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Informist, Thursday, Aug. 7, 2025

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended sharply up Thursday as traders covered short bets in the benchmark 10-year 6.33%, 2035 gilt after getting "squeezed" in the gilt, dealers said. Prices rose also on speculation that Ukraine and Russia could agree to a truce mediated by the US, or that the penalty on Indian goods exported to the US could be reduced after media reports said US President Donald Trump and Russian President Vladimir Putin are likely to meet as soon as next week.

Traders had placed short bets on the gilt on Wednesday after the Reserve Bank of India's Monetary Policy Committee indicated that it was unlikely to cut rates sooner, despite inflation data printing below the target. Traders had also placed short bets on the 10-year benchmark and bought short-term bonds maturing in up to five years to avoid the risk of holding longer-term papers after the policy outcome.

The 10-year benchmark 6.33%, 2035 gilt closed at INR 99.59, or a yield of 6.3861% against INR 99.37, or 6.4162% yield, Wednesday. The erstwhile 10-year benchmark 6.79%, 2034 bond closed at INR 102.25, or 6.4591%, against INR 102.11, or 6.4797%, Wednesday.

"People are not getting the security, there's a short of 17,000 crore (INR 170 billion)," a dealer at a state-owned bank said. "There's some buying from PSUs (state-owned banks), but nothing other than that. It will be range-bound only within 6.38-6.43% (yield on 10-year benchmark gilt)."

The number of trades in a paper in the special repo segment of the Clearcorp Repo Order Matching System is a proxy for tracking short sales in a particular bond. The data at 1700 IST showed trades worth INR 171.92 billion in the 6.33%, 2035 gilt, at a weighted average rate of 3.59%. The rate fell to a low of 0.01% during the day as traders rushed to get their hands on the bond.

Traders who had purchased the 10-year benchmark gilt at a yield of 6.33-6.35% in the secondary market did not want to sell the gilt at current levels, and hence traders who had to cover their short bets were not getting stock of the bond, dealers said. Geopolitical developments boosted market sentiment slightly in the second half of trade, dealers said. A slight rise in the rupee against the dollar, along with the news of the Trump-Putin meeting, aided the rise in prices, they said.  

Traders expect the yield curve will "bear-steepen" or "bear-flatten" due to increased risk in longer-tenure papers, stemming from uncertainty regarding both the rate cut and geopolitical developments, yet the yields of these long-term papers are attractive to lock in.

During the day, traders preferred purchasing gilts maturing in up to 10 years, though some traders also purchased the 6.68%, 2040 bond. The 15-year benchmark gilt was the third most traded gilt on the RBI's Negotiated Dealing System-Order Matching platform with a turnover of INR 26.25 billion. The bond ended at a yield of 6.76%, a spread of 38 basis points over the benchmark 10-year gilt, which was lucrative to buy if traders had the risk appetite for the tenure, dealers said.

Traders hope that the government will reduce the supply of gilts maturing in 10 to 15 years and increase short-term bond supply. Short-term bonds are well-protected by the low supply of both state bonds and gilts and by government buyback and switch auctions in these gilts, dealers said. However, traders had a low stock of these gilts since investors like asset and liability managers and mutual funds lapped up most of the supply at auctions, they said. 

Traders preferred the eight-year 7.18%, 2033 gilt and the nine-year 7.10%, 2034 gilt, along with bonds maturing in up to five years, due to reduced appetite for longer-term gilts on account of the uncertainty on whether the MPC would cut rates. The 10-year benchmark gilt yield had risen 8 bps Wednesday, as traders pared bets of a rate cut in October. Several traders now expect a cut in December, while some do not expect a cut and see 5.50% as the terminal repo rate. 

Traders have differing views on GDP growth, which is the next major cue on rates. Some expect Apr-Jun GDP growth to undershoot the RBI's forecast of 6.5% due to weak corporate earnings and low pickup in credit disbursements. Others see the Apr-Jun number to be on par with the central bank's forecast or higher, due to strong government expenditure and good monsoon rainfall. Trump's imposition of tariffs on India could lead to a lower-than-forecast GDP growth starting in August, dealers said.  

Long-term bonds were down Thursday ahead of the fresh supply Friday. The government will sell INR 110 billion of the 6.28%, 2032 bond and INR 140 billion of the 7.09%, 2074 bond. Following the slump in secondary market prices on Wednesday, demand from insurance companies is expected to be firm for the 2074 bond, as levels are seen as lucrative for locking in. Dealers see the cut-off yield on the 2074 bond at around 7.20%. The bond ended at 7.18% Thursday. However, traders are still uncertain whether investors will be interested in purchasing new stock. Demand for the seven-year gilt is seen firm from both traders and asset and liability managers, dealers said. The bond was last traded at a yield of 6.32% in the When Issued (ReIssues) segment of the RBI's Negotiated Dealing System-Order Matching platform. Dealers expect the cut-off yield on the bond to be around a similar level. 

Treasury bills were the safest investments at current prices, dealers said. State bonds were also lucrative to buy for 'held-to-maturity' books since spreads have widened due to the heavy supply of these securities, they said. However, several dealers had reached their investment limits in state bonds, and the illiquid nature of these bonds made them risky to hold in large quantities.  

The turnover in the government bond market Thursday was INR 397.15 billion, sharply lower than INR 691.85 billion Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were two trades using the wholesale digital rupee pilot for a total of INR 100 million in the 7.10%, 2034 gilt. There were no trades using this method Wednesday.

OUTLOOK

On Friday, bond prices may take cues from global developments and the overnight movement in US Treasury yields after the release of weekly jobless claims in the US for the week ended Saturday. Data released after market hours showed that jobless claims rose 7,000 to 226,000 in the week ended Saturday, higher than a Wall Street Journal consensus estimate of 221,000.  

Traders will also take cues from the result of the weekly gilt auction. Bonds may also track the movement of crude oil prices and the movement of the rupee against the dollar. Traders await developments on tariffs and confirmation of talks between Trump and Putin could soothe market sentiment, dealers said. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.38-6.45% and that on the 6.79%, 2034 bond is seen at 6.42-6.50%.

India Gilts: Up as traders cover short bets, focus on fresh supply Fri

India Gilts: Up as traders cover short bets, focus on fresh supply Fri

MUMBAI--1604 IST--Prices of most government bonds were up as traders covered short bets, dealers said. Traders covered short bets, which were placed in the 10-year benchmark 6.33%, 2035 gilt Wednesday. 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 1530 IST showed trades worth INR 171.92 billion in the 6.33%, 2035 gilt. Traders covered these short bets, and the weighted average rate on the bond was 3.59%, and it hit the day's low of 0.01%.

Traders are now focusing on the gilt auction on Friday. The government will sell INR 110 billion of the 6.28%, 2032 bond and INR 140 billion of the 7.09%, 2074 bond. Following the slump in secondary market prices on Wednesday, demand from insurance companies is expected to be firm for the 2074 bond, as levels are seen as lucrative for locking in. However, traders are still uncertain whether investors will be interested in purchasing the new stock. Long-term bonds were down Thursday ahead of the fresh supply. Demand for the seven-year gilt is seen firm from both traders and asset and liability managers, dealers said. The bond was last traded at a yield of 6.32% in the When Issued (ReIssues) segment of the RBI's Negotiated Dealing System-Order Matching platform. 

Traders prefer gilts maturing in up to five years, to avoid the risk of holding longer-term papers. However, most of the short-term supply was concentrated in the hands of investors, dealers said, which led to traders buying gilts of 8- to 10-year maturities. Traders had placed short bets on liquid papers such as the 10-year benchmark Wednesday after the Reserve Bank of India's Monetary Policy Committee indicated further scope for rate cuts was limited. 

"They (the MPC) will not go for a 25 bps cut now, either they won't cut or it'll be a 50 bps cut," a dealer at a private sector bank said. "There is clear space for a cut because they are projecting low inflation, but that refusal to cut says a lot and I don't think there will be a cut."  

Traders have differing views on GDP growth, which is the next major cue on rates. Some expect Apr-Jun GDP growth to undershoot the RBI's forecast of 6.5% due to weak corporate earnings and low pickup in credit disbursements. Others expect the Apr-Jun figure to be at par with the central bank's forecast or higher, due to strong government expenditure and good monsoons.

At 1530 IST, turnover in the gilts market was around INR 276.35 billion, much lower than INR 456.60 billion at the same time Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 10-year benchmark is expected to trade in a thin band of 6.37-6.42% until there's a breach on either side, which, if broken, could fall to 6.35% or rise to 6.45%, dealers said. For the rest of the day, the yield on the 6.79%, 2034 gilt is seen at 6.44-6.50%. Traders expect prices to inch lower nearing the end of trade, ahead of the fresh supply Friday and lack of positive sentiment, dealers said. (Cassandra Carvalho)

India Gilts: Up post slump Wed; ylds attractive, traders cover short bets

India Gilts: Up post slump Wed; ylds attractive, traders cover short bets

MUMBAI--1231 IST--Government bond prices reversed losses from earlier in the day, rising on likely buys by state-owned banks as they found yields attractive to buy, dealers said. Traders felt the fall in gilt prices was exaggerated on Wednesday so they bought gilts Thursday and covered short bets placed earlier, they said. 

"There is a divergence in market's expectations and what the MPC (Reserve Bank of India's Monetary Policy Committee) is taking into account, so even though some are seeing that this might be the end of the easing cycle, there is still caution because growth could slowdown and open up space for some cuts in the future," a dealer at a primary dealership said. "Without clarity on rates, it will be just a demand-supply play now."

While traders see an upside in yields due to uncertainty in rates in the near term, they said the rise in yields could be limited as 6.42-6.43% is the next technical yield level on the 10-year benchmark 6.33%, 2035 bond and these levels are lucrative to buy, dealers said. Traders said if 6.42-6.43% yield on the 2035 bond is breached, it could lead to a further sell-off in gilts, dealers said. Traders also covered short bets placed earlier, which led to a rise in gilt prices, they 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. The data at 1215 IST showed trades worth INR 171.92 billion in the 6.33%, 2035 gilt.

Banks' asset-liability managers preferred gilts maturing in up to eight years on attractive yields spreads with the 10-year benchmark. Traders also preferred gilts maturing in up to 10 years to limit their duration risks, dealers said. However, most said that a further rise in prices of gilt maturing in up to five years could be limited as the yield spread on the 10-year 2035 gilt over the 6.75%, 2029 gilt has already widened to over 34 basis points. Prices on longer-tenure bonds were also up on demand from long-term investors as they found yields attractive after the fall on Wednesday, dealers said. 

At 1130 IST, turnover in the gilts market was around INR 133.90 billion, lower than INR 252.70 billion at the same time Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 10-year benchmark is expected to trade in a thin band of 6.38-6.42%, until there's a breach on levels either side, which if broken could fall to 6.35% or rise to 6.45% depending on where the bias in yields is present, dealers said. For the rest of the day, the yield on the 6.79%, 2034 gilt is seen at 6.44-6.50%.  (Srijita Bose)

India Gilts: Mixed; 10-yr benchmark steady as yield attractive, most others down

MUMBAI--0926 IST--Government bond prices were mixed Thursday. While the 10-year benchmark 6.33%, 2035 bond was steady, prices of other bonds were down as traders trimmed portfolios due to lack of firm views on rate cuts in the near term, dealers said. The 2035 gilt opened slightly higher as traders found the yield attractive to buy, dealers said.

The yield on the 10-year benchmark bond had risen over 8 basis points Wednesday after the Reserve Bank of India's Monetary Policy Committee unanimously voted for a status quo on the repo rate and stance. This made yields attractive to some who bought gilts in early trade. However, others said that with no view on further rate cuts in the near term, traders would wait for yields to consolidate. Some traders see the yield on the benchmark 10-year bond hitting 6.45% in the next few sessions, after which it could rise further to 6.48%.

"These levels should hold for some time but if the yield (on the 2035 bond) breaches 6.42% we might hit stop losses and go up to 6.45%," a dealer at a private sector bank said. "In absolute terms, these yields are good, so some buying came because of that."

Investors likely picked up the 15-year 6.68%, 2040 bond as they found the yield attractive, dealers said. However, traders will likely prefer short-term papers maturing in up to 10 years to limit their duration risks. Some traders expect the yield curve to steepen due to aversion to long-term papers while others expect yields across tenures to move in tandem with each other.

At 0926 IST, turnover in the gilts market was around INR 15 billion, slightly lower than INR 15.90 billion at 0930 IST Wednesday, 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 6.38-6.45% and that on the 6.79%, 2034 gilt is seen at 6.44-6.50%.  (Srijita Bose)

India Gilts: Seen down on lack of firm views on more rate cuts by MPC

MUMBAI – Government bond prices may open down as traders are likely to trim portfolios due to lack of firm views on the rate cuts in the near term, dealers said. Traders pared back their expectations of further rate cuts after the Reserve Bank of India on Wednesday unanimously voted for a status quo on stance and the repo rate. 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.38-6.45% during the day. On Wednesday, the bond ended at INR 99.37, or 6.42% yield. Traders expect the erstwhile 10-year benchmark 6.79%, 2034 gilt to trade in a range of 6.42-6.50%. The 2034 gilt closed at INR 102.11, or 6.48% yield on Wednesday. Traders see the yield on the benchmark 10-year 6.33%, 2035 bond hitting 6.45% in the next few trading sessions, after which it could further rise to 6.48%.

Traders will also trim portfolios to make room for fresh stock at the weekly gilt auction Friday. The government will sell INR 110 billion of the 6.28%, 2032 bond and INR 140 billion of the 7.09%, 2074 bond. Due to the slump in the secondary market, demand from insurance companies is seen firm for the 2074 bond as levels are seen lucrative to lock in. However, traders will prefer short-term papers maturing in up to 10 years. Some traders expect the yield curve to steepen due to aversion to long-term papers, while others expect yields across tenures to move in tandem with each other.

Meanwhile, the yield on the US 10-year Treasury note rose 4.25% at 0832 IST from 4.23% at 1700 IST Wednesday. Post market hours Wednesday, US President Donald Trump announced an extra 25% tariffs on Indian exports to the US starting Aug. 27. Previously, the US had imposed 25% tariffs on Indian goods along with an additional penalty for importing oil from Russia. Traders will watch the movement in rupee to take cues to trade during the day.  (Srijita Bose)

End

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

Edited by Saji George Titus

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