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Informist, Tuesday, May 27, 2025

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended steady due to a lack of significant cues during the day. Bond prices erased early gains from a fall in US Treasury yields due to profit-booking. Volumes were lower than recent trading sessions, which many traders expected, as traders await India's GDP growth estimates for Jan-Mar, and the INR-360-billion weekly gilt auction, both of which are scheduled Friday. 

The turnover in the gilts market was at INR 394.85 billion Tuesday, lower than INR 531.95 billion Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. "This was expected right, that volumes will be like this till Friday," a dealer at a private sector bank said. "There is caution before the GDP and auction."

Private sector banks and primary dealerships likely trimmed portfolios ahead of the two key events lined up Friday. While primary dealerships made room for fresh auction stock, traders also sold gilts to trim risk if India's GDP growth for Jan-Mar prints is higher than estimates. An Informist poll estimated the print at 6.80%. Most traders expect a reading of around 6.50%, but some expect print above 7.00% and as low as 6.00%. 

Traders also booked profits as the 6.33%, 2035 gilt hit the key 6.20% level. The 2035 gilt yield is expected to fall to 6.10% by the Reserve Bank of India's Monetary Policy Committee meeting on Jun. 6.

The benchmark 10-year 6.79%, 2034 gilt closed at INR 103.75, or 6.25% yield, flat compared with Monday's close. The 6.33%, 2035 bond closed at INR 100.93, or 6.20% yield, from INR 100.92, or 6.20%, on Monday.

At the gilt auction Friday, the government will sell INR 60 billion of the 6.64%, 2027 bond and INR 300 billion of the 6.33%, 2035 bond. Demand for both the bonds is seen firm, but traders are focussed on the result of the 2035 bond sale, since it is the second auction of the gilt.

After the auction, traders expect the 2035 bond to be the next 10-year benchmark gilt, replacing the 6.79%, 2034 bond. If fully subscribed, Friday's auction will take the 2035 bond's outstanding amount to INR 600.00 billion. Dealers expect aggressive bidding for the 2035 gilt at the auction from Deposit Insurance and Credit Guarantee Corp. The RBI purchased the 2034 and 2035 gilts in the secondary market Monday and Tuesday, dealers said. However, it was not purchasing gilts aggressively, they said, and would likely be more active on Friday as it would've recieved payments for premiums from banks by then.

While preference for gilts maturing in up to 5 years remained robust, some dealers said they were now purchasing gilts of slightly longer maturities, such as those maturing in six to seven years. Foreign portfolio investors were also buying gilts maturing in similar tenures, they said. The scope for further fall in the extreme short end of the yield curve was limited until MPC's meeting in June, dealers said. 

As for the INR-158-billion state bond auction, cut-off yields were lower than expected. The yield on Tamil Nadu's 10-year bond was set at 6.60%, lower than an Informist poll estimate of 6.62%. However, states raised only INR 156.50 billion as Goa did not accept any bids for its 12-year bond. While state-owned banks bid aggressively for short-term state bonds, the aggressive cut-offs were supported by demand from life insurers and provident funds in the longer-end, dealers said. 

"EPFO and insurers have taken longer-end state bonds today (Tuesday) which supported the auction," a dealer at a state-owned bank said. 

Some traders preferred Demand for Separate Trading of Registered Interest and Principal of Securities, since it offered similar yields to state bonds, making it appealing for traders who had limits in state bond investments, dealers said. Muted demand for long-term gilts through forward rate agreements also led to demand for these securities, dealers said. Around INR 7.20 billion of the 7.09%, 2054 bond was traded as principal for these securities, data under the 'Reported Deals' segment of Clearing Corp. of India showed.

"The liquidity in STRIPS has increased because traders are getting better returns and there's no limit on these investments also," a dealer at another state-owned bank said.   

Bond prices opened higher as traders bet on at least a 25 bps cut in the repo rate at the next policy review in June. A fall in US Treasury yields in early Asian trade also aided the rise in bond prices. The yield on the 10-year benchmark US Treasury note was 4.49% as of 0900 IST, down from 4.53% at 1700 IST Friday. Financial markets in the US were shut on Monday on account of Memorial Day. 

There were two trades worth INR 100 million conducted in the 7.10%, 2034 gilt using the wholesale digital rupee pilot Tuesday. No trades were conducted through this method the previous day.

OUTLOOK

On Wednesday, bond prices are likely to take cues from the overnight movement of US yields at open, after the release of US economic data. Traders also await India's GDP growth estimates for Jan-Mar and for FY25, due on Friday.

Traders may continue to position for a rate cut at the MPC's meeting in June and preference for short-term gilts is expected to continue. Traders may track the result of the Treasury bill auction of INR 190 billion due to preference for short-term securities. 

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.20-6.28% on Wednesday, while the 6.33%, 2035 bond is seen at 6.18-6.22%.

India Gilts: Erase gains on profit-booking as 2035 gilt fell below 6.20% yld

MUMBAI--1521 IST--Prices of government bonds erased most gains as the 6.33%, 2035 gilt fell below the key 6.20% yield level. Bond prices were little changed after the result of the INR-158-billion state bond auction. The cut-off yield on Tamil Nadu's 10-year bond was 6.60%, slightly lower than an Informist poll estimate of 6.62%. States raised only INR 156.50 billion at the auction, as Goa did not accept any bids for its 12-year bond. 

Traders sold gilts at a profit as the yield on the 2035 gilt neared the crucial 6.20% level. The yield touched an intraday low of 6.1977%. Traders expect the yield to hit 6.10% by Jun. 6 when the Reserve Bank of India's Monetary Policy Committee announces its decision. 

Volumes in the gilt market were low and are expected to be so until Friday as dealers await the weekly gilt auction, which includes an INR-300-billion sale of the 6.33%, 2035 gilt. Traders placed short bets on gilts to make room for auction stock. Moreover, traders preferred the short end of the yield curve.

Some traders also bought gilts maturing in seven to 10 years with the view that spreads of these gilts over the 10-year gilt could compress further. Traders also await India's GDP growth data for Jan-Mar, which is due on Friday, and gilt prices are expected to trade in a thin band until then.

Demand for Separate Trading of Registered Interest and Principal of Securities was robust in the secondary market, since it offered similar yields to state bonds, making it appealing for traders who had limits in state bond investments, dealers said. Around INR 7.20 billion of the 7.09%, 2054 bond was traded as principal for these securities, data under the 'Reported Deals' segment of Clearing Corp. of India showed.  

Volume in the gilt market was INR 246.40 billion at 1430 IST, lower than INR 371.95 billion at the same time on Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. During the day, the yield on the 10-year benchmark the 6.79%, 2034, gilt is seen at 6.20-6.26%. (Cassandra Carvalho)

India Gilts: Remain up on rate cut expectations, fall in US yields supports

MUMBAI--1230 IST--Government bond prices remained up as traders continued to buy gilts on firm expectations of a 25-basis-point cut in the repo rate in June, dealers said. An intraday ease in US Treasury yields also buoyed gilt prices. Gains were capped as some traders refrained from buying aggressively before the INR 360-billion gilt auction and India's GDP growth estimates for Jan-Mar, both of which are scheduled on Friday. 

"It's wait and watch, positioning is also done by most and no one wants to sell," a trader at a primary dealership said. "(The 10-year) US yield is also a good support, and DICGC (Deposit Insurance and Credit Guarantee Corp.) is also buying today (Tuesday)."

Volumes in the gilt market were also low due to a dearth of incremental cues in the market, dealers said. Market turnover was INR 190.25 billion at 1230 IST, lower than INR 302.45 billion at the same time Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.

Traders also await the result of the state bond auction Tuesday. For Tamil Nadu's 10-year bond, an Informist poll of eight bond traders estimated the cut-off yield at 6.62%, a spread of 38 bps over the 10-year benchmark, 6.79%, 2034 gilt, as of 1230 IST. At last week's auction, the spread was at 37-39 bps. Demand for short-tenure bonds was also seen firm at the auction, dealers said. 

Traders expect primary dealerships to place short bets on gilts to make space for fresh supply at the weekly gilt auction Friday. At the auction, the government will sell INR 60 billion of the 6.64%, 2027 gilt and INR 300 billion of the 6.33%, 2035 gilt. Starting next week, traders will likely consider the 2035 gilt as the new 10-year benchmark, replacing the current 6.79%, 2034 gilt, dealers said. 

The yield on the 10-year benchmark US Treasury note slipped to 4.45% at 1230 IST from 4.49% at 1000 IST. The yield was at 4.53% at 1700 IST Friday. Financial markets in the US were shut on Monday for Memorial Day. Traders were of the view that any further fall in the 10-year US yield would likely lead to inflows from overseas investors later in the day. For the rest of the day, the yield on the 10-year benchmark 6.79%, 2034 gilt is seen at 6.20-6.26%. (Vidhushi RajPurohit)

India Gilts: Up on rate cut view; gains capped on lack of fresh cues

India Gilts: Up on rate cut view; gains capped on lack of fresh cues 

MUMBAI--0920 IST--Prices of government bonds rose slightly Tuesday as traders continued to position for further policy rate cuts in 2025, dealers said. Traders expect gains to be capped due to lack of incremental cues Tuesday. Traders will await the result of the INR 158-billion state bond auction at 1030-1130 IST for further cues. 

Traders await the Reserve Bank of India's Monetary Policy Committee meeting in June, the decision of which will be announced on Jun. 6. Gilt prices remained up as the market widely anticipates another 25 basis point repo rate cut at the June MPC meet. 

"Market is positive, people are sure of a rate cut and if the GDP comes low then people can start looking at 50 bps of rate cut in June," a dealer at a state-owned bank said. India's GDP growth estimates for Jan-Mar and FY25 are due on Friday. An Informist poll estimated the Jan-Mar reading at 6.80%. Most traders expect the print in the range of 6.00-6.80%. Some tarders also estimate a reading as high as 7.00%.

If the reading is near the lower end of the range, traders expect the MPC to cut the repo rate by 50 bps to support growth. On the other hand, a strong growth figure could lead traders to retrace their deeper rate cut expectations and sell off their positions, dealers said.  

A fall in US Treasury yields over the weekend also kept gilt prices up, dealers said. The yield on the 10-year benchmark US Treasury note was 4.49% as of 0920 IST, down from 4.53% at 1700 IST Friday. Financial markets in the US were shut on Monday on account of Memorial Day. 

"Market can track US yields to some extent as there are no news cues today (Tuesday)," a dealer at a private sector bank said. "But looks like it will be a range-bound day."

At the state bond auction Tuesday, 10 states are scheduled to raise INR 158 billion through bonds. At the auction, short-term bonds will be bid for aggressively by traders, while demand for long-term bonds is likely be subdued, dealers said. The result of the auction will provide cues to traders later in the day, they said. 

Volume in the gilt market was INR 26.85 billion at 0920 IST, lower than INR 41.15 billion at the same time on Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. During the day, the yield on the 10-year benchmark 6.79%, 2034 gilt is seen at 6.20-6.26%. (Vidhushi RajPurohit)

India Gilts: Seen tad up on hope of 50 bps of more rate cuts in 2025

MUMBAI – Prices of government bonds are likely to open slightly higher Tuesday as traders are expected to continue to buy gilts ahead of the Reserve Bank of India's Monetary Policy Committee meeting in June, dealers said. Traders will also take cues from the result of the INR 158-billion state bond auction, they said. 

The yield on the 10-year benchmark 6.79%, 2034 bond is seen at 6.20-6.26%. On Monday, the 10-year gilt ended at INR 103.75, or 6.25% yield. The gilts market widely expects the MPC to cut the policy repo rate by 25 basis point in June and anticipates another similar rate cut later in the year, dealers said. At the current yield level of 6.25% on the 2034 gilt, traders have already priced in a 25 bps rate cut and they expect the yield to inch down to 6.20% before the June policy meeting. 

For the 6.33%, 2035 gilt, which is expected to become the 10-year benchmark after its auction Friday, dealers see a yield range of 6.18-6.22% for the day. On Monday, the gilt closed at INR 100.92 or 6.20% yield. 

"Right now, there is no fresh cue, only MPC is there and before that there is GDP estimates. So market will continue to position according to their expectations," a dealer at a state-owned bank said. India's GDP growth estimates for Jan-Mar and for FY25 are due on Friday. An Informist poll estimated the Jan-Mar reading at 6.80%. Traders expect the print in the range of 6.00-6.80%, while some also estimate a reading as high as 7.00%.  

Meanwhile, gilts maturing in up to five years are expected to remain in favour on the back of ample systemic liquidity and expectations of further steepening in the yield cuve, dealers said. The yield spread of the 10-year benchmark 6.79%, 2034 over the five-year 6.75%, 2029 bond widened to 41 bps at market close Monday from over 26 bps at the start of the month.

At the state bond auction Tuesday, 10 states are scheduled to raise INR 158 billion through bonds. Short-tenure bonds are expected to be in greater demand even at the auction, dealers said.

"The auction will sail smoothly as there is not much supply, people can even go for the belly of the curve, 10-15 year bonds, at the auction," a dealer at a private sector bank said.  (Vidhushi RajPurohit)

End

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

Edited by Akul Nishant Akhoury

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