More Stories

Informist, Tuesday, Jun. 10, 2025

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended lower in choppy trade Tuesday as the 6.79%, 2034 gilt yield rose above the key level of 6.35%, dealers said. Traders, especially from foreign banks, sold gilts as hopes of further repo rate cuts faded. Traders also feared that the Reserve Bank of India could announce a variable rate reverse repo auction, after the central bank Monday said it was discontinuing its daily variable rate repo auctions starting Wednesday, dealers said.

"It's the VRRR rumour, it's the technical levels, it's the panic-selling," a dealer at a private sector bank said. "The market is selling, market is falling because traders were too heavy." Traders said the reintroduction of VRRR auctions could keep overnight money market rates at or above the repo rate, which would translate to a rise in bond yields as well.

Traders closely tracked the technical levels of bond yields, as sales likely from foreign banks triggered stop-losses of some traders, they said. Mutual funds also likely sold gilts. After the 2034 gilt yield broke the 6.35% level, it neared the next technical level of 6.37-6.38%, dealers said. However, the key 6.35% level was also a lucrative level to purchase gilts, as it has not been seen in a month. Purchases by state-owned banks at this level limited fall in bond prices, dealers said.

The 10-year benchmark 6.33%, 2035 gilt closed at INR 100.25, or 6.29% yield, compared with INR 100.33, or 6.28% yield at close Monday. The most-traded bond 6.79%, 2034 bond closed at INR 102.95, or 6.36%, compared with INR 103.07, or 6.35% Monday. Short-term gilts closed sharply down. The five-year 6.75%, 2029 gilt ended at INR 103.13 or 5.95% yield, compared to INR 103.40 or 5.88% yield Monday. The 2029 gilt yield closed at its highest since May 16. As seen Monday, the 6.92%, 2039 gilt yield continued to rise, ending 5 basis points higher at 6.63%. 

Bond prices opened the day higher tracking an overnight fall in US Treasury yields, dealers said. The yield on the benchmark 10-year US Treasury note fell to 4.45% at 1700 IST from 4.49% at 0900 IST and 4.51% at 1700 IST Monday. US yields fell as investors are waiting for the outcome of US-China trade talks and US CPI inflation data for May. The US CPI data is due at 1800 IST Wednesday. Bond traders are likely to closely track US yields, as the view on the domestic rate cut trajectory is bleak after the central bank's Monetary Policy Committee decision Friday, dealers said.

Some traders, especially foreign and private sector banks, realigned their portfolio ahead of US CPI data. Traders from state-owned banks bought gilts on expectations that India's CPI inflation for May would be 3.00% or lower. India's CPI inflation for May is due at 1600 IST Thursday. An Informist poll sees consumer inflation at a six-year low of 3.0% in May.

Traders placed short bets on gilts as appeal of these securities reduced after the MPC's surprise change of stance to 'neutral'. 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 1800 IST showed trades worth INR 83.16 billion in the 6.79%, 2034 gilt, which is a near three-week low. The volume could be revised higher, dealers said.

Banks Tuesday continued to sell gilts maturing in 10-15 years, mostly from their held-for-trading books, dealers said. Short-term gilts, which were expected to outperform other tenures, fell sharply Tuesday as mutual funds sold them. Fear of the RBI reintroducing a VRRR auction also weighed on these gilts, dealers said.

"The RBI has stopped daily VRRs so it's a negative indication for the market," a dealer at a state-owned bank said. "After the 100 bps CRR cut, market is uncertain about what liquidity measures the RBI will provide after this."

Purchases by insurance companies limited the fall of long-term bond prices. They bought these high-yielding gilts, even though inflows into insurance companies are usually muted in Apr-Jun, as spreads widened further over the 10-year benchmark this month, dealers said. The spread of the 7.09%, 2054 gilt yield over the 6.33%, 2035 gilt yield widened to 68 bps from 60 bps at the beginning of June. Under the 'Reported Deals' segment of the RBI's Negotiated Dealing System-Order Matching platform, a single deal worth INR 17.51 billion was reported under the unconfirmed odd lot in the 7.30%, 2053 gilt. A similar deal worth INR 15.00 billion was reported under the unconfirmed standard lot in the 7.36%, 2052 gilt.

However, due to traders' preference for the shorter-end of the yield curve, demand for long-term bonds at the weekly gilt auction Friday is seen tepid, dealers said. The government will sell INR 110 billion of the 6.79%, 2031 bond, INR 50 billion of the 6.98%, 2054 green bond, and INR 140 billion of the 7.09%, 2074 bond on Friday. Dealers expect the cut-off yield on the green bond to rise above 7.00%, from its indicated yield of 6.98%.

Demand for long-term gilts from insurance companies has reduced their appetite for long-term state bonds. At the weekly state bond auction of INR 183.30 billion, cut-off yields on states' 10-year bonds were lower than expectations at 6.66-6.68%. An Informist poll estimated the cut-off yields at 6.70-6.72%. However, the cut-off yield on Telangana's 30-year bond was 7.10%, against an Informist poll estimate of 7.05%.

The turnover in the gilt market was INR 504.15 billion, lower than INR 624.45 billion Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Two trades worth INR 100 million were conducted in the 7.10%, 2034 gilt using the wholesale digital rupee pilot Tuesday against nil Monday.

OUTLOOK

On Wednesday, bond prices are likely to take cues from the movement of US yields after the US economic data, dealers said. However, bonds are expected to trade in a thin band as hopes of further rate cuts have faded after the MPC decision Friday. Traders see no significant cues that could pull down gilt yields, unless GDP growth or CPI inflation is significantly lower, or if US yields cool down, they said.

Traders may also take cues from the result of the INR 190-billion Treasury bill auction, especially after short-term gilts fell sharply Tuesday.

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.20-6.35% and that on the most-traded 6.79%, 2034 bond is seen at 6.32-6.40% Wednesday.

India Gilts: Reverse gains as 6.79%, 2034 gilt yld rises past key 6.35% level

MUMBAI--1516 IST--Prices of government bonds reversed early gains as the 6.79%, 2034 gilt yield rose above the key 6.35% level, dealers said. Foreign banks were likely sellers, they said. Dealers were closely watching the next technical level at which stop-losses would be triggered, which is seen at around 6.37-6.38% for the 6.79%, 2034 gilt, they said. 
 

"That panic-selling sentiment is still there, it's not gone away," a dealer at a private sector bank said. "Foreign banks are continuously selling, and whatever long-term positions traders had, they're getting rid of."

Traders who had built portfolios since March on hopes of the 10-year benchmark gilt yield hitting 6.00% sold gilts after the Reserve Bank of India's Monetary Policy Committee indicated that further scope for rate cuts was limited, after it cut the repo rate by a surprise 50 basis points Friday. Traders also placed short bets on gilts, dealers said.  

Losses were limited as state-owned banks likely bought gilts at the key 6.35% level, which is seen lucrative, dealers said. The 6.79%, 2034 gilt yield touched the day's high of 6.3653%, a level not seen since May 9.  

Cut-off yields at the weekly state bond auction were lower than expectations. The cut-off yields on states' 10-year bonds were 6.66-6.68%, against an Informist poll estimate of 6.70-6.72%. Long-term state bond yields however, were higher than estimates, likely due to preference for long-term gilts. The cut-off yield on Telangana's 30-year bond was 7.10%, against an Informist poll estimate of 7.05%. Insurance companies preferred high-yielding long-term gilts, whose spreads had widened further over the 10-year benchmark this month, dealers said. 

Under the 'Reported Deals' segment of the RBI's Negotiated Dealing System-Order Matching platform, a single deal worth INR 17.51 billion was reported under the unconfirmed odd lot in the 7.30%, 2053 gilt. A similar deal worth INR 15.00 billion was reported under the unconfirmed standard lot in the 7.36%, 2052 gilt. Dealers said this was demand from insurance companies due to lucrative spreads. The spread of the 7.09%, 2054 gilt yield over the 6.33%, 2035 gilt yield widened to 69 basis points from 60 bps at the beginning of June.

The turnover in the gilts market was INR 396.80 billion at 1530 IST, lower than INR 479.40 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 6.33%, 2035 gilt is seen at 6.27-6.30%. For the 6.79%, 2034 gilt, dealers see the yield at 6.35-6.42%.  (Cassandra Carvalho)

India Gilts: Remain up as US yields inch down; PSU banks buy

MUMBAI--1208 IST--Government bond prices were up as US Treasury yields inched down. Prices rose amid thin trading volume as state-owned banks picked up bonds, dealers said. 

"In absolute terms, these are good levels to buy. Some value buying is coming at these levels and I don't see market significantly worsening from here," a dealer at a state-owned bank said. Traders paid close attention to the spread between the repo rate and the 10-year 2035 gilt yield. With the repo rate at 5.50%, the spread between the two widened to 77 bps Tuesday, from a spread of 20 bps when the repo was 6.00% at close of Indian market hours Thursday. 

"The 10-year (yield) could go up to 6.35% levels, but I think good amount of buying will come and that support should me maintained...today (Tuesday), volumes are also dull so even if people are taking trading positions we are seeing a price action," the dealer said. The turnover in the gilts market was INR 153.25 billion at 1130 IST, lower than INR 232.70 billion at the same time on Monday, according to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform. 

Insurance and pension funds also picked up longer-tenure gilts as they found yields attractive to hold, dealers said. The yield spread on the 40-year benchmark 6.90%, 2065 bond over the 10-year benchmark 6.33%, 2035 bond has widened to nearly 69 basis points from 45 bps over a month ago. Though an expected boost in liquidity due to a cut in banks' cash reserve ratio and hopes of further buyback auctions by the government is expected to keep bonds maturing in up to 10 years in favour, gains on shorter tenure bonds were limited as traders had already taken aggressive bets before the RBI Monetary Policy Committee's decision and awaited further cues to trade, dealers said. 

At the state bond auction, demand for longer tenure bonds is seen muted as overall demand for higher maturity bonds ha slumped on dashed hopes of further domestic rate cuts during the year, dealers said. Demand from banks for state bonds at the auction is also seen muted with market participants demanding higher yields premiums over gilts, they said. 

Traders await US CPI inflation data on Wednesday as the next trigger for US yields. With domestic rate cuts seen nearly done after the RBI's rate-setting panel delivered a 50 bps cut in the repo rate Friday, traders are now more keenly tracking US yields and data, dealers said. Traders also await the US Federal Open Market Committee statement next week for an outlook on rates, they said.

During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.25-6.30%. For the 6.79%, 2034 gilt, dealers see the yield at 6.30-6.35%.  (Srijita Bose)

India Gilts: Up as US yields ease slightly, traders cover some short-bets 

MUMBAI--0920 IST--Prices of government bonds were up as as US Treasury yields eased slightly, dealers said. Prices also rose as some traders picked up gilts in light volumes after a sharp fall in prices Monday, they said. 

"People are slowly picking up bonds now because the levels are good and there is a bit of fall in US yields also," a dealer at a private sector bank said. As at 0920 IST, the yield on the 10-year benchmark, US Treasury note was at 4.48%, down from 4.51% at the Indian market close on Monday. "There is still caution, but some people are also covering short bets as shorts increased Monday," the dealer added. 

In the special repo segment of the Clearcorp Repo Order Matching System, the volume of the 6.79%, 2034 gilt was INR 83.12 billion as at 0920 IST, slightly lower than INR 87.23 billion Monday. The number of trades in a paper in the special repo segment of the Clearcorp Repo Order Matching System shows the short sales in a particular bond.

Traders await the INR 183.30-billion state bond auction at 1030-1130 IST. They see the spread of states' 10-year bond yields over the 10-year benchamark, 6.33%, 2035 gilt widening to around 48-50 basis points from 43-44 bps at last week's auction. 

The turnover in the gilts market was INR 44.85 billion at 0920 IST, slightly higher than INR 44.55 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 6.33%, 2035 gilt is seen at 6.25-6.30%. For the 6.79%, 2034 gilt, dealers see the yield at 6.30-6.35%. (Vidhushi RajPurohit)

India Gilts: Seen steady on lack of fresh cues; state bond auction result eyed

MUMBAI – Prices of government bonds are likely to open steady on Tuesday due to lack of any incremental cues, dealers said. Traders will also take cues from Tuesday's state-bond auction result, they said. Traders are expected to closely track intraday movements in US Treasury yields ahead of US CPI inflation data for May, which is due on Wednesday. India's CPI print for May, due on Thursday, is also awaited by traders.

"There are no new cues right now, mostly market will be flattish. Some selling can continue, but we don't see any sharp movement in any particular direction," a dealer at a state-owned bank said. "It will be mostly based on data for now, and till the India inflation print is out, market will be mostly range-bound."

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.26-6.30%. The gilt ended at INR 100.33 or 6.28% yield on Monday. For the most traded and erstwhile 10-year benchmark, 6.79%, 2034 gilt, traders expect a range of 6.33-6.37%. The 2034 gilt closed at INR 103.07 or 6.35% yield on Monday.

Hopes of deeper rate cuts were erased after the Reserve Bank of India's Monetary Policy Committee changed its policy stance to 'neutral' from 'accommodative', which led gilt prices across tenures to slump Monday. The RBI's rate-setting panel's decision to cut the repo rate by 50 basis points to 5.50% was a positive for the market, and traders expect the gilt market to gradually stabilise after getting clarity on the outlook once the May CPI prints for the US and India are released.

Some traders were of the view that the yield levels on gilts are lucrative, which could lead to some buying by state-owned banks. However, caution before the inflation print is likely to keep traders from any sharp purchases, dealers said. During the day, traders are also likely to take cues from the result of the INR 183.30-billion state bond auction at 1030-1130 IST. Traders expect the spread between gilts and state bonds to widen after Friday's MPC decision, they said. At last week's state bond auction, the cut-off yield for states' 10-year bonds were at 6.63-6.64%, a spread of 43-44 basis points over the 10-year benchamark, 6.33%, 2035 bond issued by the Centre. (Vidhushi RajPurohit)

End

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

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.