More Stories

Informist, Wednesday, Jul. 16, 2025

By Aaryan Khanna

NEW DELHI – Government bond prices ended little changed Wednesday from the previous day as traders refrained from placing large bets because of the lack of domestic cues. Bond prices recovered from early lows as investors stepped up purchases at levels seen as lucrative, dealers said.

The 10-year benchmark 6.33%, 2035 gilt closed at INR 100.12, or 6.31% yield, against INR 100.14, or 6.31% yield Tuesday. The most-traded 6.79%, 2034 bond closed at INR 102.85, or 6.38%, unchanged from Tuesday's closing level. Trade volumes fell to their lowest since Mar. 10.

Bond prices had fallen slightly at the opening after US Treasury yields rose overnight. At 0930 IST, the yield on the 10-year benchmark US Treasury note was 4.48%, the highest in more than a month, from 4.43% at 1700 IST Tuesday. The benchmark yield was little changed at 4.49% by the end of Indian market hours. US yields rose as CPI inflation for June, published after market hours Tuesday, indicated the possible impact from President Donald Trump's tariff policies. Odds of the US Federal Open Market Committee cutting rates in September decreased.

However, bond prices recovered almost immediately amid muted trade volumes. Investors picked up on-the-run gilts on the view that yields were at the higher end of the trading range and offered compelling returns over the cost of funding even near the repo rate of 5.50%, dealers said. This was virtually the only significant price activity that happened during the day, and prices remained in a narrow band through the day after 1000 IST.

"I had expected that vols (volatility) would pick up today because India and US CPI data are both out, and market would position after them," a dealer at a private-sector bank said. "But no one seems interested in trading on either side, there are no volumes. So we are also not doing too much."

Some traders said the chances of a rate cut in August had increased after India's CPI inflation fell to a 70-month low of 2.10% in June, with July's inflation print expected below 2%. However, comments from the RBI in the past about having limited policy space to cut rates and the change in the Monetary Policy Committee's stance to "neutral" from "accommodative" are holding traders back from making aggressive bets on rate cuts in India, dealers said.

Traders said RBI Governor Sanjay Malhotra's commentary on rates Tuesday in an interview did not shed much light on the next policy actions, and the rate-setting panel may wait for the US FOMC to cut rates first. The US panel's next decisions are scheduled in late July and then in September. With a near-zero chance of a July rate cut in the US, according to Fed funds futures data on the CME FedWatch tool, dealers said a rate cut by the RBI's rate-setting panel next month would be a surprise, and prices may only rise in the immediate run-up to the policy decision.

"It could be that the MPC surprises us again and cuts the (repo) rate," a dealer at a state-owned bank said. "But the market is still not convinced it will happen, or in general that the range is going to break soon, so even during the day the activity has been low for the last two weeks."

Trade in long-term bonds was dull after four sessions of increased activity, though the new 15-year 6.68%, 2040 bond has gained traction among traders soon after its first issuance. It was the third most-traded paper Wednesday. The 15-year paper moved in line with the 10-year segment rather than gilts maturing in 30-50 years as investor interest had been concentrated in the long end and not been seen for the 15-year paper, dealers said. The 30-year benchmark 7.09%, 2054 gilt ended lower ahead of its scheduled issuance worth INR 120.00 billion at auction on Friday, they said.

At the auction, the government will also issue a new five-year, 2030 gilt for a notified amount of INR 150.00 billion. Dealers were confused how to price the bond considering the steepness of the yield curve in that segment. The current five-year benchmark 6.75, 2029 gilt yield was 5.98% Wednesday and the illiquid gilt closest in maturity to the new bond yielded 6.11%. There was one trade in the 2030 paper in the when-issued segment at 6.01% Wednesday, though dealers said the coupon may be a few basis points higher but below 6.05%, provided there were no fresh cues.

The turnover in the government bond market Wednesday was INR 240.20 billion, down from INR 392.90 billion Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. This was the lowest volume in the regular market since Mar. 10. There were two trades worth INR 100.00 million using the wholesale digital rupee pilot, same as on Tuesday.

OUTLOOK

Bond prices Thursday may take cues from movement in US Treasury yields amid a lack of scheduled cues on the domestic front, dealers said. With trading interest muted, prices may remain in a narrow band, they said. 

Short-term bonds may remain well-bid after RBI Governor Malhotra gave clarity on the central bank'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 250.00 billion of gilts maturing in the financial year 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 Thursday. The quantum accepted and cut-off prices may lend cues to short-term bonds Friday, dealers said.

Traders may short-sell bonds near the end of market hours Thursday to make room for fresh supply at the weekly gilts auction worth INR 270.00 billion Friday. The government will sell INR 150.00 billion of a new 2030 bond and INR 120.00 billion of the 7.09%, 2054 gilt.

Traders also expect India and the US 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 fell below 86 a dollar again Wednesday.

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: Remain in thin band; strong demand from MFs at T-bill auction

MUMBAI--1528 IST--Prices of government bonds remained in a thin band due to lack of significant triggers, dealers said. The result of the Treasury bill auction was largely along expected lines due to strong bidding from mutual funds, dealers said.

"We're just waiting for some fresh domestic triggers," a dealer at a state-owned bank said. "We're not buying, we're not selling. The next big thing is GDP now. There's a chance of (rate) cuts in the future because governor said right, yesterday, that inflation can be lower than forecasted and they're worried about growth, so basically he opened up chances of a cut."

The next big domestic data print for bond traders is GDP growth data for Apr-Jun, due end of August. Until then, bond prices are seen moving in a narrow range. For this week, the buyback auction and the weekly gilt auction will lend cues, but are unlikely to significantly move prices, dealers said. On Thursday, the government will buy back three gilts worth INR 250 billion. The buyback auction of the three gilts, all maturing in 2026-27 (Apr-Mar), will be held at 1030-1130 IST. Preference for short-term securities has been muted this week, which may lead to higher participation at the buyback auction, as traders price in a higher cost of borrowing after indications from the central bank that it prefers the overnight call money rate closer to repo.

Turnover in the gilts market was INR 169.00 billion as of 1530 IST, much lower than INR 277.15 billion at the same time Tuesday, 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 6.28-6.36% and that on the 6.79%, 2034 gilt at 6.35-6.40%.  (Cassandra Carvalho)

India Gilts: In thin band, volumes dull on lack of domestic triggers

India Gilts: In thin band, volumes dull on lack of domestic triggers

MUMBAI—1335 IST--Prices of government bonds were in a thin band, after recovering losses earlier in the day. Trade volume was thin due to lack of significant domestic triggers, dealers said. Turnover in the gilts market was INR 99.30 billion as of 1330 IST, much lower than INR 171.10 billion at the same time Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.

Traders favoured the 6.79%, 2034 gilt for their trading books, as its yield hovered in the 6.35-6.40% range. However, traders refrained from aggressive bets, and banks also did not heavily purchase gilts for their investment books, dealers said.

Some traders also placed short bets before the weekly gilt auction. The government will sell INR 150 billion of a new five-year, 2030 gilt and INR 120 billion of the 7.09%, 2054 bond Friday. The new 2030 bond was traded at 6.01% in the 'when-issued' segment of Reserve Bank of India's Negotiated Dealing System-Order Matching platform. Traders were divided on the expected coupon of the bond, as some refer to the 6.75%, 2029 bond as the five-year benchmark, while others looked at bonds of comparable maturity in 2030 or 2031 for reference.    

Traders will track the result of the Treasury bill auction of INR 200 billion. Demand is seen firm, inspite of the rise in US Treasury yields, though the result would likely hinge on participation from mutual funds, dealers said. Banks were less likely to pick up T-bills due to a reduction in the spread between funding costs and the securities, dealers said. Traders are now pricing in an overnight call money market rate of 5.40-5.50%, from 5.25-5.35% earlier, after RBI Governor Sanjay Malhotra said the central bank would prefer borrowing rates closer to the repo rate. An Informist poll estimated the cut-off on the 91-day T-bill at 5.39%, same as the cut-off at last week's auction. 

Despite the rise in US yields, the fall in bond prices was limited as these were lucrative levels to pick up gilts for trading books, dealers said. Traders expect atleast one more cut in the repo rate, though they are divided on when, with most expecting one in October or later in the financial year, dealers said. Moreover, current prices were not profitable enough to sell gilts, dealers said. 

"This is a good level to buy the 10-year (6.79%, 2034 gilt) right now," a dealer at a state-owned bank said. "But we're stuck because no one is buying for anything other than trading books and this is not a level to sell also."

For the rest of 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: Slightly down as US yields rise; recover early losses

India Gilts: Slightly down as US yields rise; recover early losses

MUMBAI--0932 IST--Prices of government bonds were a tad down Wednesday tracking an overnight rise in US Treasury yields, dealers said. Gilt prices recovered most of the losses after opening lower on buying at levels seen lucrative, dealers said. After a soft inflation print in India, traders are betting on at least one more cut in the repo rate in the rest of 2025-26 (Apr-Mar), and have currently overlooked the rise in US yields, dealers said. 

Fears of repercussions of US President Donald Trump's tariff policy on the Indian economy have ebbed, especially on the back of a soft CPI print in June, even as US inflation data reflected the likely impact on their economy, dealers said. At 0930 IST, the yield on the benchmark 10-year US Treasury note was 4.48%, the highest in more than a month, from 4.43% at 1700 IST Tuesday. The US yields rose as CPI inflation for June, published post market hours Tuesday, indicated the possible impact from Trump's tariff policies. Odds of the US Federal Open Market Committee cutting rates in September decreased.    

"Indian market is not affected by the US yield rise right now," a dealer at a private sector bank said. "In absolute terms these levels are very attractive to buy, 6.30-6.40% (yield) on a 10-year is good. May be if US yields (10-year US yield) cross 4.50% then we'll see some movement here."

India's CPI inflation for June, published Monday, was at its lowest in six years at 2.1%. Reserve Bank of India Governor Sanjay Malhotra in interactions with media has indicated that the RBI's Monetary Policy Committee could cut rates further if growth weakened or inflation moderated. Traders now see a cut in the repo rate in December or early next calendar year., and expect the yield curve to steepen until then. 

Trade volume in the benchmark 6.33%, 2035 gilt was extremely low compared to the erstwhile 10-year benchmark 6.79%, 2034 gilt, likely because the bond was much more expensive, and traders favoured the liquid 2034 gilt.

Traders will track the result of the Treasury bill auction of INR 200 billion later in the day. Turnover in the gilts market was INR 14.90 billion as of 0930 IST, slightly higher than INR 13.50 billion at the same time Tuesday, 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 6.28-6.36% and that on the 6.79%, 2034 gilt at 6.35-6.40%.  (Cassandra Carvalho)

India Gilts: Seen lower as 10-year US Treasury yld nears 4.50% post Jun CPI

MUMBAI – Prices of government bonds are seen opening lower Wednesday as the yield on the benchmark 10-year US Treasury note neared the key 4.50% level after US CPI inflation data for June indicated the effects of US President Donald Trump's tariff policies, dealers said. 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.28-6.36% during the day. On Tuesday, the bond ended at INR 100.14, or 6.31% yield. For the erstwhile 10-year benchmark 6.79%, 2034 gilt, traders expect a range of 6.35-6.42%. The 2034 gilt closed at INR 102.85, or 6.38% yield Tuesday. The 2034 gilt is seen opening near the key 6.40% level Wednesday. At 0800 IST, the yield on the benchmark 10-year US Treasury note was 4.48%, the highest in more than a month, from 4.43% at 1700 IST Tuesday.  

US CPI inflation for June, published post market hours Tuesday, rose 2.7% on year, which was in line with consensus estimates from The Wall Street Journal. However, the data indicated possible impact from Trump's tariff policies. Odds of the US Federal Open Market Committee cutting rates in September decreased. At 0800 IST, the CME FedWatch tool showed that Fed fund futures reflected a 45% probability of the FOMC holding rates at its meeting in September, up from 37% a day ago.

On the domestic front, losses may be limited as traders see the 6.40% yield on the 6.79%, 2034 gilt as a lucrative level to purchase gilts. CPI inflation for June, published Monday, was at its lowest in six years, which may give some comfort to bond prices. Despite the low print, comments from Reserve Bank of India Governor Sanjay Malhotra Tuesday did not provide any cues on further rate cuts. 

Cut-off yields at the Treasury bill auction of INR 200 billion Wednesday are seen spiking slightly though appetite for these short-term securities is seen firm from mutual funds and banks, dealers said. 

Bonds may also take cues from offshore developments through the movement of the rupee against the dollar. Foreign banks, which have net purchased gilts worth INR 90.70 billion this month, may turn net sellers Wednesday, dealers said.  (Cassandra Carvalho)

End

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

Edited by Rajeev Pai

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 (11) 4220-1000

Send comments to feedback@informistmedia.com

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