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Informist, Friday, Mar. 28, 2025

By Srijita Bose

MUMBAI – Government bond prices rose after the government released a light borrowing plan for Apr-Sept, though it was in-line with market expectations. Traders retained their aggressive bets on a repo rate cut in April, especially due to easier-than-usual liquidity conditions in April, dealers said.

The 10-year 6.79%, 2034 bond ended at INR 101.45, or 6.58% yield, against INR 101.31, or 6.60% Thursday. The 10-year gilt has fallen 15 basis points in March, marking its best month since April 2023. In 2024-25 (Apr-Mar), the benchmark yield fell 47 basis points, the most in a financial year since FY20.

Domestic banks bought bonds near the end of trade to drive up the absolute prices on bonds and show a greater accrued profit for the year, boosting the valuations of their gilt portfolios, dealers said. However, the rise in prices was capped at close as some traders booked profit, shying away from carrying heavy portfolios into the new financial year and before a long weekend, they said.

"There was good buying momentum today, and people bought accross all segments, " a dealer at a private bank said. "There was some value buying coming from banks for year-end purposes but people don't want to risk going into the long weekend because 'Trump-tariffs' are also going to come." US President Donald Trump is expected to impose reciprocal tariffs on trading partners starting Wednesday, though there are expectations that final tariffs may be diluted.

Prices of bonds maturing in 30-50 years rose the most as the share of supply in Apr-Sept was lowered to 35.0% from 38.2% in the current financial year, including green bonds, dealers said. The yield on the 40-year benchmark 7.34%, 2064 bond closed at 6.95%, the lowest since Oct. 3, after the share of the bond was reduced the most among all tenures to 14.0% in Apr-Sept borrowing from 19.7% a year ago. Traders also preferred to pick up bonds maturing above 30 years to lock in better price appreciation per basis point move in yield due to its longer tenure, betting on the Reserve Bank of India's Monetary Policy Committee to cut the repo rate by 25 basis points in April.

"Long-term bonds are still looking good but short-end is also picking up now and there is still space of yields to steepen if there are more rate cuts on the way," a dealer at a state-owned bank said. "Plus, we have switches also, so ultimately the long-end supply is going to increase." The government planning to carry out gilt switches worth INR 2.5 trillion in FY26.

Short-tenure gilts gained favour despite an increased share of supply in these bonds as dealers said that the liquidity conditions have improved, and are expected to be better in April. The supply of bonds maturing up to five years will increase to 16.6% from 15.2% in the current financial year. However, traders expect the increase in the supply of these bonds to be easily absorbed as the market expects a 25 bps rate cut in April with a softer stance to signal further cuts during the year, dealers said. The seven-year benchmark 6.79%, 2031 remained in favour as the share of issuance of the bond will fall to 8.2% in Apr-Sept, from 8.9% in the same period a year ago.

Foreign portfolio investors bought gilts maturing in two to seven years on the view of a deeper rate-cutting cycle, dealers said. FPIs picked up gilts as India's weightage is raised to the maximum 10% on JP Morgan's Government Bond Index – Emerging Markets Friday, concluding the 10-month inclusion period. Bloomberg's Emerging Market Local Currency Government Index will also raise India bonds' weightage to 3% at the month-end. FPIs bought INR 45.7 billion worth of fully accessible route gilts, Clearing Corp. of India data showed at 1800 IST showed.

The market-wide turnover for the day was INR 542.60 billion, compared to INR 675.45 billion Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There was no trade using the wholesale digital rupee pilot for the 13th consecutive day.

OUTLOOK

Gilts are not traded on Saturday. Money markets will remain closed on Monday on the ocassion of Id-Ul-Fitr and Tuesday due to banks' closing of accounts for FY25. On Wednesday, government bond prices may take cues from the movement in US Treasury yields after the release of US inflation data post market hours Friday. Traders may also assess developments related to US tariff policy, with the Donald Trump's administration reciprocal tariffs set to kick in on Wednesday.

Traders are likely to retain their bets on a repo rate cut and stance change by the RBI's MPC in April due to a lack of significant interest rate cues until the next review on Apr. 7-9, dealers said. Dealers are also looking forward to states' borrowing plan for Apr-Jun, also likely to be released Friday.

Crude oil prices could also be a trigger for gilts if they move significantly, dealers said. A sharp movement of the rupee against the dollar could also provide cues. The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.55-6.63% during the day.

India Gilts: Remain up; 10-year benchmark on track for best month in 2 years

MUMBAI--1540 IST--Prices of government bonds remained sharply up across most tenures as the market remained positive after the release of the government's borrowing plan for Apr-Sept, dealers said. With the calendar out of the way and easier-than-usual liquidity conditions at year-end, traders retained their aggressive bets on a repo rate cut in April.

The 10-year benchmark, 6.79%, 2034 gilt underperformed other bonds owing to some profit booking by traders as the gilt's yield touched 6.58%, a psychologically crucial level. An increase in the share of 10-year supply in Apr-Sept from 2024-25 (Apr-Sept) also weighed on its price, dealers said, even as the 10-year gilt yield remained on track for its best month since Apr 2023.

Traders said that at 6.58% yield level on the 10-year benchmark gilt, traders have fully priced in a 25 bps rate cut. Any further softening would depend on how aggressive bets on a stance change by the Reserve Bank of India's Monetary Policy Committee get, with about half of the market expecting a move to 'accommodative' from 'neutral', dealers said said. Some traders expect the RBI to come up with more liquidity infusion measures before the MPC to facilitate the transmission of rate-cut into the broader financial system. RBI might announce an open-market operation auction to purchase gilts amounting of up to INR 500 billion in April, after its INR 2.45-trillion worth of gilt buys at auction in Jan-Mar, dealers said.

Short-tenure gilts also remained in favour despite an increased share of supply in these bonds as dealers said that the liquidity conditions have improved, and are expected to be better in April. Dealers also said that with the government planning to carry out gilt switches worth INR 2.5 trillion in FY26, it would lead to increase in the supply of long-tenure bonds. Foreign portfolio investors were also seen buying gilts maturing in two to seven years, dealers said. At 1430 IST, overseas investors bought INR 8.91 billion worth of fully accessible route gilts, Clearing Corp. of India data showed.

"In the current scenario when everyone is expecting the MPC to go for rate cuts and bring some liquidity measures, short tenure gilts will continue to look attractive to traders," a dealer at a primary dealership said. "Plus, the government will bring switches which will increase the quantum for long-tenure bonds so in that way the lower supply plan will be balanced out there."

Bonds maturing in 30 to 50 years remained sharply up as the share of supply in Apr-Sept was lowered to 35.0% from over 38.2% in the current financial year, including green bonds, dealers said. The yield on the 40-year benchmark 7.34%, 2064 bond fell to 6.94%, the lowest since Oct. 16.

The bond shed some gains from earlier on the day as traders booked profits, a phenomenon seen across the yield curve, as traders lightened their portfolios ahead of the long weekend, dealers said. Money markets are shut on Monday for Id-ul-Fitr and on Tuesday for banks' annual closing of accounts, with the first trading day of the new financial year on Wednesday.

The market-wide turnover was INR 406.55 billion, lower than INR 523.30 billion at 1545 IST on Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. During the day, the yield on the 6.79%, 2034 bond is seen at 6.56-6.62%. (Vidhushi Rajpurohit)

India Gilts: Remain up; long-term bonds surge as Apr-Sept issuance share dn

MUMBAI--1324 IST--Prices of government bonds were sharply up after the government's borrowing plan for the first half of the financial year starting Tuesday was in line with expectations. Bonds maturing in 30-50 years outperformed those of other tenures as the share of these bonds in Apr-Sept calendar was reduced and as traders continued to bet on a rate cut in April, dealers said. 

"The calendar was mostly as per expectations, the lower supply of long-term was definitely a positive...but overall too yields are expected to soften, so good buying momentum is coming," a dealer at a private bank said. "FPIs (foreign portfolio investors) and foreign banks are also there, but towards the end there could be some profit booking."

Foreign portfolio investors picked up gilts as India's weightage rises to the maximum 10% on JP Morgan's Government Bond Index –Emerging Markets Friday, concluding the 10-month inclusion period. Bloomberg's Emerging Market Local Currency Government Index will also increase India bonds' weightage to 3% at the month-end. FPI holdings of fully accessible route bonds crossed INR 3 trillion on Thursday, after hitting INR 2 trillion in July. Foreign investors have bought around INR 165 billion worth of fully accessible route gilts in March.

Traders rushed to pick up 30-50-year bonds after the share of supply in Apr-Sept was lowered to 35% from over 38.2% in the current financial year, including green bonds, dealers said. The yield on the 40-year benchmark 7.34%, 2064 bond fell to 6.94%, the lowest since Oct. 16, as the share of the bond was reduced the most among all tenures to 14.0% in Apr-Sept borrowing from 19.7% a year ago. Traders also preferred to pick up bonds maturing above 30 years to lock in better price appreciation per basis point move in yield due to its longer tenure, ahead of the Reserve Bank of India's Monetary Policy Committee meeting in April. 

Meanwhile, domestic banks that sold gilts near end of trade on Thursday to book profits before the end of the financial year, bought back bonds as they expect yields to fall further going into the first week of April, dealers said. Only trades till Thursday would be accounted for in the FY25 accounts for market participants, as gilts are settled on a 'T+1' basis.

Traders also picked up shorter-tenure bonds maturing up to seven years despite increased share of supply in these bond to 24.8% from 23.2%, as liquidity conditions eased further and on rate cut expectations, dealers said. The small increase in the supply would be easily absorbed at a time when the market expects at least two further rate cuts in 2025, shifting preference towards short-term bonds. The seven-year benchmark 6.79%, 2031 gilt gained further as the share of those bonds will fall to 8.2% in Apr-Sept, from 9.1% the previous year.

The market-wide turnover was INR 315.05 billion, slightly lower than INR 377.35 billion at 1330 IST on Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. During the day, the yield on the 6.79%, 2034 bond is seen at 6.56-6.62%.  (Srijita Bose)

India Gilts: Up as FY26 H1 borrowing plan light, Apr rate cut view

MUMBAI--1010 IST--Prices of government bonds were up Friday as the government's borrowing plan for Apr-Sept is in line with the market's expectations, dealers said. Traders said the light borrowing for the first half of 2025-26 (Apr-Mar) was seen as a positive cue for gilt prices. Banks which had Thursday sold bonds at a profit for year-end considerations also picked up gilts.

The government will borrow INR 8.00 trillion through dated securities in Apr-Sept, accounting for 53.98% of the gross market borrowing target of INR 14.82 trillion for FY26. Dealers had estimated a similar borrowing share and said that there was no negative surprise in the calendar.

The 10-year 6.79%, 2034 bond fell in early trade due to an increase in the share of 10-year supply in Apr-Sept. However, traders said the supply would likely come in a new 10-year bond, while the 2034 bond would remain the benchmark and most-liquid gilt to capture expected gains in gilt prices. The bond recovered early losses and rose even as 26.2% of the borrowing in Apr-Sept will be conducted through 10-year bonds, up from 23.85% in FY25.

Prices were also up as traders want to lock in current yields on the view that prices may rise further ahead of the upcoming monetary policy review, dealers said. The Reserve Bank of India's Monetary Policy Committee is widely expected to cut the repo rate by 25 basis points to 6.00% and change its stance to 'accommodative' from 'neutral'. 

"The yield (on the 10-year benchmark, 6.79%, 2034 gilt) is expected to soften further by 2-3 bps before MPC meeting in April as there is an overall positivity in the market on rate cut," a dealer at a state-owned bank said. 

However, gains may be limited as traders might not want to carry their position for five days owing to the long weekend ahead, dealers said. The market-wide turnover was INR 112.45 billion, higher than INR 67.15 billion at 1030 IST on Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. During the day, the yield on the 6.79%, 2034 bond is seen at 6.56-6.62%. (Vidhushi Rajpurohit)

India Gilts: Most seen up as FY26 H1 borrowing plan light, in line with view

MUMBAI – Prices of most government bonds may rise slightly Friday as the government's borrowing for Apr-Sept is in line with the market's expectations. However, the 10-year benchmark 6.79%, 2034 bond may fall or underperform peers as its share in the borrowing plan has increased, dealers said.

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.56-6.62%, compared with 6.60% on Thursday. Late Thursday, the central government detailed its borrowing plan for the first half of the new financial year starting Tuesday. The government will borrow INR 8.00 trillion through dated securities in Apr-Sept, accounting for 53.98% of the gross market borrowing target of INR 14.82 trillion for 2025-26 (Apr-Mar). Traders were expecting the share of borrowing in Apr-Sept to be 53-55% of the full year target, and they had estimated the quantum to be around INR 8 trillion.

The borrowing pattern has changed slightly in Apr-Sept. Gilts will be issued in cycles of four weeks, against three weeks earlier for most bonds, and there will only be two gilts sold at each weekly auction. This is expected to lead to greater secondary market trade volumes in FY26, dealers said.

As is generally the case, the 10-year benchmark gilt has the biggest share in the total borrowing figure. A total of 26.2% of the Apr-Sept bond issuances will be through sales of the 10-year paper, the borrowing calendar showed, up from 23.85% in the current financial year. The yields of long-tenure gilts might fall as the government has reduced the share of long-term borrowing to 35.0%, from 37.5% in FY25. Dealers said the lower supply would make these bonds attractive for mutual funds and insurance companies, which are the major investors for these bonds.

With the hotly anticipated calendar out of the way, traders may want to lock in current yields on the view that prices may rise further after the upcoming monetary policy review, dealers said. The Reserve Bank of India's Monetary Policy Committee is widely expected to cut the repo rate by 25 basis points to 6.00% and change its stance to 'accommodative' from 'neutral'. 

Gains could be capped as traders might sell bonds to book profits. On Thursday, the 10-year benchmark gilt fell to 6.58%, its lowest level in over three years, before ending at 6.60% owing to profit booking. (Vidhushi Rajpurohit)

End

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

Edited by Deepshikha Bhardwaj

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