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Informist, Tuesday, Jul. 15, 2025

By Aaryan Khanna

NEW DELHI – Prices of most government bonds ended little changed, even as traders tracked from a variety of cues through the day. Comments from Reserve Bank of India Governor Sanjay Malhotra Tuesday did not provide more clarity on the interest rate trajectory, dealers said. Buys from foreign banks and some positivity from the benign June inflation print Monday led to the 10-year benchmark gilt ending slightly higher.

The 10-year benchmark 6.33%, 2035 gilt closed at INR 100.14, or 6.31% yield, against INR 100.09, or 6.32%, Monday. The most-traded 6.79%, 2034 bond closed at INR 102.85, or 6.38%, against INR 102.82, or 6.38%, Monday.

In an interview with CNBC-TV18, Malhotra said the RBI's Monetary Policy Committee was dictated more by the outlook on CPI inflation, and not the current inflation data. This was a disappointment to some traders who had purchased gilts earlier in the day, in anticipation that the governor could indicate a quicker rate cut cycle after CPI inflation fell to 2.10% in June, the lowest reading since January 2019 and at the lower end of the RBI's 2-6% comfort band. Moreover, CPI inflation in Apr-Jun averaged 2.7%, against the RBI's forecast of 2.9%.

"There were no fresh cues from the governor, he has already said whatever he needed to with actions," a dealer at a foreign bank said. "He again brought up ghosts in the inflation data by saying he is focusing on future inflation, so it doesn't look like he is comfortable in indicating that the room has opened up yet." 

Bonds had opened lower after the RBI announced a three-day, INR-1-trillion variable rate reverse repo auction after market hours Tuesday. With INR-1.52-trillion already parked with the central bank in a seven-day VRRR, traders said the RBI was likely aiming to align call money rates to the policy repo rate. The auction was undersubscribed as banks preferred to hold on to cash. When Malhotra confirmed the RBI's intention in the interview, there was no reaction in the market, dealers said. However, traders said there was a greater clarity on the RBI's liquidity actions going ahead.

Even short-term gilts ended higher as some traders had expected the RBI to announce daily VRRR auctions starting this week. The five-year benchmark gilt rose as asset-liability managers still favoured bonds maturing up to seven years and said the spread of around 50 bps from the cost of funding was still attractive. Some dealers also held on to hope of a further rate cut in Aug-Dec, especially after the fall in headline inflation, though they said the market was not pricing it in yet.

Prices recovered soon after the open as the 6.33%, 2035 bond's price hit INR 100.00, seen as the bottom of the near-term trading range. They rose ahead of the RBI governor's initial comments at 1400 IST, in anticipation Malhotra may indicate some positivity on rate cuts. With some traders disappointed with the comments, the 6.79%, 2034 gilt persisted off highs through the rest of the day. 

Gilts also gave up some gains due to higher-than-expected cut-off yields on state bonds maturing within 8-12 years, dealers said. The RBI set cut-off yields of 6.86-6.87% on states' 8-year bonds, much higher than an Informist poll estimate of 6.78%. However, buying from foreign banks and portfolio investors helped buoy gilt prices, dealers said. Data from Clearing Corp. of India at 1815 IST showed foreign portfolio investors purchased fully accessible route gilts worth nearly INR 10 billion Tuesday

"The buying in the 10-year came from traders near the end," a dealer at a primary dealership said. "Swaps were getting received and there was some activity from foreign banks before the US CPI."

Bonds maturing in 40 and 50 years ended higher, continuing the momentum since Friday after firm demand for the 7.09%, 2074 gilt at auction. However, traders had begun booking profits after the sharp rise in prices and the buying momentum had decreased, dealers said.

With the increase in trading volumes of the long-term bonds, some investors and traders shifted their holdings in the 40-year segment to the newer 6.90%, 2065 gilt from the older 7.34%, 2064 gilt, which has seen declining trading activity after being replaced as the on-the-run gilt. The 30-year benchmark 7.09%, 2054 gilt ended lower ahead of its supply at the weekly gilt auction on Friday, dealers said.

Turnover in the government bond market Tuesday was at INR 392.90 billion, from INR 357.90 billion Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were two trades worth INR 100 million using the wholesale digital rupee pilot, the same as on Monday.

OUTLOOK

Bond prices on Wednesday may take cues from the movement in US Treasury yields after the release of US CPI data for June at 1800 IST. Headline CPI inflation was slightly higher than expectations at 0.3%, while core CPI inflation was cooler at 0.2% on month, against expectations of a 0.3% rise.

Short-term bonds may remain well bid after RBI Governor Sanjay Malhotra provided clarity on the RBI's liquidity management aims, and said he would ideally like call money rates to adhere to the policy repo rate of 5.50%, dealers said. The government's decision to buy back INR 250 billion of gilts maturing in 2026-27 (Apr-Mar) may lend some support to Treasury bills and bonds maturing up to two years, they said. The RBI said the government would buy back the 7.27%, 2026, 5.63%, 2026, and 6.99%, 2026 gilts on Thursday.

Prices of long-term bonds may continue to rise after firm demand for the 50-year benchmark bond at the weekly gilt auction Friday and renewed trader interest, dealers said. However, bonds in 30 years may remain under pressure as traders make room for the 7.09%, 2054 gilt that the government will sell this week.

Traders also expect the US and India to strike a preliminary trade deal soon. This is likely to help the rupee appreciate and also result in some foreign portfolio investment inflows into both equities and fixed income, dealers said. The rupee topped 86 a dollar Monday for the first time in a week due to continued uncertainty on the trade deal.

Crude oil price movements may also lend cues. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.26-6.34% Wednesday and that on the most-traded 6.79%, 2034 bond is seen at 6.32-6.40%.

India Gilts: Off highs; RBI Malhotra's comments fail to provide rate cut cues

MUMBAI--1528 IST--Prices of government bonds were off highs after Reserve Bank of India Governor Sanjay Malhotra's comments in an interview to CNBC-TV18 failed to provide any cues on further cuts in the repo rate, dealers said.  

"It's bearish for the market not because governor was bearish but because he didn't say anything positive (pro-rate cuts)," a trader at a primary dealership said. "And he's still sticking to the optimistic growth part."

Malhotra said the RBI's Monetary Policy Committee was dictated more by the outlook on CPI inflation, and not the current inflation data. This was a disappointment to some traders who had purchased gilts earlier in the day, in anticipation that the governor could indicate a quicker rate cut cycle after a benign CPI inflation print for June. 

Malhotra also said that the central bank would ideally prefer the overnight call money rate near the policy rate. This was evident through the variable rate reverse repo auctions the RBI had recently conducted, dealers said.  

Gilts also gave up some gains due to higher-than-expected cut-off yields on state bonds maturing within 8-12 years, dealers said. The RBI set cut-off yields of 6.86-6.87% on states' 8-year bonds, much higher than an Informist poll estimate of 6.78%. Long-term gilts also gave up gains even though the cut-off on Telangana's 35-year bond was 7.09%, sharply lower than 7.13% estimated in an Informist poll.

The losses were limited due to value-buying from banks' asset and liability managers, and some foreign banks and portfolio investors, dealers said. Data from Clearing Corp. of India showed foreign portfolio investors purchased gilts worth INR 2.39 billion through the fully accessible route, as of 1528 IST.

Turnover in the gilts market was INR 283.35 billion as of 1530 IST, higher than INR 233.20 billion at the same time Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the rest of the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.25-6.36% and that on the 6.79%, 2034 gilt at 6.32-6.40%. (Cassandra Carvalho)

India Gilts: Up; focus on RBI governor comments at 1400 IST post low Jun CPI

India Gilts: Up; focus on RBI governor comments at 1400 IST post low Jun CPI

MUMBAI--1253 IST--Prices of government bonds were up on expectation that Reserve Bank of India Governor Sanjay Malhotra's comments in a television interview would indicate a quicker rate cut cycle, on the back of CPI inflation for June being at a six-year low. Television news channel CNBC-TV18 will screen an interview with the governor at 1400 IST, it said. The channel's preview of some of the questions revolved around CPI, liquidity and US President Donald Trump's tariffs. 

"I feel like there's hope in the market that the governor's comments will be dovish after such a low CPI reading," a trader at a primary dealership said. "Because he set a really high bar last time (at the June policy press conference), that you know, 'I've done what I had to do' sort of commentary."    

CPI inflation data for June, published Monday, was at a six-year low of 2.1%, much lower than 2.82% in May, and an Informist poll estimate of 2.3%. However, traders' rate views were litle changed post the data. Some traders were hoping for a print below 2% for a rethink on rate cuts. Instead, core CPI inflation rose to a 21-month high of 4.4%, which led to some traders trimming their gilt holdings after the data, dealers said. Traders expect the RBI's Monetary Policy Committee to next cut rates either in October, December or the next calendar year.  

Traders hoped the governor's comments would offer some solace and clarity after confusion in the bond market regarding the central bank's policy on liquidity management and rates. After the RBI has conducted several variable rate reverse repo auctions since mid-June, traders are of the view that the central bank would prefer to keep overnight money market rates anchored between the Standing Deposit Facility and the policy repo rate of 5.50%.   

Traders also expect a positive result at the state bond auction. Demand from long-term investors such as insurance companies is seen firm for bonds maturing in 20 years and above, after a spate of gilt purchases from this segment the past few days. Data from Clearing Corp. of India shows that the 'Others' segment, which includes insurance companies, provident funds and the Reserve Bank of India, net purchased gilts worth INR 122.82 billion since Jul. 1 till Monday. Purchases from long-term investors in the secondary gilt market Tuesday also aided the rise in prices, dealers said.  

Banks and mutual funds are seen purchasing the short-term papers, dealers said. The cut-off yield on Odisha's 3-year paper could be lower than an Informist poll estimate of 6.21%, due to firm demand, and its small quantum of INR 5.00 billion, dealers said. 

Turnover in the gilts market was INR 136.60 billion as of 1230 IST, higher than INR 129.05 billion at the same time 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 6.25-6.36% and that on the 6.79%, 2034 gilt at 6.32-6.40%. (Cassandra Carvalho)

India Gilts: Steady; buys at lucrative levels offset losses from VRRR notice 

India Gilts: Steady; buys at lucrative levels offset losses from VRRR notice 

MUMBAI--0930 IST--Prices of government bonds were steady after opening lower, as current levels were lucrative to buy gilts, dealers said. The INR 100.00 level on the 6.33%, 2035 gilt, and the INR 102.82 level on the 6.79%, 2034 gilt were considered cheap to pick up bonds. 

Volume was low and trade was concentrated in the 10-year gilts and the newly issued 6.28%, 2032 bond. Traders await the result of the state bond auction. Demand for the auction is seen firm, even though the quantum was higher than indicated in the state borrowing calendar for Jul-Sept. Twelve states will raise INR 269 billion through bonds on Tuesday, higher than INR 174 billion scheduled in states' indicative borrowing calendar. Some traders said they would prefer the higher-yielding state bonds over gilts.

"Demand is seen fine, because these current levels are good," a dealer at a state-owned bank said. "And another thing is that there are short-term papers this time, which have not been there in the past two to three auctions. Around 15,000 crores (INR 150 billion) is just short-term securities like eight-year, nine-year papers which will be bought by banks and mutual funds."

Later in the day, traders will also track RBI Governor Sanjay Malhotra's comments in an interview with CNBC TV18, they said. Traders await clarity on the central bank's policy on liquidity management and rates, especially after the RBI said it will conduct a three-day VRRR auction for a notified amount of INR 1 trillion at 1000-1030 IST Tuesday. This is after the central bank accepted all offers worth INR 1.52 trillion at the seven-day, INR 2.50 trillion VRRR auction Friday. 

Traders see the VRRR announcement as a move where the RBI wants to keep overnight money market rates anchored between the Standing Deposit Facility and the policy repo rate of 5.50%. The weighted average call rate was 5.44% Tuesday, up from 5.31% Monday, while the weighted average triparty repo rate was 5.29%, up from 5.19% Monday. 

Turnover in the gilts market was INR 13.10 billion as of 0930 IST, lower than INR 58.40 billion at the same time Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Trade was concentrated in the 10-year benchmark 6.33%, 2035 gilt and the erstwhile 10-year benchmark 6.79%, 2034 gilt. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.28-6.36% and that on the 6.79%, 2034 gilt at 6.35-6.40%. (Cassandra Carvalho)

India Gilts: Seen dn on RBI's INR-1-tln VRRR; state bond auction result eyed

MUMBAI – Prices of government bonds are seen opening lower after the Reserve Bank of India announced a three-day variable rate reverse repo auction of INR 1 trillion for Tuesday, dealers said. Some dealers had expected such an announcement, so the impact of the notice may be limited. Short-term bonds may fall more than gilts maturing in 10 years or more.  

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.28-6.36% during the day. The bond is seen opening 4-5 paise lower. On Monday, the bond ended at INR 100.09, or 6.32% yield. For the erstwhile 10-year benchmark 6.79%, 2034 gilt, traders expect a yield range of 6.35-6.40%. The 2034 gilt closed at INR 102.82, or 6.38% yield Monday.

Traders see the VRRR announcement as a move where the RBI wants to keep overnight money market rates anchored between the Standing Deposit Facility and the policy repo rate of 5.50%, which may weigh on gilts maturing up to seven years, dealers said.

The state bond auction result may lend direction to gilt prices later in the day, dealers said. Twelve states will raise INR 269 billion through bonds on Tuesday, higher than INR 174 billion scheduled in the states' indicative borrowing calendar. Some traders said they would prefer the higher-yielding state bonds over gilts. However, prices of long-term bonds may continue to rise after firm demand for the 7.09%, 2074 bond at the weekly gilt auction Friday and renewed trader interest, dealers said.

On the global front, the yield on the benchmark 10-year US Treasury note was largely unchanged at 4.44% at 0800 IST, from 4.43% at 1700 IST Monday. US CPI for June, due at 1800 IST, is seen rising to 2.7% on an annual basis from 2.4% in May, according to The Wall Street Journal, with core inflation seen rising to 3.0% from 2.8% the previous month.

Bonds may also track the movement of the rupee against the dollar. Foreign portfolio investors purchased gilts worth INR 17.32 billion Monday, through the fully accessible route, and may continue to do so on Tuesday as well. (Cassandra Carvalho)

End

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

Edited by Akul Nishant Akhoury

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