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Informist, Monday, Aug. 11, 2025

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended sharply lower Monday for the second straight session as stop losses were triggered when the yield on the 10-year benchmark 6.33%, 2035 gilt rose above the key technical level of 6.42% and traders had no appetite to hold risk due to the lack of visibility on a domestic rate cut, dealers said. 

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 99.20, or a yield of 6.4398% against INR 99.40, or 6.4121% yield, Friday. The yield on the bond touched a high of 6.4437% intraday, the highest for a 10-year benchmark gilt since Apr. 11. The erstwhile 10-year benchmark 6.79%, 2034 bond closed at INR 101.71, or 6.5367%, against INR 102.02, or 6.4922% Friday.

 

A large investor or corporate entity sold gilts in large quantities earlier in the day, which triggered stop-losses on gilts, dealers said. Foreign banks were also likely selling gilts, they said. Ever since the outcome of the Reserve Bank of India's Monetary Policy Committee's August meeting dented hopes of a rate cut any time soon, traders expected the 10-year benchmark gilt yield to rise to 6.45-6.50% in the near term, with some expecting it last Friday itself. However, the yield level of 6.42% on the 10-year benchmark was lucrative to purchase gilts, which had limited further losses. 

 

"I don't think people care about the level also now, they're just selling everything they have because they're like 'I don't want to carry this risk right now'," a dealer at a private sector bank said. "Now everyone is waiting for 6.50% (yield on the 10-year benchmark gilt), the market is expecting it... If RBI can intervene in the rupee (foreign exchange market), then it can at least do a small OMO (purchase of gilts through an open market operation) in gilts."

 

Lack of firm buying interest also aided the fall in prices, dealers said. Losses were limited as some state-owned banks bought gilts in light volumes as current market prices were seen as lucrative to buy, since the yield on the 10-year benchmark was at a four-month high. Some banks and primary dealerships also covered their short sales in the 6.33%, 2035 bond, which helped it fare better than the 6.79%, 2034 gilt, dealers said. 

 

The data at 1800 IST showed trades worth over INR 180 billion in the 10-year benchmark gilt in the special repo segment of the Clearcorp Repo Order Matching System – a proxy for tracking short sales in a particular bond – up from INR 166.57 billion Friday.

 

Across the yield curve, long-term bond prices were down the most, as traders exited these papers to trim their exposure to risk. Even as traders preferred short-term gilts due to uncertainty on the policy and geopolitical front, short-term gilts were barely traded. Among the short-term segment, some traders preferred the 7.32%, 2030 gilt as its yield was last traded at 6.2093%, higher than that of the benchmark five-year 6.01%, 2030 gilt, which was last traded at a yield of 6.1730%. Appetite for holding gilts across the curve reduced after stop-losses were triggered for two consecutive days, dealers said. 

 

The 6.01%, 2030 bond will be sold at the weekly bond auction, the demand for which is seen as robust from investors. At the weekly bond auction, which will be held Thursday, the government will sell INR 150 billion of the 6.01%, 2030 bond and INR 130 billion of a new 30-year, 2055 bond, the RBI said post-market hours.

 

"Everybody is cautious right now. There is no one segment, not even PSU (state-owned) banks, holding up the market right now because everyone is a little hesitant to buy," a dealer at a state-owned bank said. "I think the auction won't be good, but it'll be moderate because both these papers are investor papers, traders won't go for it, but levels are good for EPFOs (Employees' Provident Fund Organisation), ALMs (asset and liability managers) and all."

 

Spreads between liquid and less-traded bonds in tenures up to 10 years widened as traders favoured liquid gilts. Mutual funds also oriented their portfolio towards the heavily traded gilts, dealers said. Fund managers are increasingly preferring gilt only for liquidity while picking up higher-yielding state or corporate bonds, as hopes of further capital gains have diminished and investors maximise interest returns, they said. Some mutual funds were facing a cash crunch due to lower-than-foreseen inflows, dealers in money markets said.

 

Bond prices opened higher, as traders covered short bets after the sharp fall in prices Friday. A smaller-than-indicated state bond auction size also aided the rise in prices, but gains were reversed on continued short-selling by primary dealerships and large sales from foreign banks and corporates, dealers said. Foreign banks were likely trimming portfolios ahead of the US CPI for July due Tuesday. Traders were also cautious ahead of India's CPI data for July, also due Tuesday. 

 

The turnover in the government bond market Monday was INR 434.35 billion, lower than INR 535.60 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were four trades in the 6.79%, 2034 gilt using the wholesale digital rupee pilot for a total of INR 200 million Monday. There were two trades using digital rupee for a total of INR 100 million in the 7.10%, 2034 gilt Friday.

 

OUTLOOK

On Tuesday, bond prices may take cues from the state bond auction results. 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. Traders will closely track technical levels, geopolitical developments and the movement in US Treasury yields.

 

Later in the day, bonds will take cues from India's CPI inflation data for July, due at 1600 IST Tuesday. Retail inflation in India likely fell to a record low of 1.3% in July, mainly because of the statistical effect of a high base and lower food prices, according to an Informist poll. CPI inflation was at 2.10% in June, the lowest since January 2019, and 3.60% a year ago. Traders have priced in a print lower than 1.5%, and bond prices may react if the number surprises on the upside.

 

Investors also await US inflation data to gauge the chances of a rate cut by the Federal Open Market Committee in September. Foreign banks and portfolio investors may remain on the sidelines before the US data, dealers said. Inflation is seen rising 2.8% on year in July, according to consensus estimates from the Wall Street Journal. 

 

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. 

 

The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.40-6.50% and that on the 6.79%, 2034 bond is seen at 6.50-6.57%.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	99.2025	6.4398%	99.4000	6.4121%
6.79%, 2034	101.7125	6.5367%	102.0200	6.4922%
6.75%, 2029	102.3500	6.1255%	102.5000	6.0868%
6.68%, 2040	98.6000	6.8302%	98.8900	6.7987%
6.90%, 2065	95.7700	7.2240%	96.1000	7.1977%

 

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India Gilts: Off lows; PSU banks step up purchases as 10-yr yield at 3-month high

 

NEW DELHI--1530 IST--Government bond prices were off lows as state-owned banks stepped up purchases after the yield on the 10-year benchmark bond hit a three-month high earlier in the day, dealers said. Bond prices remained lower than Friday's closing levels as traders remain uncertain about the possibility of further repo rate cuts by the Reserve Bank of India's Monetary Policy Committee in 2025.

 

Bonds also recovered as some banks and primary dealerships covered their short sales in the 6.33%, 2035 bond, which helped it fare better than the 6.79%, 2034 gilt, dealers said. 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 1515 IST showed trades worth over INR 180 billion in the 10-year benchmark gilt.

 

"The market is very pessimistic on rate cuts, they don't think more are coming, so the selling pressure continues from the second-half of Friday," a dealer at a state-owned bank said. "There should be support at 6.44% (yield on the 10-year benchmark 6.33%, 2035 bond). If some negative news come and it breaks 6.44%, then the 10-year could go to 6.60% eventually."

 

Some traders remain hopeful that the MPC will cut rates in October or December since India's GDP growth is likely to take a hit of around 50 basis points from the imposition of US tariffs of up to 50% on exports to the world's largest economy. However, risk appetite to place bets on rate cuts remained dull after traders hit stop-losses once again when the yield on the 6.33%, 2035 bond topped 6.42%, and the 10-year benchmark yield rose to its highest since May 9. The erstwhile benchmark 6.79%, 2034 bond's yield rose above 6.50% to its highest since Apr. 9. Moreover, sales of long-term bonds from foreign banks and mutual funds, and persistent short sales by primary dealers, kept a downward pressure on prices, dealers said.

 

The lack of trading volumes across tenures also disappointed some traders. Some banks have avoided buying the new five-year benchmark 6.01%, 2031 or even the erstwhile benchmark 6.75%, 2029 gilt over the past two weeks despite their preference for short-term gilts, due to lacklustre trading volumes amid the rate uncertainty, dealers said. The 2029 bond was the more traded of the two short-term securities, at only INR 2.80 billion.

 

Spreads between liquid and less-traded bonds in tenures up to 10 years have also increased as mutual funds have also oriented their portfolio towards heavily-traded gilts, dealers said. Fund managers are increasingly preferring gilt only for liquidity while picking up higher-yielding state or corporate bonds, as hopes of further capital gains have diminished and investors maximise interest returns, they said.

 

"There is an illiquidity premium building into 2033 and 2034 bonds over on-the-run papers of similar tenures. Those offer great spreads to enter if you have the appetite," a dealer at a private-sector bank said.

 

At 1530 IST, the turnover in the gilts market was around INR 314.25 billion, slightly lower than INR 334.80 billion at the same time Friday, 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 6.43-6.55%.  (Aaryan Khanna)

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India Gilts: Reverse early gains; 10-year 6.33%, 2035 bond hits stop-losses

 

	1140 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.24	99.51	99.21	99.42	99.40
YTM (%)	6.4349	6.4395	6.3963	6.4093	6.4121

 

	1140 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.79%, 2034
PRICE (INR)	101.82	102.13	101.77	102.10	102.02
YTM (%)	6.5218	6.5284	6.4766	6.4805	6.4922

 

MUMBAI--1140 IST--Government bond prices reversed early gains on likely sales by primary dealers and foreign banks Monday, dealers said. Some traders hit stop-losses on the 10-year benchmark 6.33% , 2035 bond as the yield breached 6.42% levels, triggering a sharp fall in gilts accross the curve, they said. 

 

"Definitely we hit stop-losses, I think people were overbought still considering most are not seeing any more rate cuts, and the buying support is not coming in at any levels," a dealer at a primary dealership said. "Some bids are coming around 6.43-6.4350%, so maybe it could hold this level for sometime. But if fresh selling comes all the bids are gone...It will not fall in a straight line but the 10-year (2035 bond) yield could rise to 6.50% also."

 

Caution on trajectory of interest rates after the Reserve Bank of India's Monetary Policy Committee outcome last week along with concerns over mismatch in demand-supply dynamics have led traders to pare their risky positions and remain on the sidelines, dealers said. Primary dealers and mutual funds likely sold gilts to limit their duration exposure, they said. Meanwhile, foreign banks also likely sold ahead of US inflation data, due Tuesday, that could be a gauge for rate trajectory by the US Federal Open Market Committee in September, dealers said. A large corporate house also likely sold gilts after buying before last week's policy outcome as rate cut bets dwindled, they said.

 

State-owned banks were likely buyers. However, the demand from them was limited as they already held heavy positions of gilts, dealers said. Traders also waited for yield on the 2035 bond to rise near 6.44-6.45% levels for buying momentum to pick up in gilts, they said. "Another thing that has dampened sentiments is that the weekly close on Friday was above 6.40% (on the 2035 bond)," a dealer at a state-owned bank said. 

 

At 1130 IST, the turnover in the gilts market was around INR 165.95 billion, higher than INR 58.65 billion at the same time Friday, 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 6.43-6.55%.  (Srijita Bose)

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India Gilts: Up as traders cover short bets; rise in US ylds limits gains

 

	0940 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.48	99.51	99.42	99.42	99.40
YTM (%)	6.4009	6.4096	6.3963	6.4093	6.4121

 

	0940 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.79%, 2034
PRICE (INR)	102.11	102.13	102.09	102.10	102.02
YTM (%)	6.4791	6.4820	6.4766	6.4805	6.4922

 

MUMBAI--0940 IST--Government bond prices opened higher Monday as traders covered their short bets placed Friday. However, the gains were capped due to a rise in US Treasury yields, dealers said. 

 

"Prices are up because of short covering because the sell-off Friday was mostly panic-driven, so we will look at the technical levels now," a dealer at a private-sector bank said. "Long-end should also see some support because these are good levels for investors and the small size of Tuesday's (state bond) auction, but overall there's still a lot of uncertainty so I don't see much of a rise." 

 

Traders covered short bets placed Friday before the weekly auction and due to caution over the weekend on India-US ties, dealers said. Traders felt the fall in prices Friday was exaggerated and bought gilts Monday at attractive yields, they said. The 15-year 6.68%, 2040 gilt price was also up as traders expected demand from long-term investors to come in. Long-term bonds are expected to rise during the day on a smaller-than-indicated state bond auction size Tuesday. On Tuesday, six states will raise INR 84.50 billion through the sale of bonds. The indicative calendar for state borrowing for Jul-Sept showed eight states would borrow INR 147.00 billion on Tuesday. However, with no clarity on interest rate trajectory, downward bias in gilt yields is expected to be limited, they said. 

 

Meanwhile, the yield on the 10-year US Treasury note rose to 4.29% Monday from 4.26% at 1700 IST, Friday. Investors now await US inflation data due this week to gauge the chances of a rate cut by the Federal Open Market Committee in September. Foreign banks and portfolio investors may remain on the sidelines before the US data, dealers said. 

 

At 0930 IST, the turnover in the gilts market was around INR 24.40 billion, higher than INR 7.20 billion at the same time Friday, 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 6.43-6.55%.  (Srijita Bose)

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India Gilts:Seen up as traders cover short bet; rise is US ylds to cap gains

 

MUMBAI – Government bond prices are expected to rise Monday as traders who had placed short bets Friday are likely to cover them as caution over US tariff risks passed over the weekend, dealers said. However, the rise in gilt prices could be limited due to a rise in US Treasury yields, they said. 

 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.38-6.45% during the day. On Friday, the bond ended at INR 99.40, or 6.41% yield. Traders expect the erstwhile 10-year benchmark 6.79%, 2034 gilt to trade in a range of 6.43-6.55%. The 2034 gilt closed at INR 102.02, or 6.49% yield, on Friday. 

 

The yield on the 10-year US Treasury note rose to 4.29% at 0838 IST Monday against 4.26% at 1700 IST Friday as investors assessed the impact of higher tariffs imposed by the US government on the country's economic growth and inflation. Investors now await US data on inflation due this week to gauge the chances of a rate cut by the Federal Open Market Committee in September. Foreign banks and portfolio investors may remain on the sidelines before the US data, dealers said. 

 

Meanwhile, long-term bonds may rise during the day on a smaller-than-indicated state bond auction Tuesday, they said. On Tuesday, 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.

 

Traders await developments on tariffs and India's response to the US levy, dealers said. Prime Minister Narendra Modi said he had a detailed conversation with Russian President Vladimir Putin on deepening bilateral ties. Trump had imposed 25?ditional tariff on India for New Delhi's continued purchase of crude oil from Moscow. The standing committee on external affairs will be briefed Monday on the latest developments in India's foreign policy with reference to US-India trade negotiations and tariffs, reports said. Traders will eye the movement in the rupee 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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