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Informist, Friday, Aug. 1, 2025

 

By Srijita Bose

 

MUMBAI – Most government bond prices ended steady Friday on caution ahead of US jobs data, dealers said. Gilts started giving up early gains after the cut-off prices at the weekly gilt auction were slightly below expectations, especially those on the 15-year 6.68%, 2040 gilt, they said. 

 

The 10-year benchmark gilt closed at INR 99.72, or a yield of 6.368%, against INR 99.68, or 6.3735% yield, Thursday. The erstwhile 10-year benchmark 6.79%, 2034 bond closed at INR 102.53, or 6.4191%, against INR 102.55, or 6.4164%, Thursday. Traders who had placed short bets on the 2035 gilt before the weekly gilt auction covered them, and the gilt ended tad higher Friday. 

 

Traders trimmed their positions to reduce risk ahead of the US jobs data. Consensus estimates from The Wall Street Journal see non-farm payrolls at 100,000, down from 147,000 in June. Unemployment rate is seen rising to 4.2% in July from 4.1% the previous month. The data will give cues to the 10-year US Treasury yield, which has risen to 4.38% Friday from 4.35% at 1700 IST, Thursday. Foreign banks and primary dealers likely placed some short bets before the US data to be released in the latter half of the session, dealers said. 

 

"There is caution because of NFP (non-farm payrolls) and weekend...right now everyone is mostly goiong neutral into the MPC (Reserve Bank of India's Monetary Policy Committee outcome)," a dealer at a primary dealership said. "At the auction, cut-offs were decent but traders' demand for the 15-year paper is not there." 

 

Demand for the 15-year 6.68%, 2040 gilt was mixed at the auction, and the gilt was down after auction results. Traders said the bid-to-cover ratio for the bond at the auction was poor, with INR 384.91 billion of total bids received. Demand from traders for the 15-year paper was muted at the auction as they expect steepening of the yield curve, dealers said. A lower outstanding of the 15-year paper, which was at INR 320 billion after Friday's auction, also led to muted demand for the gilt at auction, they said.

 

Bond prices were up before the auction result as traders expected the cut-off on the long-term 6.90%, 2065 gilt to be aggressive due to demand from long-term investors, dealers said. Traders expected prices to rise after the auction, as some wished to cover short bets placed earlier on liquid gilts to make room for the auction stock, dealers said. 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. Data at 1730 IST showed trades worth INR 100 billion in the 6.33%, 2035 gilt, up from INR 84.99 billion Thursday.

 

Dealers said insurers bought INR 20 billion to INR 30 billion of the 2065 bond for forward-rate agreements. However, some dealers said demand for forward-rate agreements was lesser than earlier expected as yields on longer tenure bonds have not significantly changed since last auction. 

 

"I think at this level market has taken some FRA (forward rate agreements)," a dealer at private sector bank said. "So I think they'll look for another level to take FRA. Of course if there's a rally then this level would look good again." 

 

Some longer tenure gilts were up earlier in the day on demand from insurers at yield levels seen attractive. However, traders expect supply in longer-tenure bonds to remain heavy and refrained from picking up these bonds, as they anticipated higher supply of state bonds during the quarter, dealers said. Traders' interest in long-term papers was also muted since they were deemed risky to hold without any strong indication of rate cuts in the near-term, dealers said. 

 

Meanwhile, investors continued to prefer shorter-tenure gilts for their held-to-maturity books and saw some interest from traders as well, dealers said. Traders moved to gilts maturing in up to 10 years to limit their duration risks, they said. 

 

The turnover in the government bond market Friday was INR 354.90 billion, lower than INR 402.50 billion Thursday, 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 Friday, the same as Thursday. 

 

OUTLOOK

Gilts are not traded on Saturdays. On Monday, bond prices are likely to take cues from the movement in US yields after the jobs data, dealers said. Traders have already pared their rate cut bets for next week's MPC outcome, and without significant cues, gilts may trade in a thin band during the day, they said.

 

Traders will also look out for any further announcements on US tariffs on India. The lack of a deal before the Aug. 1 deadline is likely to keep the rupee under pressure. However, some demand could come as traders now expect US tariffs to lead to a slowdown in domestic growth, which could prompt the RBI to cut rates later in the year, dealers said. 

 

Traders will also look out for any announcement on liquidity management – including a new framework – by the RBI for cues to trade gilts maturing up to seven years. Governor Sanjay Malhotra had said he would like the call money rates to adhere to the policy repo rate of 5.50%.

 

Any movement in crude oil prices may also lend cues. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.35-6.41% and that on the 6.79%, 2034 bond is seen at 6.38-6.47%.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	99.7150	6.3680%	99.6750	6.3735%
6.79%, 2034	102.5300	6.4191%	102.5500	6.4164%
6.75%, 2029	102.8000	6.0120%	102.7600	6.0236%
6.68%, 2040	99.8900	6.6910%	100.0200	6.6772%
6.90%, 2065	97.7200	7.0710%	97.6650	7.0753%

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India Gilts: Mixed; most erase gains on caution before US jobs data

 

	1557 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.66	99.77	99.64	99.68	99.68
YTM (%)	6.3756	6.3784	6.3603	6.3732	6.3735

 

	1557 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.79%, 2034
PRICE (INR)	102.50	102.60	102.50	102.55	102.55
YTM (%)	6.4230	6.4230	6.4090	6.4166	6.4164

 

MUMBAI--1545 IST--Government bond prices were mixed. Gilts gave up some earlier gains, and the 10-year gilts traded in a thin band due to caution ahead of the weekend and US non-farm payrolls data for July, due post market hours Friday, dealers said. Meanwhile, some longer tenure gilts were up on demand from insurers at yield levels seen attractive. 

 

"There was around INR 20 billion demand for FRA (forward-rate agreements) for the 40-year (6.90%, 2065) bond at auction today. Overall too, demand from insurers is good but it's because of attractive yields," a dealer at a primary dealership said. "Now, long-term will move according to how the supply in state bonds come...but overall, market is cautious because of NFP."

 

Traders trimmed their positions to reduce risk ahead of the US jobs data. Consensus estimates from The Wall Street Journal expect non-farm payrolls at 100,000, down from 147,000 in June. Unemployment is seen rising to 4.2% in July from 4.1% the previous month. The data will give cues to the 10-year US Treasury yield, which has risen to 4.38% from 4.35% at 1700 IST Thursday. 

 

Demand for the 15-year 6.68%, 2040 gilt was mixed at the auction, and the gilt was down after auction results. Traders said the bid-to-cover ratio for the bond at the auction was poor, with INR 384.91 billion of total bids received. Demand from traders for the 15-year paper was muted at the auction as they expect steepening of the yield curve, dealers said. A lower outstanding of the paper also led to muted demand for the 15-year gilt at auction, they said. 

 

As of 1530 IST, the turnover in the gilts market was INR 248.40 billion, lower than INR 291.75 billion at the same time Thursday, according to data on the Reserve Bank of India'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 6.33-6.40% and that on the 6.79%, 2034 gilt is seen at 6.38-6.45%.  (Srijita Bose)

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India Gilts: Erase most gains as auction cut-off prices tad below view

 

	1332 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.69	99.77	99.64	99.68	99.68
YTM (%)	6.3714	6.3781	6.3603	6.3732	6.3735

 

	1332 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.79%, 2034
PRICE (INR)	102.53	102.60	102.51	102.55	102.55
YTM (%)	6.4198	6.4219	6.4090	6.4166	6.4164

 

MUMBAI--1332 IST--Prices of government bonds gave up most gains after the cut-off prices at the weekly gilt auction were slightly below expectations, especially that on the 15-year 6.68%, 2040 gilt, dealers said. Moreover, traders were also selling gilts to trim exposure to risk over the weekend, especially before the Reserve Bank of India's Monetary Policy Committee meeting next week and the release of US non-farm payrolls for July post market hours, they said.

 

"Cut-offs were largely along expected lines but those who would have expected better might be selling," a dealer at a primary dealership said. "There is weekend and governor will also speak next week so that could also lead to some selling."

 

At the weekly gilt auction, the government sold INR 160 billion of the 6.68%, 2040 bond and INR 160 billion of the 6.90%, 2065 bond. The RBI set a cut-off price of INR 99.82 on the 6.68%, 2040 gilt, lower than an Informist poll estimate of INR 99.85. The RBI set a cut-off price of INR 97.58 on the long-term 6.90%, 2065 gilt, better than INR 97.54 estimated in the poll. Traders said insurers bought INR 20 billion to INR 30 billion of the 2065 bond for forward-rate agreements. A few traders had feared that the cut-off price on the 15-year bond would weigh on market sentiment, since interest of traders in that paper had deteriorated as they preferred short-term gilts due to uncertainty on monetary policy and geopolitics.

 

Bond prices were up before the auction result as traders expected the cut-off on the long-term 6.90%, 2065 gilt to be aggressive due to demand from long-term investors, dealers said. Traders expected prices to rise after the auction, as some wished to cover short bets placed earlier on liquid gilts to make room for the auction stock, dealers said. 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. Data at 1330 IST showed trades worth INR 99.92 billion in the 6.33%, 2035 gilt, up from INR 84.99 billion Thursday.

 

"They're expecting the (cut-off for the) long-term (bond) to be good," a dealer at a state-owned bank said before the auction result. "I think they've taken the prices up from the morning and maybe after the auction we expect prices to settle around open. PSUs (state-owned banks) have bought 15-year so some trade up and down there."

 

As of 1330 IST, the turnover in the gilts market was INR 136.70 billion, lower than INR 239.40 billion at the same time Thursday, according to data on the Reserve Bank of India'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 6.33-6.40% and that on the 6.79%, 2034 gilt is seen at 6.38-6.45%. (Cassandra Carvalho)

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India Gilts: Most recover early losses as rupee rises; fresh supply weighs

 

	0947 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.69	99.71	99.64	99.68	99.68
YTM (%)	6.3714	6.3781	6.3690	6.3732	6.3735

 

	0947 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.79%, 2034
PRICE (INR)	102.56	102.56	102.51	102.55	102.55
YTM (%)	6.4155	6.4219	6.4155	6.4166	6.4164

 

MUMBAI--0947 IST--Prices of most government bonds were steady, recovering early losses as the rupee appreciated against the dollar, dealers said. However, fresh supply of INR 320 billion at the auction weighed on gilts.

 

The rupee surged against the dollar to 87.2850 per dollar from 87.6000 at 0900 IST and 87.5950 per dollar at 1530 IST Thursday, on likely foreign inflows, dealers in the foreign exchange market said. Gilt dealers had expected that the worst was over for the rupee, after it depreciated to a record closing low of 87.5950 per dollar Thursday. 

 

However, bond prices did not rise across the curve, and gilts maturing in around 15-years remained down ahead of the gilt auction. At the auction, the government will sell INR 160 billion of the 6.68%, 2040 bond and INR 160 billion of the 6.90%, 2065 bond. Demand for both gilts will depend on bidding from long-term investors such as insurance companies and provident funds for the 2065 bond, dealers said. Most traders expect firm demand from this segment, especially since long-term bonds reversed the day's losses to end higher Thursday, likely on foreign banks' buys due to expectations of firm bids from insurers at the auction Friday, dealers said. However, some traders did not expect aggressive cut-offs at the auction due to lack of trader interest in long-term papers since they were risky to hold without any strong indication of rate cuts in the near-term, dealers said. 

 

"Actually only insurers' demand will be there for long term, no traders will go for this paper which is why I feel cut-off may not be too aggressive," a dealer at a state-owned bank said. "Around 2,000 crore FRA (INR 20 billion of buys for forward-rate agreements) demand will be there from insurers so that may drive interest."

 

Traders see scope for a rise in prices later in the day, depending on the gilt auction result. As of 0930 IST, the turnover in the gilts market was INR 6.10 billion, lower than INR 58.70 billion at the same time Thursday, according to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform.

 

Nearing the end of trade, dealers may re-align portfolios to trim exposure to risk over the weekend, especially before the release of the crucial non-farm payrolls data for July in the US. For the rest of the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.33-6.40% and that on the 6.79%, 2034 gilt is seen at 6.38-6.45%. (Cassandra Carvalho)

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India Gilts: Seen opening lower ahead of INR-320-bln auction; US yields rise

 

MUMBAI – Prices of government bonds are seen opening slightly lower Friday ahead of the INR-320-billion gilt auction, dealers said. A rise in US Treasury yields may also weigh on gilts. Traders will await the auction result, and some expect prices to rise afterwards, driven by strong demand from long-term investors, they said.

 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.33-6.40% during the day. On Thursday, the bond ended at INR 99.68, or 6.37% yield. Traders expect the erstwhile 10-year benchmark 6.79%, 2034 gilt to trade in a range of 6.38-6.45%. The 2034 gilt closed at INR 102.55, or 6.42% yield on Thursday. The yield on the benchmark 10-year US Treasury note was 4.39% at 0800 IST, higher than 4.35% at 1700 IST Thursday. 

 

At the auction, the government will sell INR 160 billion of the 6.68%, 2040 bond and INR 160 billion of the 6.90%, 2065 bond. After falling sharply during the day, the 40-year benchmark 6.90%, 2065 bond ended sharply higher Thursday, despite the fresh supply on Friday. Some dealers said the rise in long-term bonds close to the end of trade was due to purchases by foreign banks on anticipation of strong demand for forward rate agreements by insurers at the auction on Friday. The 15-year benchmark gilt is also seen lucrative to purchase at current levels, which can be sold at a profit when yields fall closer to another rate cut, expected at least by the Oct-Dec quarter. Traders may realign portfolios ahead of the three-day meeting of the Reserve Bank of India's Monetary Policy Committee starting Monday. 

 

On the global front, US Treasury yields rose due to concerns of the impact of US President Donald Trump's tariffs ahead of his Aug. 1 deadline. Investors also pared back bets of a rate cut by the US Federal Open Market Committee in September after the FOMC outcome late Wednesday indicated it would hold rates for longer. Traders may be cautious towards the end of Indian market hours, as they await the US employment report for July after market hours, and may trim positions to eliminate risk ahead of the weekend. Consensus estimates from The Wall Street Journal expect non-farm payrolls at 100,000, down from 147,000 in June. Unemployment is seen rising to 4.2% in July from 4.1% the previous month.

 

Easing of crude oil prices may provide some comfort to bond traders. Brent crude oil futures for October delivery fell to $71.63 per barrel at 0800 IST from $72.90 a barrel at 1700 IST Thursday. Oil futures snapped a three-day winning streak ahead of Trump's tariff deadline and a meeting of the Organization of the Petroleum Exporting Countries and its allies, which are seen increasing oil output for September. (Cassandra Carvalho)

End

 

US$1 = INR 87.54

 

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

 

Edited by Tanima Banerjee

 

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