursday supported by a fall in the price of Brent crude oil and US Treasury yields, dealers said. However, some traders may place short bets ahead of the fresh supply of the 10-year benchmark 6.94%, 2036 bond at the weekly gilt auction Friday, which is likely to exert pressure on bond prices, dealers said.

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 6.83% Thursday and move between 6.80% and 6.86% during the day, dealers said. Tuesday, the bond ended at INR 100.63, or a yield of 6.8488%. Financial markets administered by the Reserve Bank of India were shut Wednesday for Id-e-Milad. Traders expect volumes to remain healthy Thursday as risk appetite may have improved following the fall in Brent crude oil prices below the psychological level of $90 per barrel for the first time in almost a week, dealers said. Traders are likely to buy bonds when the yield on the benchmark 6.94%, 2036 bond is around 6.85-6.86% and this is expected to support bond prices.

 

Thursday, bond prices are likely to track developments in the US-Iran peace talks and their impact on Brent crude oil prices, dealers said. Near-month Brent crude oil futures were at $87.24 per barrel at 0730 IST, down from $89.67 per barrel at the end of Indian gilt market hours Tuesday. Brent crude prices had fallen further Wednesday when Indian money markets were shut, but rose slightly after US President Donald Trump said economic and military action "are effective" and that he was "not in a hurry" to negotiate with Tehran to end the US-Israel war on Iran, Al Jazeera reported. However, oil prices are still below $90 per barrel, which market participants see as a positive cue. 

 

Qatar's Prime Minister and Minister of Foreign Affairs Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani is scheduled to arrive in Tehran Thursday, where he will meet Iranian officials, as per media reports. The outcome of the meeting will be closely watched, as a positive response from Iran on a peace deal with the US could provide a positive cue to the market and improve the risk appetite amid uncertainty over the end of the war in West Asia, dealers said.

 

On the global front, Indian bond prices will also track movements in US Treasury yields, which are factoring in heavy supply and inflation concerns, dealers said. At 0745 IST, the yield on the 10-year benchmark US Treasury note was 4.66%, slightly lower than 4.67% at 1700 IST Tuesday. The fall in US yields is likely to support Indian bond prices, dealers said. Traders will also track the Jackson Hole Economic Policy Symposium 2026, scheduled for Thursday and Friday, for comments by US Federal Reserve Chair Kevin Warsh on the economy and long-term US bond yields, dealers said.

 

On the domestic front, the yield on the 10-year benchmark bond is seen rising more than those on other bonds Thursday, particularly due to the INR 340 billion fresh supply of the bond at the auction Friday, dealers said. Traders are likely to short-sell gilts Thursday and make purchases at the auction Friday at cheaper levels, they said.

 

Bond prices may also find support from banks deploying foreign inflows into gilts, dealers said. Foreign banks are expected to buy some bonds this week, particularly short-term bonds. Once the Reserve Bank of India's swap window for Foreign Currency Non-resident (Banks) deposits closes, the bond yield curve is seen flattening as the focus shifts to the likelihood of rate hikes in the near term, dealers said.

 

Traders will also track India's GDP data for the June quarter, scheduled for release Monday. India's economic growth is expected to moderate to a one-year low of 7.2% in the June quarter, according to the median of an Informist Poll of 14 economists. Expectations of rate hikes in 2026 are seen increasing after the minutes of the meeting of the RBI's Monetary Policy Committee were seen as more hawkish than the policy statement itself.

 

Traders will also track the results of the auction of Treasury bills later in the day. The RBI will auction INR 90 billion of 91-day T-bills, INR 80 billion of 182-day T-bills, and INR 70 billion of 364-day T-bills between 1030 IST and 1130 IST. The cut-off yields on these are likely to be similar to those set at the auction last week as liquidity in the banking system remains comfortable, dealers said. The RBI had set a cut-off yield of 5.26% on the 91-day T-bill, 5.57% on the 182-day T-bill, and 5.74% on the 364-day T-bill at the previous auction.  (Diksha Tripathy)  End

 

US$1 = INR 95.50

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

 

With inputs from Aaryan Khanna

Edited by Saji George Titus

 

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