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Informist, Tuesday, Oct. 6, 2026

 

By Diksha Tripathy

 

MUMBAI – Government bond prices ended higher Tuesday as Brent crude oil prices fell below the psychologically crucial level of $100 per barrel, dealers said. A fall in US Treasury yields during the day also supported Indian bond prices Tuesday, they said. Most traders maintained caution ahead of the key rate decision by the Reserve Bank of India's Monetary Policy Committee Wednesday. 

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 98.26, or 7.1928% yield, compared with its previous close of INR 98.14, or 7.2108% Monday. The bond moved between 7.19% and 7.23% Tuesday. The total turnover in the government securities market remained subdued as traders refrained from taking aggressive bets ahead of the MPC meeting outcome. At 1700 IST, the trade volume was INR 376.15 billion, compared to INR 325.70 billion at the end of Indian gilt market hours Monday, data from the Clearing Corp. of India showed. There were no trades using the RBI's wholesale e-rupee pilot, as has been the case for months. 

 

Bond prices reacted to a fall in Brent crude oil prices during the day Tuesday, dealers said. Brent crude oil futures for December delivery fell nearly 3% intraday to touch a low of $97.83 per barrel. Despite a fall in prices, caution prevailed in the market as traders did not want to build fresh positions amid expectations of a rate hike by the rate-setting panel Wednesday. 

 

"Oil prices have come down below 100 ($100 per barrel) and that's why there is some optimism and prices reacted," a dealer at a private sector bank said. "The market is in a wait-and-watch mode until the MPC decision."

 

Traders widely expect the MPC to raise the repo rate by 25 basis points to 5.50% from 5.25% currently. Traders also expect the RBI to announce measures to manage the high liquidity surplus in the October policy, they said. Some traders also expect the central bank to announce measures to bring down bond yields after two states rejected all bids for their bonds at the state bond auction Tuesday. 

 

A total of 12 states raised INR 236 billion at the auction Tuesday, lower than the INR 251 billion of notified amount that a total of 13 states were scheduled to raise. The cut-off yields were lower than market expectations, which helped bond prices, dealers said. However, Delhi did not accept any bids for the 2033 and the 2041 bond re-issues, and Punjab rejected all bids for its 2031 bond re-issue at the auction, the result showed. Some traders see the rejection of all bids at the auction as a signal that states are unwilling to accept higher yields. 

 

"(The) RBI may come up with some measures because these elevated yields are hampering state governments' borrowing plan, and it will also affect the development of these states," a dealer at a state-owned bank said. "To mitigate these challenges, we could see some measures (at the MPC meeting)." 

 

Tuesday, bond prices also found some support from a fall in US Treasury yields, dealers said. The yield on the 10-year benchmark US Treasury note fell to 5.26% and was at those levels at the end of Indian gilt market hours Tuesday, similar to that at 1700 IST Monday. US yields had jumped overnight and hit 5.35%, the highest since Apr. 3, 2002, amid a global sell-off, as per media reports. Traders now await the release of minutes of the US Federal Reserve's September policy meeting, due for release Wednesday. Traders will track commentary on inflation, which may lend cues to the market on the trajectory of a rate hike in the world's largest economy.       

           

OUTLOOK

Bond prices are likely to open steady Wednesday on caution before the key policy rate announcement at 1000 IST. While most traders expect a 25-bp rate hike at the October meeting, the market remains divided on the change in stance. A rate hike, if announced, may not lead to a sharp reaction. RBI Governor Sanjay Malhotra's comments on inflation, GDP growth, and measures to drain liquidity will be closely watched, dealers said. 

 

Gilts are pricing in repo rate increases of around 100 bps from current levels and a convincing argument from central bank officials on a shallower rate hike cycle despite high crude oil prices and US yields may lead to a sharp increase in bond prices, dealers said. Most traders expect a maximum rate hike cycle of only 50-75 bps by February, while others see higher inflation leading to four repo rate increases.

 

Bond prices will also track developments in the war in West Asia and its impact on crude oil prices. Significant overnight movement in US Treasury yields may also lend direction to gilt prices Wednesday, dealers said. Any significant movement in the rupee and swap rates will also lend cues, dealers said. 

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	98.2600	7.1928%	98.1375	7.2108%
6.48%, 2035	95.4500	7.1751%	95.3000	7.1986%
6.36%, 2031	97.8600	6.9344%	97.8300	6.9423%
7.06%, 2041	96.8200	7.4157%	96.7700	7.4214%
7.24%, 2055	94.8600	7.6843%	94.7500	7.6943%

 

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India Gilts: Remain up; state bond auction cut-off yields better than view

 

	1520 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.16	98.20	98.04	98.12	98.14
YTM (%)	7.2072	7.2017	7.2254	7.2135	7.2108

 

MUMBAI--1520 IST--Government bond prices remained up, tracking a fall in Brent crude oil prices during the day, dealers said. The result of the state bond auction supported the positive momentum as the cut-off yields were better than traders' expectations. 

 

A total of 12 states raised INR 236 billion at the auction Tuesday, lower than the INR-251-billion notified amount that a total of 13 states were scheduled to raise. The cut-off yields were lower than market expectations, dealers said. The Reserve Bank of India has set a cut-off yield of 7.91% on Madhya Pradesh's 10-year bond at the auction, lower than an Informist Poll estimate of 7.92%.

 

At the auction, Delhi did not accept any bids for the 2033 and the 2041 bond re-issues, and Punjab rejected all bids for its 2031 bond re-issue, the result showed. Some traders see the rejection of all bids at the auction as a signal that states are unwilling to accept higher yields and thus expect the central bank to announce some measures at the Monetary Policy Committee outcome Wednesday amid a significant rise in yields. 

 

"The yields are actually slightly lower than what the market had expected," a dealer at a state-owned bank said. "It reflects that states are unable to accept such high yields."

 

Traders remained cautious ahead of the MPC decision on a rate hike Wednesday, they said. Trade volumes did not pick up significantly despite a fall in crude oil prices during the day. The total turnover in the government securities market at 1520 IST was INR 286.9 billion, up from INR 245.5 billion at 1530 IST Monday, data from the Clearing Corp. of India Ltd. showed.

 

Brent crude oil prices fell during the day and touched a low of $97.91 per barrel amid easing supply-side concerns, dealers said. The yield on the benchmark 10-year US Treasury bond also fell intraday to a low of 5.27%, which supported Indian bond prices, dealers said. 

 

The yield on the 10-year Indian gilt is seen in a range of 7.18-7.25% during the day, dealers said. The yield is unlikely to fall below 7.20?fore the MPC's decision unless there is a major development in the war in West Asia, they said.  (Diksha Tripathy) 

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India Gilts: Recover all losses as Brent crude falls below $100/bbl

 

	1300 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.16	98.16	98.04	98.12	98.14
YTM (%)	7.2076	7.2076	7.2254	7.2135	7.2108

 

NEW DELHI--1300 IST--Government bond prices recovered all losses as Brent crude futures fell below $100 per barrel, dealers said. Trade volumes remained subdued for the second day as traders were cautious before the rate decision of the Reserve Bank of India's Monetary Policy Committee Wednesday.

 

Brent crude futures for December delivery fell below $100 per barrel around 1145 IST and sustained below that level by 1300 IST. The contract fell to a low of $99.38 per barrel during the day from $100.68 at 0900 IST. Reports that Saudi Arabia-backed forces have retaken a town in Yemen from the Iran-aligned Houthis helped ease concerns of supply constraints through the Bab El Mandeb strait, a key route to ship oil. 

 

Gilt prices had fallen earlier, tracking an overnight rise in US Treasury yields, dealers said. The 10-year US yield also eased to 5.29% from the day's high of 5.33%.

 

"Most of the volume today is only tracking crude," a dealer at a primary dealership said. "As a lot of bad news has been factored in and this policy is coming up, some of the traders are also a bit long."

 

The total turnover in the government securities market at 1300 IST was INR 167.05 billion, up from INR 149.40 billion at 1335 IST Monday, data from the Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 7.18-7.25% during the day, dealers said. The yield is unlikely to fall below 7.20?fore the MPC's decision unless there is a major development in the war in West Asia, they said. 

 

Dealers continue to widely expect the rate-setting panel to raise repo rate by 25 basis points to 5.50% Wednesday, beginning a tightening hike cycle to curb rising CPI inflation, dealers said. Traders were split on whether the RBI would change its change from the current "neutral". A stance change to "calibrated tightening" or "withdrawal of accommodation" may signal a longer rate hike cycle, while a rate hike without a stance change may ease bets of an increase in the repo rate beyond 6.00%, dealers said. Overnight indexed swap rates reflect bets of a 125-basis-point rate increase in the next year. 

 

Meanwhile, the state bond auction result will also lend cues for the rest of the day, particularly the cut-off yields on the long-term bonds, dealers said. An Informist poll pegged cut-off yields on bonds maturing in 13 years and greater at 8.00% or more. Pension and provident funds have bid in large quantum for the bonds on offer Tuesday and cut-off yields below 8.00% may lead to a rise in gilt prices as well, dealers said.  (Aaryan Khanna)

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India Gilts: Down on overnight rise in US ylds; volumes low before MPC decision

 

	0930 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.06	98.14	98.06	98.12	98.14
YTM (%)	7.2224	7.2106	7.2224	7.2135	7.2108

 

MUMBAI--0930 IST--Government bond prices were down Tuesday, tracking a significant rise in US Treasury yields overnight, dealers said. Trade volume in the market was subdued Tuesday as most traders maintained caution before a key policy outcome by the Reserve Bank of India's Monetary Policy Committee Wednesday. 

 

Traders widely expect the RBI's rate-setting panel to begin a shallow rate-hiking cycle with a 25-basis-point interest rate increase Wednesday. Market participants will also track RBI Governor Sanjay Malhotra's comments on inflation, GDP growth, and liquidity in the banking system. The views on stance change at the October MPC meeting remain mixed, dealers said. 

 

Traders also refrained from placing aggressive bets ahead of the auction of state government securities Tuesday, which kept the volumes low. A total of 13 states will invite bids to raise INR 251 billion through the sale of bonds between 1030 IST and 1130 IST. The auction is likely to sail through with banks, pension funds, and insurers likely picking up bonds, dealers said. 

 

Tuesday, an overnight rise in US yields likely pulled down Indian bond prices, dealers said. The yield on the 10-year benchmark US Treasury note was at 5.32%, up from 5.26% at the end of Indian gilt market hours Monday. Traders await the release of the minutes of the US Federal Reserve's September meeting, due Wednesday, as it may lend further cues to the bond yields, dealers said.     

 

"US yields have inched higher and that's what is pulling down our (Indian) bond prices," a dealer at a state-owned bank said. "Volume is very low because people are waiting for MPC. Now, the market will react only after MPC because then there will a lot more clarity."  

 

While a rise in US yields weighed on Indian bond prices, a fall in oil prices provided some support, dealers said. Brent crude oil prices fell overnight and were at $100.71 per barrel, down from $101.87 at 1700 IST. Traders will closely monitor any development in the war in West Asia as it could lend further cues to oil prices and, in turn, the bond market.

 

The total turnover in the government securities market at 0930 IST was INR 17.35 billion, down from INR 18.50 billion at 0930 IST Monday, data from the Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 7.18-7.25% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen steady as traders eye MPC decision; high US ylds may weigh

 

MUMBAI – Government bond prices are seen opening steady as market participants await the Reserve Bank of India's Monetary Policy Committee decision on the key policy rate, dealers said. A sharp overnight rise in US Treasury yields is likely to dampen market sentiment and push Indian bond yields higher Tuesday, dealers said. Traders are also likely to refrain from placing aggressive bets ahead of the auction of state government securities later in the day as its result is likely to lend cues to the market. 

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 7.21% and move between 7.18% and 7.24% during the day, dealers said. Monday, it ended at INR 98.14, or a yield of 7.2108%. Trade volume in the market is likely to remain low throughout the day Tuesday as traders are likely to avoid taking fresh positions before the MPC policy decision Wednesday.

 

Traders widely expect the RBI's rate-setting panel to begin a shallow rate-hiking cycle with a 25-basis-point interest rate increase Wednesday. Market participants will also track RBI Governor Sanjay Malhotra's comments on inflation, GDP growth, and liquidity in the banking system. Most traders expect an upward revision in inflation estimates for the upcoming quarters at the October MPC meeting, they said. 

 

The market has already priced in a 25-bps rate hike, and it is unlikely to impact bond prices significantly, dealers said. However, upwards revision of inflation estimates may be seen as a trigger for the market amid higher energy prices stemming from the US-Iran war, they said. The war in West Asia has continued to impact market by keeping oil prices and US yields high, dealers said. 

 

The yield on the 10-year benchmark US Treasury note jumped overnight and hit 5.35%, the highest since Apr. 3, 2002, amid a global sell-off, as per media reports. The rise in US yields was also attributed to the new data on service sector growth released Monday by the Institute for Supply Management. The report showed that the Purchasing Manager's Index — a measure of economic activity in the service sector — grew to 54.9 in September, roughly in line with expectations and slightly below the August rate of growth. Now, investors are looking ahead to the release of minutes from the US Federal Reserve's September policy meeting, due for release Wednesday. Traders will track commentary on inflation which may lend cues to the market on the trajectory of a rate hike in the world's largest economy. 

 

Tuesday, Indian bond prices may find some support due to an overnight fall in oil prices, dealers said. Brent crude oil futures for December delivery traded at $100.82 per barrel at 0800 IST, down over 1% from its level at the close of Indian gilt market hours Monday. Oil prices fell as the Group of Seven countries planned to release emergency oil and diesel stocks amid supply  concerns arising due to closure of the Strait of Hormuz. Energy prices have spiked since Iran cut off access to the Strait of Hormuz, a key waterway that carries nearly one-fifth of the world's oil supplies. Traders will monitor any development related to the US-Iran war and its impact on oil prices as it can lend direction to the markets during the day. 

 

Traders will also monitor the result of the state bond auction Tuesday. A total of 13 states are looking to raise INR 251 billion through bonds between 1030 IST and 1130 IST. The auction is likely to sail through with banks, pension funds, and insurers likely picking up bonds, dealers said. However, traders will closely track cut-off yields on bonds at the auction as higher-than-expected yields may pull down bond prices in the secondary market. At the auction last week, Tamil Nadu had rejected all bids for its 10-year bond. The market is likely to react to a similar move if it happens at the auction Tuesday, dealers said.  (Diksha Tripathy) 

 

End

 

Edited by Avishek Dutta

 

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