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Informist, Wednesday, Sept. 23, 2026

 

By Janwee Prajapati

 

MUMBAI – Government bond prices closed sharply lower Wednesday as traders trimmed holdings to make room for fresh supply of the 10-year benchmark bond at Friday's weekly auction, dealers said. While Brent crude remained below the psychologically key $100 per barrel mark for most of the day, a slight intraday uptick weighed on bond prices, dealers said. The 10-year benchmark underperformed most other segments as traders placed short bets in the paper ahead of Friday's auction, dealers said.

 

"Today (Wednesday) there was nothing else. It's just auction pressure," a dealer at a private sector bank said. "We would have been lower than 7% (yield on the 6.94%, 2036 bond) today (Wednesday) if there was no auction, because recent developments in West Asia are suggesting we can see some deal soon." 

 

The 10-year benchmark 6.94%, 2036 gilt ended at INR 99.27, down from INR 99.50 Tuesday. The bond's yield rose to 7.0447% from 7.0106% at the end of the previous session. The yield on the 10-year benchmark bond fell to the day's low of 6.9997% but failed to sustain a drop below the crucial 7% level as traders booked profits at attractive levels, dealers said. 

 

Some traders expect the bond yield to ease to 6.95% on hopes of a potential peace deal between the US and Iran, dealers said. However, the decline is unlikely to sustain, and yields are likely to rise again in the run-up to the MPC meeting, as traders expect the rate-setting panel to raise interest rates, dealers added.

 

Brent crude oil futures for November delivery were at $100.19 per barrel, up from the day's low of 97.91 per barrel and $98.37 per barrel at the end of Indian trading hours Tuesday.    

 

Oil prices fell intraday on easing supply concerns in West Asia and signs of progress toward ending the US-Iran war. Oil prices retreated after Iran proposed reopening the Strait of Hormuz within a week, while Saudi Arabia said it expected to restore its East-West pipeline within days, according to media reports. The key waterway was disabled amid the war. The yield on the 10-year US Treasury note rose to 4.98%, up from 4.93% at the end of Indian trading hours Tuesday, weighing on domestic bond prices.

 

The 10-year benchmark gilt prices were sharply down as traders placed short bets on the 6.94%, 2036 bond, hoping to cover their positions at the auction, 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. Data at 1700 IST showed trades worth INR 186.50 billion in the 6.94%, 2036 gilt, up from INR 169.19 billion Tuesday and the highest since its issuance. Some traders expect the 10-year benchmark bond yield to rise to 7.07?ter the auction result, likely triggering demand at levels seen as attractive. Traders expect the demand at the auction to be firm. The government will sell INR 340 billion of the 6.94%, 2036 bond at Friday's auction.

 

The RBI auctioned T-bills worth INR 240 billion on Wednesday, with banks likely participating actively to add these short-term securities for asset-liability management, dealers said. Mutual funds, usually active at T-bill auctions, did not bid aggressively this time due to month-end redemption pressures, dealers said. The cut-off yield on the 91-day T-bill was set at 5.3900%, the highest since Jun. 3. The cut-off on the 182-day was set at 5.8196%, the highest since May 14, 2025, while that on the 364-day T-bill was set at 6.0895%, the highest since Apr. 2, 2025. The cut-off yields were higher than estimated in an Informist poll, which had pegged cut-off yields for 91-day, 182-day, and 364-day T-bills at 5.38%, 5.78%, and 6.05%, respectively. 

 

Most traders attributed the higher cut-off yields at the auction Wednesday to a falling liquidity surplus. The RBI's net liquidity absorbed – a proxy for the banking system liquidity surplus – fell to INR 4.44 trillion Tuesday from INR 4.92 trillion Monday. The cut-off yields on T-bills have been moving higher from the past few auctions amid increased bets of a hike in the RBI repo rate at the October Monetary Policy Committee meeting, dealers said. 

Traders also refrained from placing aggressive bets as they remained cautious of the state and government borrowing calendars, which are likely to be released at the end of the month, dealers said. Some traders expect the proportion of the different bond tenures to be similar to the first half of the borrowing calendar, while others expect the supply to be comparatively higher in the short-term bond. Traders likely preferred short-term bonds as they look to deploy their foreign currency non-resident deposits, dealers said. 

 

"Everybody is waiting for the (central government) borrowing calendar for the second half," a dealer at another private sector bank said. "I think supply could be higher in T-bills and 5–7 year papers. I don't think there will be any upward revision in the borrowing quantum."

 

Total turnover in the government securities market was INR 396.70 billion Wednesday, down sharply from INR 602.95 billion on Tuesday, data from Clearing Corp. of India showed.

 

OUTLOOK

On Thursday, gilt prices will track movements in US yields and crude oil prices at the open. Later in the day, bond prices are likely to fall as traders trim holdings to make room for fresh supply of the 10-year 6.94%, 2036 bond at Friday's weekly auction. In addition, Brent crude oil prices rose by over $10 per barrel after Indian market hours and, if sustained, are likely to weigh on bond prices. The 10-year benchmark bond yield is unlikely to rise above 7.10% as a 25 bps rate hike is already priced in, some dealers said, while others expect it to rise to 7.14%, a historically crucial level.

 

Many traders expect the MPC to hike the repo rate by 25 basis points and announce more measures to drain durable liquidity, including more OMO sales of INR 250 billion or INR 500 billion. Some traders find current yields attractive for buying bonds, since the 10-year bond is unlikely to sustain a rise above its May high of 7.14%, they said. 

 

Traders also await the release of the borrowing calendar for state and central government bond issuances for the next quarter and the second half of the current financial year, respectively. The proportion of different bond tenures in the calendar will provide cues on the shape of the gilt yield curve, dealers said. The RBI has held several meetings with market participants this month to discuss the Centre's borrowing calendar, they said. Some expect more supply of seven-year bonds, while others expect more 15-year bond supply, and still others expect more supply of three- to five-year bonds. 

 

Any significant movement in the rupee and swap rates will also lend cues, dealers said. The yield on the 10-year benchmark 6.94%, 2036 bond is expected to move between 6.95% and 7.14%, dealers said.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	99.2650	7.0447%	99.5000	7.0106%
6.48%, 2035	96.4000	7.0245%	96.5875	6.9953%
6.36%, 2031	98.6000	6.7310%	98.7475	6.6912%
7.06%, 2041	98.7600	7.1958%	98.9700	7.1724%
7.24%, 2055	96.1000	7.5735%	96.3000	7.5558%

 

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India Gilts: Fall more; T-bill cut-off ylds rise as liquidity surplus falls

 

--182-day T-bill cut-off yld at auction 5.8196%, highest since May 14, 2025 

--91-day T-bill cut-off yield at auction 5.3900%, highest since Jun 3 

 

	1500 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.34	99.58	99.32	99.50	99.50
YTM (%)	7.0345	6.9997	7.0367	7.0106	7.0106

 

MUMBAI--1500 IST--Government bond prices remained down during the day as traders continued to place short bets near the 7.00% yield on the 10-year benchmark 6.94%, 2036 bond ahead of its auction Friday, dealers said. Bond prices did not react much to the result of the auction of Treasury bills Wednesday as traders had expected higher cut-off yields amid a fall in liquidity surplus, dealers said.

 

The Reserve Bank of India had invited bids to raise INR 240 billion through the sale of 91-day, 182-day, and 364-day T-bills Wednesday. Banks likely participated actively in the auction to add these short-term securities for asset-liability management, they said. Mutual funds, which are usually active at T-bill auctions, did not bid aggressively this time around due to month-end redemption pressures, dealers said. The cut-off yield on the 91-day T-bill was set at 5.3900%, the highest since Jun. 3. The cut-off on the 182-day was set at 5.8196%, the highest since May 14, 2025, while that on the 364-day T-bill was set at 6.0895%, highest since Apr 2, 2025. The cut-off yields were higher than estimated in an Informist poll, which had pegged cut-off yields for 91-day, 182-day, and 364-day T-bills at 5.38%, 5.78%, and 6.05%, respectively. 

 

Most traders attributed the higher cut-off yields at the auction Wednesday to falling liquidity surplus. The RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--fell to INR 4.44 trillion Tuesday from INR 4.92 trillion Monday. The liquidity surplus has come down by nearly 40% from its record high of INR 11.16 trillion earlier this month. The surplus has fallen on all sessions since Sept. 13, barring a marginal rise Sunday. The cut-off yields on T-bills have been moving higher from the past few auctions amid increased bets of a hike in the RBI repo rate at the October Monetary Policy Committee meeting, dealers said. Market participants are pricing in a 25 basis point rate hike in October, they said.

 

Bond prices fell more during the day as traders short-sold the 10-year benchmark 2036 gilt ahead of its auction Friday. Traders will look to cover these positions at the auction Friday, they said. The government will sell INR 340 billion of the 6.94%, 2036 gilt Friday between 1030 IST and 1130 IST. The bond is expected to remain under pressure till its auction, dealers said.         

 

An intraday rise in Brent crude oil prices also weighed on bond prices Wednesday, dealers said. Brent crude oil prices for November delivery were at $99.29 per barrel, slightly up from $98.72 per barrel at 0900 IST. Traders will closely track any developments in the war in West Asia and its impact on Brent crude oil prices, they said.    

 

The total turnover in the government securities market at 1500 IST was INR 284.40 billion, significantly lower than INR 430.15 billion at 1530 IST Tuesday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.98-7.05% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Most down on short sales as 10-yr yld fails to fall below 7%

 

	1230 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.42	99.58	99.41	99.50	99.50
YTM (%)	7.0222	6.9997	7.0244	7.0106	7.0106

 

MUMBAI--1230 IST--Prices of most government bonds were down, as traders placed short bets near the 7.00% yield level on the 10-year benchmark 6.94%, 2036 bond, dealers said. Traders also took profit at this level, they said. Fresh incoming supply of INR 340 billion of the 10-year benchmark Friday also weighed, dealers said. The 10-year yield tested the key 7.00% level earlier in the session to hit 6.9997%, which is the lowest since Sept. 10, but did not sustain the fall. Traders do not expect such a fall below 7.00% at least until the Reserve Bank of India's Monetary Policy Committee meeting next month, given crude oil prices remain at current levels, they said.

 

"We're not expecting yields to move downwards from here, max (maximum) it (10-year yield) will go to 96 (6.96%), so one can short (sell) at this level," a trader at a primary dealership 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 186.50 billion in the 6.94%, 2036 gilt, up from INR 169.19 billion Tuesday and the highest in the bond since its issuance. Intraday, a slight rise in Brent crude oil prices also put pressure on bond prices, dealers said. Near-month Brent crude oil futures rose to $99.49 per barrel from $98.72 per barrel at 0900 IST and from a day's low of $97.97 per barrel. 

 

Mutual funds likely refrained from aggressive bids at the INR-240-billion Treasury bill auction due to redemptions nearing the end of the month and quarter, dealers said. "MFs (mutual funds) have been on the selling side only, I don't think they're going to go for much (of T-bills)," a dealer at a mutual fund said. Systemic liquidity surplus has fallen all sessions since Sept. 13, barring a marginal rise Sunday, which is likely to reflect in T-bill cut-off yields, along with expectations of a repo rate hike, dealers said.  

 

Traders will also assess the outcome of meetings the central bank is conducting this week on market participants' feedback ahead of the MPC meeting next month, dealers said. The total turnover in the government securities market at 1230 IST was INR 149.70 billion, similar to INR 150.75 billion at the same time Tuesday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.98-7.05% during the day, dealers said.  (Cassandra Carvalho)

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India Gilts: Tad up on hope of Hormuz re-opening; Brent below $100/bbl helps

 

	0930 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.55	99.58	99.50	99.50	99.50
YTM (%)	7.0034	6.9997	7.0106	7.0106	7.0106

 

MUMBAI--0930 IST--Government bond prices were slightly up on expectation of the re-opening of the Strait of Hormuz and end to the US-Iran war, dealers said. The talks between Iran and the US, which were held Tuesday as per media reports, kept Brent crude oil prices lower than the psychologically crucial level of $100 per barrel, which supported bond prices Wednesday, dealers said. 

 

"The market sentiment is bullish today (Wednesday) with the likelihood of an end to the US-Iran war," a dealer at a state-owned bank said. "Apart from PSUs, even traders might be taking fresh positions today. (The) 10-year (6.94%, 2036 bond) may even break the 7% level." 

 

Traders, especially state-owned banks, likely bought bonds near 7.00% yield on 6.94%, 2036 bond Wednesday, they said. Traders expect bond prices to rise further during the day in case of a positive development in the war in West Asia. Bond prices were also supported with Brent crude oil futures trading below $100 per barrel. Brent crude oil futures for November delivery were at $98.28 per barrel at 0930 IST, similar to $98.50 per barrel at the end of Indian gilt market hours Tuesday.              

 

The total turnover in the government securities market at 0930 IST was INR 50.90 billion, up from INR 26.65 billion at 0930 IST Tuesday, data from Clearing Corp. of India Ltd. showed. Traders will closely track developments in the war in West Asia which could impact crude oil prices and, in turn, bond prices. The yield on the 10-year gilt is seen in a range of 6.98-7.05% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen steady; US-Iran peace talks, Brent below $100/bbl may help

 

MUMBAI – Government bond prices are seen steady at open on lack of major triggers as Brent crude oil futures and US Treasury yields were at levels similar to that of Tuesday, dealers said. However, the likelihood of an end to the US-Iran war may keep Brent crude oil prices below $100 per barrel and fuel optimism in the market Wednesday, dealers said.

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 7.01% Wednesday and move between 6.98% and 7.05% during the day, dealers said. Tuesday, it ended at INR 99.50, or 7.0106% yield. The trading volume is likely to remain firm throughout the day if Brent stays below the psychologically crucial levels of $100 per barrel, dealers said. 

 

The Indian government securities market is likely to see the optimism amid a fall in Brent crude oil prices, dealers said. Brent crude oil prices for November delivery fell further overnight and were at $98.67 per barrel at 0830 IST. Oil prices fell on easing supply concerns in West Asia and signs of progress toward ending the US-Iran war. Oil prices retreated after Iran proposed reopening the Strait of Hormuz within a week, while Saudi Arabia said it expected to restore its East-West pipeline within days, as per several media reports. The key waterway route had been disabled amid the war. Traders will closely track any developments in the war as it could impact Brent crude oil prices and thus, Indian bond prices. 

 

US President Donald Trump said at the United Nations General Assembly that the US officials ‌had a "very good" three-hour meeting with Iranian leaders, Al-Jazeera reported. The meeting with Iran was led by US envoys Steve Witkoff and Jared Kushner, the news report said, citing Trump.

 

On Wednesday, the government will also sell INR 240 billion worth of Treasury bills comprising 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. Traders expect the cut-off yield on these papers to rise at the auction following the RBI's measures to absorb liquidity from the banking sytem and expectations of a rate hike by the Reserve Bank of India's Monetary Policy Committee, dealers said. 

 

Traders also await the release of the borrowing calendar for state and central government bond issuances for the next quarter and the second half of the current financial year, respectively. The proportion of different bond tenures in the calendar will provide cues on the shape of the gilt yield curve, dealers said. Most traders expect little change in the Centre's plan compared with those in Apr-Sept, though bankers have put forth several preferences to the central bank. The RBI has held several meetings with market participants this month to discuss the Centre's borrowing calendar, they said. Some expect more supply of seven-year bonds, while others expect more 15-year bond supply, and still others expect more supply of three- to five-year bonds.  (Diksha Tripathy)

 

End

 

US$1 = INR 95.74

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

 

Edited by Saji George Titus

 

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