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Informist, Wednesday, Aug. 13, 2025

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended off highs Wednesday as traders sold gilts ahead of an INR-280-billion gilt auction, dealers said. Traders were expecting bond prices to fall near the end of trade, a pattern seen for the past three trading sessions. However, purchases at levels seen lucrative after the yield on the 6.33%, 2035 gilt rose to the psychologically crucial 6.50?rlier in the day kept bond prices up. Some foreign banks and portfolio investors were also purchasing gilts, dealers said. 

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.91, or a yield of 6.4811%, against INR 98.83, or 6.4920% yield, Tuesday.

 

"It's just that sentiment went for toss because of the non-stop fall in prices, but otherwise 6.50% (yield on the 10-year 6.33%, 2035 gilt) is a psychologically important level," a dealer at a private sector bank said. "Good buying should've come at these levels." 

 

Earlier in the day, the yield on the 10-year benchmark 6.33%, 2035 gilt rose to 6.5086%, which triggered purchases by state-owned banks at levels seen lucrative, dealers said. Traders also covered short bets, dealers said. Foreign banks and FPIs also bought gilts, which buoyed prices, they said. Foreign portfolio investors bought gilts worth INR 5.52 billion through the fully accessible route Wednesday, according to data from the Clearing Corp. of India at 1700 IST. A fall in swap rates also aided the rise in prices.

  

Traders speculated that investors were purchasing gilts to take advantage of current levels. Towards the end of trading hours, some gains were erased as traders trimmed portfolios to make room for the fresh supply on Thursday.

 

The rise in the rupee against the dollar also contributed to the rise in gilt prices, dealers said. The rupee appreciated to 87.44 per dollar at Wednesday's close. A fall in swap rates also helped the rise in gilt prices. The five-year swap rate ended at 5.64%, 3 basis points lower than Tuesday's close on likely offshore flows.  

 

The government will sell INR 150 billion of the 6.01%, 2030 bond and INR 130 billion of a new 30-year, 2055 bond at an auction on Thursday. Bond prices in the secondary market could not sustain the sharp rise in prices earlier in the day due to selling pressure ahead of the auction. Some traders were covering short bets due to lucrative levels, while some were placing short bets to pick up fresh stock at the auction. 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. At 1800 IST, trades worth INR 156.31 billion were recorded in the most traded 6.33%, 2035 gilt, a tad higher than INR 154.88 billion recorded at 1330 IST but slightly lower than INR 157.59 billion Tuesday. State-owned banks were purchasing gilts earlier in the day when prices were down, but likely turned sellers when prices rose, dealers said. 

 

Demand at the gilt auction is yet to be ascertained, as levels are extremely lucrative for long-term investors such as insurance companies and pension funds, but appetite from this segment is seen moderate, dealers said. The five-year 6.01%, 2030 bond is likely to be lapped up by banks' asset and liability managers, they said. In the secondary market, traders favoured either the 10-year benchmark or the 15-year 6.68%, 2040 gilt. Some preferred short-term papers maturing within 2027-29. The government's switch auction of INR 300 billion, which will be held on Monday, added to selling pressure on bonds maturing in 10-15 years as most of the destination securities offered at the switch were of this maturity, dealers said. Most gilt purchases in the secondary market Wednesday were for available-for-sale books, they said. Several traders bought the long-term 7.09%, 2054 gilt this week on speculation of a state-owned insurance company purchasing the new 2055 gilt at auction for forward-rate agreements.

 

"LIC (Life Insurance Corp. of India) may be coming for FRA (forward-rate agreement) at the 30-year (auction) tomorrow (Thursday)," a dealer at another private sector bank said. "But the front-running is already done so any rally tomorrow may not sustain."

 

There were three erroneous trades in the secondary gilt market during the day, dealers said. The 6.33%, 2035 gilt opened at INR 99.55 or 6.3911% yield, likely due to a single erroneous trade of INR 50 million by a cooperative bank, dealers said. There was an erroneous trade in the 7.10%, 2034 gilt and an erroneous trade in the 7.09%, 2054 gilt. 

 

The turnover in the government bond market was INR 582.45 billion, similar to INR 569.95 billion Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were five trades in state bonds for a total of INR 1.60 billion using the wholesale digital rupee pilot Wednesday. There were no trades using this method Tuesday.

 

OUTLOOK

On Thursday, bond prices may take cues from the result of the weekly gilt auction on Thursday. Bonds may also take cues from the overnight movement of US Treasury yields. Traders will closely track technical levels on gilts, after the yield on the 10-year benchmark hit 6.51% Wednesday. Traders fear that due to lack of buying interest, the 10-year benchmark yield could rise to 6.60% in the near term. If the yield rises above 6.50%, the 6.52-6.53% level could be the next psychologically crucial level to watch for, they said. Some traders expect the fall in prices to have bottomed out because there is no expectation of a rate hike and some traders still expect more rate cuts, while others see yields rising to 6.53-6.56%. Traders may also realign prtoflios ahead of the long weekend. Financial markets will be shut Friday for Independence day. Traders are also looking forward to next week's auction. The government is scheduled to sell INR 300 billion of a 10-year gilt and INR 60 billion of a three-year gilt next week.

 

Bonds may also track the movement of crude oil prices, as well as the movement of the rupee against the dollar. Traders await developments on tariffs and India's response to the US levy, dealers said. Any increase in government expenditure to provide support to those impacted by tariffs may weigh on bond prices due to fear of an increase in government borrowing. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.45-6.55%.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.9100	6.4811%	98.8325	6.4920%
6.79%, 2034	101.5650	6.5581%	101.4700	6.5720%
6.75%, 2029	102.0800	6.1953%	102.0300	6.2088%
6.68%, 2040	98.3300	6.8597%	98.1975	6.8742%
6.90%, 2065	95.3600	7.2568%	95.3000	7.2616%

 

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India Gilts: Sharply up on short-covering; rise in rupee, fall in OIS aid

 

	1544 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.00	99.55	98.72	99.55	98.83
YTM (%)	6.4684	6.5086	6.3911	6.3911	6.4920

 

India Gilts: Sharply up on short-covering; rise in rupee, fall in OIS aid

 

MUMBAI--1544 IST--Government bond prices were sharply up as traders covered short bets. A sharp rise in the rupee against the dollar and a fall in overnight indexed swap rates also led to the rise in gilts, dealers said. However, poor risk appetite and traders exiting earlier bets capped the rise in gilts, they said. 

 

"There was a sudden movement in rupee... maybe the RBI (Reserve Bank of India) is there in the background. In the morning, many banks got calls from the RBI enquiring about the rise in yields in long bonds... so now I think people are thinking it's better to cover shorts because the market was oversold also," a dealer at a primary dealership said. "Offshore receiving is also there, so that too is playing a role."

 

Banks were likely buying for their available-for-sale portfolios, dealers said. The rupee rose to a day's high of 87.38 to a dollar, which some said was likely due to offshore flows. Some foreign banks and portfolio investors also likely bought bonds in light quantities as yields have turned attractive, they said. Traders also found the gilts maturing in 15 years lucrative. Long-term investors such as insurers also picked up gilts maturing in 30-40 years. 

 

Meanwhile, the RBI has allocated the Monetary Policy Department to Executive Director Indranil Bhattacharyya, suggesting the Monetary Policy Committee could have a new member at the October meeting. The Monetary Policy Department was earlier handled by Executive Director Rajiv Ranjan, currently the third RBI member of the MPC. However, the change is unlikely to have a significant impact on the voting pattern of members at the next policy review, dealers said. 

 

At 1530 IST, turnover in the gilts market was INR 569.95 billion, sharply higher than INR 390.55 billion at the same time on Tuesday, 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 6.44-6.55%.  (Srijita Bose)

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India Gilts: Reverse losses on short-covering, buying by state-owned banks

 

	1323 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.94	99.55	98.72	99.55	98.83
YTM (%)	6.4776	6.5086	6.3911	6.3911	6.4920

 

MUMBAI--1323 IST--Prices of government bonds rose, reversing early losses after the yield on the 10-year benchmark 6.33%, 2035 gilt hit the psychologically crucial 6.50% mark earlier in the day, a level seen appealing to buy gilts. State-owned banks were buying bonds for their available-for-sale books and traders covered short bets. However, with the trajectory of bond yields seen so far this week, traders expect yields to rise further and were not aggressive in their purchases, dealers said. 

 

State-owned banks were buying gilts in the secondary market after the 10-year yield hit the 6.50% level, at which its yield spread was 100 basis points over the repo rate. However, there was no certainty on whether prices could sustain the rise, which made it tricky to buy gilts aggressively, dealers said.

     

The result of the INR-210-billion Treasury bill auction was largely along expected lines. Traders had expected that the 91-day T-bill cut-off yield could be higher than estimated, a repeat of last week's auction cut-offs, they said. An Informist poll median estimated the cut-off on the bill at 5.48%, while the Reserve Bank of India set a cut-off of 5.49%. The presence of mutual funds at the auction capped a rise in yields, they said. The preference for T-bills from mutual funds is despite net sales from this market segment in the secondary gilt market. Mutual funds have net sold INR 51.40 billion worth of gilts in the past two trading sessions. Appetite from state-owned banks at the T-bill auction was slightly lesser than usual, dealers said. 

 

Traders fear that due to lack of buying interest, the 10-year benchmark yield could rise to 6.60% in the near-term. If the yield rises above 6.50%, the 6.52-6.53% level could be the next psychologically crucial level to watch for, they said. Traders preferred buying the 10-year benchmark and the 15-year 6.68%, 2040 gilt, while some preferred short-term papers maturing within 2027-29. Some traders covered short bets as current levels were lucrative, 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.

 

At 1330 IST, trades worth INR 154.88 billion were recorded in the most traded 6.33%, 2035 gilt, slightly down from INR 157.59 billion Tuesday. Traders may place short bets ahead of the weekly gilt auction Thursday, but short sales could be limited due to uncertainty on the yield trajectory in the near-term. 

 

"Market is sitting sideways, we cannot be deceived by the current price action," a dealer at a state-owned bank said. "In the morning (past few trading sessions) market is fine but by evening all stop-losses get hit." 

 

At 1330 IST, turnover in the gilts market was around INR 310.05 billion, higher than INR 183.90 billion at the same time Tuesday, 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 6.45-6.55%.  (Cassandra Carvalho)

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India Gilts: Tad down; traders eye technical levels on 10-yr benchmark bond

 

	0939 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.80	99.55	98.77	99.55	98.83
YTM (%)	6.4966	6.5012	6.3911	6.3911	6.4920

 

MUMBAI--0939 IST--Government bond prices were slightly down Wednesday. Traders watched out for technical levels, with the 10-year benchmark 6.33%, 2035 bond near the psychologically crucial 6.50% level, dealers said. Some traders covered some short bets placed in earlier sessions, dealers said.

 

"There is no appetite in the market right now as eveyone has been losing money left-right-centre! But some people are covering short bets and just testing the 6.50% level (on the 2035 bond)," a primary dealer said. "Now, we will have to see if RBI (Reserve Bank of India) intervenes in the market or lets it fall even more." 

 

At open, the 6.33%, 2035 was at 6.39%, 10 basis points lower than Tuesday's close. Dealers said that it was likely an error trade. The 2035 bond prices reversed gains due to reduced risk appetite of investors over uncertainty on the future trajectory of domestic interest rates. Some traders expect the fall in prices to have bottomed out with the yield on the 10-year bond at over 89 bps above the RBI's repo of 5.50%, higher than historical averages, dealers said. The yield on the 2035 bond tested psychological levels, with the yield rising above 6.50% at the day's low.  

 

Traders covered short bets placed in earlier sessions to resist a further fall in gilts, dealers said. If the crucial psychological level of 6.50% on the 2035 bond is breached, dealers said that the yield could rise to 6.53-6.56%. 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. At 0939 IST, trades worth INR 154.88 billion were recorded in the most-traded 6.33%, 2035 gilt, slightly down from INR 157.59 billion Tuesday.

 

At 0930 IST, turnover in the gilts market was around INR 18.60 billion, higher than INR 43.60 billion at the same time Tuesday, 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 6.45-6.55%.  (Srijita Bose)

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India Gilts: Seen opening steady after falling sharply Tuesday

 

MUMBAI – Government bond prices may open steady after falling sharply Tuesday. Traders will watch out for technical levels, with the 10-year benchmark 6.33%, 2035 bond near the psychologically crucial 6.50% level, dealers said. Gilts may fall during the day as risk appetite of investors has reduced due to uncertainty over the future trajectory of domestic interest rates, some dealers said.

 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.45-6.55% during the day. On Tuesday, the bond ended at INR 98.83, or 6.49% yield. The yield on the 10-year bond is over 90 basis points above the Reserve Bank of India's repo of 5.50%, higher than historical averages, dealers said. The yield on the 2035 bond has risen 16 basis points from Aug. 5, a day before the Monetary Policy Committee maintained status quo on repo rate.

 

With poor investor appetite and traders unable to exit their previous bets due to a continuous rise in yields, demand is expected to remain muted, dealers said. However, some traders may cover short bets placed earlier as yields are deemed attractive, they said. Some traders expect the fall in prices to have bottomed out while others see yield on the 2035 bond rising to 6.53-6.56%. Traders will place bets for the weekly gilt auction on Thursday. Traders are also looking forward to next week's auction. The government is scheduled to sell INR 300 billion of a 10-year gilt and INR 60 billion of a three-year gilt next week. 

 

India's CPI inflation for July on Tuesday came in at 1.55%, slightly higher than an Informist poll estimate of 1.3%. The print did not change any rate views since the Monetary Policy Committee in its August policy outcome did not indicate a need to cut rates in spite of Apr-Jun CPI inflation being below the RBI's forecast.

 

Bonds may also track the movement of crude oil prices and the rupee against the dollar. Traders await developments on tariffs and India's response to the US levy, dealers said. Any increase in government expenditure to provide support to those impacted by tariffs may weigh on bond prices due to fears of an increase in government borrowing.  (Srijita Bose)

 

End

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

 

Edited by Avishek Dutta

 

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