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Informist, Friday, Aug. 28, 2026

 

By Janwee Prajapati

 

MUMBAI – Government bond prices ended down Friday as traders placed short bets ahead of the weekend, dealers said. An intraday rise in Brent crude oil prices above $90 per barrel also pulled down bond prices, dealers said. Traders refrained from building aggressive positions ahead of the release of India's June-quarter GDP data. Traders also awaited US Fed Chair Kevin Warsh's comments at the Jackson Hole Symposium on Friday for a policy signal.   

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.19, against INR 100.34 Thursday. The yield on the bond rose to 6.9108% from 6.8901% at the end of the previous session. This was the highest closing level for the 10-year benchmark yield since Jun. 11. Yield on the bond oscillated between 6.90% and 6.92% during the session Friday. The yield on the 6.94%, 2036 bond failed to break and rise above the 6.92% level as public sector banks likely stepped in to purchase bonds at levels seen as attractive, dealers said. These banks were net buyers on Thursday, purchasing INR 52.38 billion of bonds.    

 

Bond prices rose to the day's high after the results of the weekly INR 340 billion gilt auction were announced. The Reserve Bank of India set a cut-off price of INR 100.17 on the 6.94%, 2036 bond at the auction, compared with INR 100.15 in an Informist poll. The bid cover ratio was more than twice that of the bond at the auction. Public sector banks likely bought the bonds aggressively, dealers said. 

 

Traders likely covered around INR 80 billion worth of short positions at the auction, which also drove demand for the bond, dealers said. However, some traders who couldn't get auction supply had to cover their short positions in the secondary market, which led to a brief recovery in bond prices, dealers said. Most traders who placed short bets Thursday with a view to covering them at the auction Friday likely covered those positions in the secondary market in early trade when levels seemed attractive, which reduced the total amount of short covering at the auction, dealers said.

 

"Participation at the auction was good today, which is why we saw slightly higher cut-off prices," a dealer at a private sector bank said. "Some people covered their positions (short) early in the day. The rest, some 7 to 8 thousand (INR 70 – INR 80 billion), were covered at the auction."   

 

Bond prices fell again post-auction as traders continued to place short bets ahead of the weekend, dealers said. A proxy for tracking short sales on 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 1700 IST showed trades worth INR 114.22 billion in the 6.94%, 2036 gilt, up from INR 82.93 billion Thursday. 

 

Brent crude oil futures for November delivery rose above $90 per barrel intraday and were at $89.93 per barrel at 1700 IST, up from $87.36 per barrel at the end of Indian trading hours Thursday. The rise in crude oil prices weighed on market sentiment as a peace deal between the US and Iran was nowhere in sight, dealers said. Any further rise in Brent crude oil prices is likely to push up the yield on the 10-year benchmark 6.94%, 2036 bond to the 7% level, dealers said. However, most traders do not expect the yield on the bond to sustain at the 7% level. It is likely to ease due to robust demand from public sector banks at these levels, dealers said.

 

Traders also await the release of India's GDP data for the June quarter, which is widely expected to be near 7.7%, dealers said. Some traders expect the data to be near 8% whereas others expect it to be in line with the central bank's projection of 7%, dealers said. Bond price movements will depend on GDP data and crude oil prices, dealers said. Traders expect the 10-year benchmark bond yield to trade in a range of 6.85% to 6.93% if the Brent crude oil prices continue to trade between $85 per barrel and $90 per barrel. According to an Informist Poll, India's GDP growth is expected to moderate to a one-year low of 7.2% in the June quarter. 

 

GDP data will also influence expectations of a rate hike at the next meeting of the RBI's Monetary Policy Committee, dealers said. Apart from GDP, focus will be on inflation and the El Nino effect, dealers said. Traders are divided on expectations of a repo rate hike, with some expecting it in October and others expecting it only after the December policy. Traders expect the rate-setting panel to hike rates by 50 bps to 75 bps in the current financial year. The one-year overnight indexed swap rate of 5.92% prices in four rate hikes, dealers said. Some traders also expect the RBI's MPC to follow the US Federal Open Market Committee's policy decision, as a rise in US policy rates will affect the rate differential between the two.

 

"I think more than the GDP percentage, people will watch the contribution of different components to the GDP," a dealer at another private sector bank said. "If consumption has a higher contribution, then we will see a rise in bond yields because of inflation fears." 

 

Traders will closely watch Kevin Warsh's speech at the Jackson Hole Symposium for policy signals. Investors expect him to offer more details about the economy, recent volatility in bond markets, and the risks facing the US and global outlooks, dealers said. The yield on the 10-year benchmark US Treasury note was at 4.69% at 1700 IST, up from 4.67% at the end of Indian trading hours Thursday. US traders see only a 36% probability of a rate hike by the US Federal Reserve at its next meeting in September, similar to a week ago, according to the CME FedWatch tool.    

 

Trade volumes were low on Thursday, with nearly 65% of the total trade volume being concentrated in the 10-year benchmark. Total turnover on the RBI's Negotiated Dealing System–Order Matching system was INR 487.70 billion Friday, down from INR 487.70 billion Thursday. There were no trades using the central bank's e-rupee pilot Friday, as has been the case in recent months.

 

OUTLOOK

Gilts are not traded on Saturdays. Monday gilt prices are likely to open tracking developments in the war in West Asia and Brent crude oil prices, dealers said. They will also track movements in US Treasury yields, which are pricing in heavy supply along with inflation fears, dealers said. Traders will refrain from aggressive bets ahead of the release of India's June quarter GDP data scheduled at 1600 IST Monday, which is likely to keep trade volume low, dealers said. US Federal Reserve Chair Kevin Warsh's comments at the annual Jackson Hole Economic Policy Symposium after Indian market hours Friday will also guide bond price movements, dealers said.  

 

Traders will also track the result of the INR-300-billion-worth buyback auction. Post-market hours Friday, RBI said the government will buy back INR 300 billion worth of four gilts at a buyback auction Thursday. The bonds included in the buyback are the 7.33%, 2026 bond, the 5.74%, 2026 bond, the 8.15%, 2026 bond, and the 8.24%, 2027 bond. The bonds selected for buyback are the same as bonds selected at the previous buyback auction, which will likely keep the amount of bonds offered at the auction lower than the notified amount, dealers said.     

 

On a longer-term view, 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. Some traders expect the yield on the 10-year benchmark bond to rise above 7% in the next few months if the RBI raises repo rates, dealers said. In such a scenario, some traders expect the yield on the 10-year benchmark to halt at 7.20% in the current calendar year.

 

Given the expectation of a rate hike, some traders expect the central bank to announce measures to absorb excess liquidity from the banking system to set the stage for a smooth transmission of rate hikes, dealers said. Such measures may include incremental cash reserve ratio or bond sales through open-market operations. Traders, however, are divided on the usefulness of such measures. Some traders expect such an announcement within the next month. 

 

Traders have pared bets on a steepening of the yield curve after the RBI advanced the closure of foreign currency non-resident (bank) deposits. Traders now expect the curve to flatten. The supply of government securities for the second half of the current financial year will also play a key role in the movement of the yield curve, dealers said. Some traders expect the state government borrowing calendar for the December quarter to be similar in size to the same period last year. 

 

The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.85% and 6.93%, dealers said. Any significant movement in the rupee and swap rates will also lend cues, they said.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.1900	6.9108%	100.3350	6.8901%
6.48%, 2035	97.3000	6.8829%	97.4350	6.8621%
6.36%, 2031	99.3300	6.5346%	99.5025	6.4893%
7.06%, 2041	99.7800	7.0831%	99.9400	7.0656%
7.24%, 2055	96.6300	7.5271%	96.9600	7.4983%

 

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India Gilts: Remain down on sales ahead of weekend; caution before GDP Mon

 

	1519 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.19	100.29	100.16	100.17	100.34
YTM (%)	6.9108	6.8972	6.9151	6.9136	6.8901

 

MUMBAI--1519 IST--Governmnet bond prices were sharply down ahead of the weekend as some traders placed short bets, dealers said. However, traders refrained from building aggressive positions as they remained cautious ahead of India's GDP data release Monday, dealers said. Traders also awaited Fed Chair Kevin Warsh's comments at the Jackson Hole Symposium on Friday for a policy signal.
 

"Most of the shorts were covered at the auction itself, which is why we saw only a brief rise after the auction result," a dealer at a private sector bank said. "Some traders who could not cover their positions at the auction found cover in the secondary market. Then traders started positioning for the weekend and GDP data."

 

Bond prices recovered some losses as traders covered some short bets in the secondary market after the cut-off price at the auction on the 10-year benchmark 6.94%, 2036 bond was at the higher end of market expectations, dealers said. Public sector banks likely continued to purchase bonds at levels seen as attractive, which limited the fall in bond prices, dealers said.      

 

The Reserve Bank of India set a cut-off price of INR 100.17 on the 6.94%, 2036 bond at the auction, compared with INR 100.15 in an Informist poll. The bid cover ratio was more than twice the bond at the auction. Public sector banks likely bought the bonds aggressively, dealers said. These banks were net buyers Thursday, purchasing INR 52.38 billion of bonds. State-owned banks likely continued their buying momentum Friday at levels seen as attractive, which anchored the bond prices from falling further, dealers said.

 

Traders will also track India's GDP estimates for the June quarter, scheduled for release on Monday. According to 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, while market participants expect the print to be between 6.9% and 8.0%, dealers said. Most dealers expect it to be close to the RBI's estimate of 7%, the dealers said. 

 

Brent crude oil futures for November delivery inched higher intraday to $88.32 per barrel at 1519 IST, up from $87.36 per barrel at the end of Indian gilt market hours Thursday, as fear of an escalation in the war in West Asia looms, dealers said. Brent crude futures remained above the psychologically crucial level of $85 per barrel level, which weighed on market sentiment, dealers said.

 

The total trading volume in the government securities market at 1519 IST was INR 373.30 billion, higher than INR 312.35 billion at 1530 IST Thursday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.83–6.93% for the remainder of the day, dealers said.  (Janwee Prajapati)

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India Gilts: Remain dn; higher cut-off price at auction fuels brief recovery

 

	1348 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.19	100.29	100.17	100.17	100.34
YTM (%)	6.9104	6.8972	6.9136	6.9136	6.8901

 

MUMBAI--1348 IST--Government bond prices remained down, however, a higher-than-expected cut-off price at the auction of the 10-year benchmark 6.94%, 2036 bond fuelled a brief recovery, dealers said. The price of the 10-year 2036 bond went up briefly as traders who could not get their desired stock at the auction covered short positions in the secondary market, they said. 

 

The government had invited bids to raise INR 340 billion through the sale of the 6.94%, 2036 bond Friday. Demand at the auction was firm, dealers said. Some large state-owned banks and a private-sector bank likely bid aggressively and bought nearly INR 250 billion worth of the stock at the auction. The remaining amount was likely taken by other investors, they said.

 

Traders who had short-sold the bond ahead of the auction also covered the positions at the auction, with short bets worth around INR 70 billion being covered, dealers said. The Reserve Bank of India set a cut-off price of INR 100.17, or 6.9136%, on the 6.94%, 2036 gilt at the auction Friday. This is higher than the median of an Informist Poll of INR 100.15, or 6.9165%. 

 

"The cut-off (cut-off price on the 6.94%, 2036 bond at the weekly gilt auction) is decent... it's comparatively better," a dealer at a private sector bank said. "Participants had expected something around INR 100.15...so it is on the higher side."

 

Dealers said the 6.92% yield level on the 10-year benchmark 2036 bond is seen as a strong level due to buying by state-owned banks. However, the risk traders flagged is that despite the auction sailing through, the fresh supply could weigh on the market as long as the global situation continues to put pressure on the secondary market. Bond yields in the secondary market have risen with Brent crude prices inching higher amid the Russia-Ukraine war heating up again, dealers said.

 

The total trading volume in the government securities market at 1348 IST was INR 258.70 billion, higher than INR 192.60 billion at 1330 IST Thursday, 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 6.83–6.93% during the day, dealers said.  (Diksha Tripathy and Janwee Prajapati)

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India Gilts: Down as traders trim positions before 6.94%, 2036 bond auction

 

	0953 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.24	100.25	100.17	100.17	100.34
YTM (%)	6.9040	6.9022	6.9136	6.9136	6.8901

 

MUMBAI-–0953 IST--Government bond prices were down Friday as traders placed short bets ahead of the auction of the 6.94%, 2036 bond, dealers said. Traders also trimmed positions to make space in portfolios for the fresh INR-340-billion supply of the 10-year benchmark bond, they said.

 

The yield on the 10-year benchmark bond rose to 6.9136%, its highest level since Jun. 12, as traders likely trimmed positions. Some state-owned banks likely bought bonds when the yield on the 10-year 2036 bond remained near 6.91%, which capped losses on bond prices, they said.

 

"There is some selling before the auction (of the 6.94%, 2036 gilt) and it was expected, too," a dealer at a state-owned bank said. "Also, there is another war that the market is tracking now, which is the Russia-Ukraine one, apart from the US-Iran (war), so that fears are also there now." 

 

Market volume remained low amid rising tensions between Russia and Ukraine, dealers said. Brent crude oil futures for November delivery were at $88.21 per barrel at 0940 IST, up from $87.36 per barrel at the end of Indian gilt market hours Thursday. Oil futures inched higher as the market turned its attention from the war in West Asia to the heating-up Russia-Ukraine war. 

 

The total trading volume in the government securities market at 0940 IST was INR 55 billion, higher than INR 31.55 billion at 0940 IST Thursday, 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 6.83–6.93% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen steady on caution before gilt auction; result to lend cues

 

MUMBAI – Government bond prices are seen opening steady Friday as traders are likely to refrain from placing aggressive bets ahead of the INR 340-billion auction of the 10-year benchmark 6.94%, 2036 bond, dealers said. Some traders may trim positions before the auction to make space in their portfolios for the fresh supply, which may weigh on bond prices. Bond prices are also likely to remain under pressure due to an overnight rise in Brent crude oil prices amid concerns over the Russia-Ukraine war heating up, dealers said.

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 6.89% Friday and move between 6.83% and 6.92% during the day, dealers said. Thursday, the bond ended at INR 100.34, or a yield of 6.8901%. Trading volumes are expected to remain low in the first half of the session as traders are unlikely to take positions ahead of the auction, they said. The auction result is likely to provide cues to the market, after which dealers may take positions, they said. Traders may also trim positions in the second half of the session ahead of the weekend, which may put pressure on bond prices, they said. 

 

At the auction of the 6.94%, 2036 bond, demand is seen robust as traders who have been placing short bets in the market over the past few days are likely to cover these positions, dealers said. Demand from across categories including state-owned banks, primary dealers, and private sector banks, is likely to be strong for the most liquid paper, dealers said. The cut-off price for the paper at the auction is likely to be higher due to the firm demand, dealers said.

 

Some traders also believe the auction supply may not be enough, as short positions in the paper have increased significantly since the announcement of the auction on Monday. Therefore, prices in the secondary market may also inch higher after the auction due to demand from traders who are unable to get their desired stock at the auction, dealers said.

 

On Friday, bond prices are likely to track developments in the US-Iran peace talks, developments in Russia-Ukraine tensions, and their impact on Brent crude oil prices, dealers said. Brent crude oil futures for November delivery were at $88.17 per barrel at 0730 IST, up from $87.36 per barrel at the end of Indian gilt market hours Thursday.

 

Oil futures inched higher as the market turned its attention away from the war in West Asia to the Russia-Ukraine war, which is heating up. Oil prices fell overnight after Russia bombarded cities across Ukraine with missiles and drones in an overnight onslaught that ran into the daylight hours of Thursday, when explosions echoed around Kyiv through the morning, the Associated Press reported.

 

On the US-Iran war front, Iranian mediators have placed renewed emphasis on reopening the Strait of Hormuz, with Tehran agreeing to draw up a list of conditions to restore normal traffic after a Qatari emissary pressed the Iranians to respect freedom of navigation, reported Reuters. With the US having disengaged from talks in favour of an economic pressure campaign, Qatar's Prime Minister and Minister of Foreign Affairs Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani met senior Iranian leaders in Tehran Thursday, stressing the importance of returning to the pre-war status of open shipping through an international waterway, the Reuters report said. Any developments on the war front 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 risk appetite, 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 0730 IST, the yield on the 10-year benchmark US Treasury note was 4.68%, slightly higher than 4.67% at 1700 IST Thursday. The rise in US yields is likely to limit gains in Indian bond prices, dealers said. Traders will also track comments by US Federal Reserve Chair Kevin Warsh on the economy and long-term US bond yields at the Jackson Hole Economic Policy Symposium 2026, scheduled for later in the day, 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. Thursday, S&P Global Ratings projected India's GDP growth for 2026-27 (Apr-Mar) at 6.6% on account of the continuing energy shock and challenging agricultural conditions. The ratings agency also said it expects India's GDP growth averaging 7.0% on year over the next three years. Traders are likely to assess the comment and see its impact on the market. Expectations of rate hikes in 2026 are seen increasing after the minutes of the meeting of the Reserve Bank of India's Monetary Policy Committee were seen as more hawkish than the policy statement itself.  (Diksha Tripathy)  End

 

End

 

US$1 = INR 95.3775

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

 

Edited by Saji George Titus

 

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