More Stories

Informist, Friday, Aug. 8, 2025

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended sharply down across tenures in the last hour of trade Friday, reversing early gains, as a large investor likely trimmed its exposure to risk, especially in long-term bonds, after a source-based report of India pausing defence ties with the US, dealers said. Prices fell further after stop losses were triggered. Traders also trimmed positions ahead of the weekend, dealers said. Traders speculated that the large investor, who trimmed exposure, was either a mutual fund or a foreign portfolio investor. 

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 99.40, or a yield of 6.4121% against INR 99.59, or 6.3861% yield, Thursday. The erstwhile 10-year benchmark 6.79%, 2034 bond closed at INR 102.02, or 6.4922%, against INR 102.25, or 6.4591% Thursday.

 

"There's the Russian oil news and the US defence news," a trader at a primary dealership said. "What is for sure is someone sold a long-term, the fifty-year paper, because they had heavy positions. Let's see the number, whether it's investors or a private bank or who."

 

Friday, Reuters reported, citing three Indian officials, that India has paused plans to buy weapons and aircraft from the US. Post-market hours, the Indian defence ministry denied the report.

 

Dealers said a large investor likely exited its heavy positions in long-term bonds following the report. The news comes shortly after US President Donald Trump imposed an additional 25% tariff on Indian exports to the US. Dealers also said another source-based Reuters report about India being open to reducing oil imports from Russia led to a fall in prices, as it could lead to lower tariffs from the US. Traders were earlier pricing in a moderation in GDP growth due to the higher tariffs by the US.

 

The 7.09%, 2074 bond ended at INR 98.23, down 53 paise from Thursday's close. Earlier in the day, the bond touched the day's high of INR 99.10, after the cut-off price on the gilt was higher than expected at the weekly gilt auction. Traders speculated that after two days of purchases at appealing levels, following the 8-basis-point rise in the 10-year benchmark yield Wednesday, some participants had heavy portfolios and immediately sold their longer-term gilts to reduce exposure to risk after the two news reports reduced the risk appetite. Stop-losses were triggered at around the 6.40% yield level on the 6.33%, 2035 gilt. Earlier in the day, private insurance companies and some traders who didn't get stock of the long-term bond at the auction were picking up long-term bonds in the secondary market. Dealers said insurance companies were also buying the 10-year benchmark 6.33%, 2035 bond.   

 

At the gilt auction, the government sold INR 110 billion of the 6.28%, 2032 gilt and INR 140 billion of the 7.09%, 2074 gilt. The Reserve Bank of India set a cut-off price of INR 98.78 on the long-term bond, with a weighted average price of INR 98.94. According to an Informist poll, the cut-off price was seen at INR 98.73. Banks' asset and liability managers picked up stock of the 6.28%, 2032 gilt. The central bank set a cut-off price of INR 99.64 on the gilt, a tad lower than a poll estimate of INR 99.65. Mutual funds also may have bid for the paper, dealers said. The 2032 bond ended 30 paise down at INR 99.54, and at a yield of 6.36%. Dealers said the yield could fall to 6.25-6.27% in the near term due to its lucrative level.  

 

Traders covered short bets in the 6.33%, 2035 gilt, after getting "squeezed" in the bond for the second day. The data on the special repo segment of the Clearcorp Repo Order Matching System showed trades worth INR 166.57 billion in the 6.33%, 2035 gilt, at a weighted average rate of 3.75%, with the day's low at 1%. The number of trades in a paper in the special repo segment is a proxy for tracking short sales in the bond.

 

Some traders said they preferred higher-yielding state bonds for their investment books, due to their lucrative yield spreads with gilts. However, others said spreads still had scope to rise by around 10 basis points due to heavy supply expected in the next few quarters. At the state government bond auction Tuesday, the cut-off yields on states' 10-year bonds saw a spread of 54-69 basis points over the 10-year benchmark, 6.33%, 2035 gilt.

 

"Historically, when spreads compress we're at 19-20 bps (for the 10-year state bond yield over the 10-year benchmark gilt yield) and when spreads widen we're at 60-70 bps, so I don't think spreads can rise more, but let's see," a dealer at a state-owned bank. "When the spread of triple A corporate bonds rises over g-sec, only then SGS (state government securities) spreads will rise."

 

The turnover in the government bond market Friday was INR 535.60 billion, higher than INR 397.15 billion Thursday, 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, the same as Thursday.

 

OUTLOOK

Gilts are not traded on Saturdays. On Monday, bond prices may take cues from geopolitical developments and the movement in US Treasury yields. Traders said bond prices could recover slightly after the sharp, unprecedented fall on Friday. Several traders still prefer building portfolios in the 10-year benchmark gilt, due to its liquidity in secondary market trade and expectations that the yield will fall to 6.35% gradually.

 

Traders may also take cues from the state bond auction size. Post-market hours, RBI said six states will raise INR 84.50 billion through the sale of bonds on Tuesday. The indicative calendar for state borrowing for Jul-Sept showed eight states would borrow INR 147.00 billion on Tuesday.

 

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 India's response to the US levy, dealers said. Post market hours, Prime Minister Narendra Modi said he had a detailed conversation with Russian President Vladimir Putin on deepening bilateral ties. Trump had imposed a 25?ditional tariff on India for New Delhi's continued purchase of crude oil from Russia. 

 

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.35-6.50% and that on the 6.79%, 2034 bond is seen at 6.43-6.55%.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	99.4000	6.4121%	99.5850	6.3861%
6.79%, 2034	102.0200	6.4922%	102.2500	6.4591%
6.75%, 2029	102.5000	6.0868%	102.6000	6.0620%
6.68%, 2040	98.8900	6.7987%	99.2100	6.7641%
6.90%, 2065	96.1000	7.1977%	96.7625	7.1455%

 

---

India Gilts: Off highs on profit-booking; up earlier on firm auction demand

 

	1432 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.62	99.69	99.50	99.53	99.59
YTM (%)	6.3813	6.3981	6.3722	6.3939	6.3861

 

	1432 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.79%, 2034
PRICE (INR)	102.26	102.32	102.16	102.18	102.25
YTM (%)	6.4575	6.4719	6.4488	6.4687	6.4591

 

India Gilts: Off highs on profit-booking; up earlier on firm auction demand 

 

MUMBAI--1432 IST--Prices of government bonds were off highs as traders who had picked up bonds when the yield on the 10-year benchmark 6.33%, 2035 bond was at 6.42% sold gilts at a profit, dealers said. Prices were up earlier after the cut-off price on the 7.09%, 2074 gilt at the gilt auction was higher than traders' expectations, dealers said. The Reserve Bank of India set a cut-off price of INR 98.78 on the long-term bond, and the weighted average price was INR 98.94. The median of an Informist poll estimated the cut-off price at INR 98.73. 

 

"People were saying if investors are there then cut-off (yield) will be 7.18-7.19% (on the 7.09%, 2074 gilt), but some wild expectations were also 7.19% or higher than 7.20% in case investors didn't step in," a trader at a primary dealership said. "From the cut-offs it looks like it (Life Insurance Corp. of India) was there but we don't know whether it was. Basically investors entered at the last-minute because the sheer levels are attractive...there is no way traders would've gotten stock at the auction."

 

Traders had speculated that demand from a large state-owned insurance company would not be as aggressive at the auction, which reflected in the cut-offs for primary dealerships' underwriting fees, dealers said. The RBI set a cut-off of 0.45 paisa on the 2074 bond, higher than an Informist poll estimate of 0.26 paisa at the underwriting auction. However, shortly after the gilt auction, prices of long bonds rose in the secondary market on likely demand from private insurance companies, dealers said. Tracking the rise in long-term bond prices, the benchmark 10-year 6.33%, 2035 bond recovered losses and traders covered short bets, dealers said. Insurers also picked up the 2074 bond at the auction for forward rate agreements and Separate Trading of Registered Interest and Principal of Securities, dealers said, but not for a substantial amount. Banks' asset and liability managers picked up stock of the 6.28%, 2032 gilt. The central bank set a cut-off price of INR 99.64 on the gilt, a tad lower than a poll estimate of INR 99.65. Mutual funds also may have bid for the paper, dealers said. 

 

Despite the strong demand at auction, traders were hesitant to build portfolios aggressively in the secondary market, and some gains were erased due to profit-booking. At 1430 IST, the turnover in the gilts market was around INR 263.65 billion, slightly higher than INR 249.30 billion at the same time Thursday, according to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform. Traders were largely on the sidelines as the yield on the 6.33%, 2035 bond hovered around the key technical level of 6.38%.

 

Earlier in the week, traders were expecting the 10-year gilt yield to rise to 6.45% in the near-term after the outcome of the RBI's Monetary Policy Committee dented hopes of a quicker rate cut cycle. However, some traders said the sharp fall in prices Wednesday was excessive. Several traders prefer building portfolios in the 10-year benchmark gilt, due to its liquidity in secondary market trade, and some expect the yield to hit 6.35% gradually.

 

Traders from foreign and private sector banks were also covering short bets in the gilt after getting "squeezed" in the bond in the latter half of the week. Other traders said it would only take a strong cue on rates such as lower-than-expected GDP growth reading for yields to decisively move downwards. For the rest of the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.35-6.42% and that on the 6.79%, 2034 gilt is seen at 6.43-6.50%.  (Cassandra Carvalho)

---

India Gilts: Mixed; 10-year benchmark recovers losses, long-term bonds up

 

	1221 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.59	99.60	99.50	99.53	99.59
YTM (%)	6.3858	6.3981	6.3848	6.3939	6.3861

 

	1221 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.79%, 2034
PRICE (INR)	102.25	102.25	102.16	102.18	102.25
YTM (%)	6.4589	6.4719	6.4589	6.4687	6.4591

 

India Gilts: Mixed; 10-year benchmark recovers losses, long-term bonds up 

 

MUMBAI--1221 IST--Government bond prices were mixed due to a lack of clear direction on interest rates. While most gilts recovered early losses as traders covered some short bets placed earlier on the 10-year benchmark gilt, longer tenure bonds were up on likely demand from both traders and insurers due to attractive yields, dealers said. Gilts were down earlier as traders sold bonds at a profit, they said.

 

"There will be some tail at the auction, and in long-end I was hearing LIC (Life Insurance Corp. of India) is not sitting on much cash, even if they do they prefer to go for 30-40 year papers rather than in extreme long-end right now. So we have to see how much they pick up at auction," a dealer at a state-owned bank said. "But in the secondary market, because of good yields some insurers and pension funds are coming to buy."

 

At the auction, the government will sell INR 110 billion of the 6.28%, 2032 bond and INR 140 billion of the 7.09%, 2074 bond. Some traders had likely placed intraday short bets before the auction and picked up longer tenure bonds as they initially expected large insurers to pick up at the auction and prices to rise post auction results, dealers said. However, intraday shorts were also limited as traders feared covering those bets later in the day could be difficult, and therfore, covered those bets after the auction.

 

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 1229 IST showed trades worth INR 166.57 billion in the 6.33%, 2035 gilt, at a weighted average rate of 3.25%, with the day's low at 1%. With fear of heavy supply in longer tenure bonds and the yield curve steepening, long-term investors were mostly seen bidding for higher returns on the 2074 bond at auction, they said. Some demand from forward rate aggreements was also seen for the 2074 bond at auction, dealers said. 

 

On the 2032 bond, demand from banks' asset-liability managers is expected to be firm, dealers said. Demand from mutual funds was also firm, they said. Some said demand from traders for the seven-year paper could be muted at the auction due to lower outstanding and liquidity of the bond in the secondary market. Currently, the 2032 bond only has an outstanding of INR 110 billion in the secondary market, which should rise to INR 220 billion after the auction Friday. However, with limited scope of a further rally in gilts, traders also likely bid for the 2032 gilt at auction, dealers said. 

 

Meanwhile, banks also picked up state bonds in light volumes for their held-to-maturity books to get higher returns on their portfolios. With uncertainty around rate cuts and limited scope for a fall in the yield curve from current levels, investors chose to pick up state bonds to mark a higher return on their books, dealers said. 

 

Volumes remained muted. At 1230 IST, the turnover in the gilts market was around INR 98.25 billion, lower than INR 158.95 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 6.37-6.45% and that on the 6.79%, 2034 gilt is seen at 6.44-6.50%.  (Srijita Bose)

---

India Gilts: Mixed; long-end bonds up on hope of rise in prices post auction

 

	0928 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.54	99.56	99.53	99.53	99.59
YTM (%)	6.3925	6.3939	6.3897	6.3939	6.3861

 

India Gilts: Mixed; long-end bonds up on hope of rise in prices post auction

 

MUMBAI--0928 IST--Government bond prices were mixed, with the 10-year benchmark 6.33%, 2035 bond slightly down as traders are likely to have placed short bets ahead of the INR 250-billion auction, dealers said. However, longer tenure bonds were up as traders expect prices of these bonds to rise more after the auction, they said. Prices could take cues from the results of the auction later in the day.

 

At the auction, the government will sell INR 110 billion of the 6.28%, 2032 bond and INR 140 billion of the 7.09%, 2074 bond. "I am hearing good demand at auction for both bonds," a dealer at a state-owned bank said. "If the big insurer is there at the auction, then they will sweep through the auction. So, prices could rise after auction results like we saw in last auction also." 

 

Expectations of heavy supply of longer tenure bonds and steepening of the yield curve could lead to higher yield cut-offs on the 2074 bond. However, with the yield on the 2074 bond at around 7.17%, demand from insurers is expected to be firm, dealers said. Some traders picked up longer-tenure bonds in the secondary market in early trade as they expected prices of these bonds to rise after the auction, they said. Instead, they placed intra-day short bets on the 10-year gilt, dealers said. 

 

Meanwhile, on the 2032 bond, demand from banks' asset-liability managers and mutual funds is expected to be firm, dealers said. Demand from traders for the seven-year paper could be muted at the auction due to lower outstanding and liquidity of the bond in the secondary market, they said. 

 

Trade volumes were muted and the estwhile 10-year benchmark 6.79%, 2034 bond was not traded yet. At 0926 IST, the turnover in the gilts market was around INR 7.45 billion, lower than INR 19.25 billion at 0930 IST 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 6.38-6.45% and that on the 6.79%, 2034 gilt is seen at 6.44-6.50%.  (Srijita Bose)

---

India Gilts: Seen steady before INR-250-bln auction

 

MUMBAI – Government bond prices are expected to open steady ahead of INR 250 billion worth auction on Friday. Gilts may take cues from the result of the auction later in the day, dealers said. 

 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.38-6.45% during the day. On Thursday, the bond ended at INR 99.59, or 6.39% 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 102.25, or 6.46% yield on Thursday. 

 

Some traders may trim portfolios to make room for fresh stock at the auction. The government will sell INR 110 billion of the 6.28%, 2032 bond and INR 140 billion of the 7.09%, 2074 bond. However, demand from investors is expected to be stronger than traders at the auction, dealers said. The seven-year bond is expected to be firmly bid by asset-liability managers, they said. Meanwhile, for the 50-year bond, long-term investors such as insurers are expected to pick up the bond at atrtractive yield, they said.

 

The reserve bank of India Monertary Policy Committee's unanimous pause on rates and the RBI's forecasts for growth and inflation in the June quarter of 2026 suggest a high bar for rate cuts. However, traders still see the possibility of the panel cutting rates in Oct-Dec if GDP growth surprises on the downside, particularly with the US imposing a cumulative 50% tariffs on imports from India, dealers said. On the liquidity front, traders have priced in overnight borrowing rates close to the repo rate. Traders will also keep a close watch on the movement of rupee. Prices may fall near end of trade as traders could likely place some short bets ahead of the weekend.  (Srijita Bose)

 

End

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

 

Edited by Saji George Titus

 

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.