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Informist, Thursday, Aug. 14, 2025

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds surged on Thursday after S&P Global Ratings upgraded India's sovereign credit rating to 'BBB' from 'BBB-' with a stable outlook. Foreign portfolio investors bought gilts worth INR 15.85 billion through the fully accessible route Thursday, according to data from Clearing Corp. of India at 1700 IST. However, the gains were capped and the yield on the 10-year benchmark 6.33%, 2033 gilt did not sustain a fall below the psychologically crucial 6.40% level due to caution before a meeting between US President Donald Trump and Russian President Vladimir Putin on Friday, along with US economic data due over the extended weekend. Financial markets will be shut on Friday on account of Independence Day. 

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 99.49, or a yield of 6.4003%, against INR 98.91, or 6.4811% yield, Wednesday. The yield fell 8 basis points Thursday, the most in a day for a 10-year benchmark gilt yield since Apr. 2. The 15-year benchmark 6.68%, 2040 gilt yield also ended over 8 bps down, while the five-year benchmark 6.01%, 2030 gilt yield ended 3 bps lower. The newly-issued 7.24%, 2055 bond ended at INR 101.00 or 7.1585% yield.  

 

"This (the rating upgrade) is a positive only, but you cannot forget about other pressures right," a dealer at a private sector bank said. "Some buying was there initially, but sustained buys will come in slowly, so we're in the middle of a range now. There's offloading, short-covering and an important event tomorrow (Friday). So, some shift in portfolios (Thursday)."

 

The US imposed a cumulative 50% tariff on Indian goods, which includes an additional penalty for purchasing oil from Russia. Bond traders were pricing in that the government's GDP growth estimate for 2025-26 (Apr-Mar) could be lower than the Reserve Bank of India's forecast of 6.5% due to a hit on growth from tariffs.  

 

Some traders, especially domestic ones, placed short bets on gilts ahead of the long weekend, while offshore traders bought gilts. Buyers dried up when the 10-year benchmark 6.33%, 2035 bond's yield fell below the psychologically crucial 6.40% level, which was being constantly tested after the rating upgrade. The 10-year benchmark yield fell nearly 10 basis points from Wednesday's close to 6.3842% during the day, after the rating upgrade. This was the steepest intraday fall in the 10-year yield since Jun. 6, barring Wednesday's 10 bps fall on account of an erroneous trade. 

 

Trade was centred in the 10-year benchmark 6.33%, 2035 gilt, where most of the short-selling was happening, dealers said. The total turnover in the 2035 gilt was INR 382.65 billion, the highest in a 10-year benchmark gilt since the Reserve Bank of India's Monetary Policy Committee meeting outcome in June. Traders who had bought gilts when prices slumped earlier this week offloaded their stock at a profit, while offshore traders were on the buying side, dealers said. Foreign portfolio investors have net bought gilts worth INR 59.06 billion through the fully accessible route this week, data from Clearing Corp. of India showed as of 1830 IST. Earlier in the week, FPIs were buying short-term gilts when prices of these bonds fell sharply, dealers said.   

 

"Flows have been more outflows than inflows this year, so the rating upgrade will definitely see more flows coming in now, though I don't have an estimate right now," a dealer at another private sector bank said. "Today (Thursday) has been more of shorting (short-selling) from the local (domestic) side and buying from foreign."    

 

Traders do not see substantial foreign inflows into India because of the rating upgrade, since flows had already reduced due to geopolitical uncertainty and a narrowing interest rate differential between US Treasury yields and Indian government bond yields. Additionally, a possible cut in the weight of India in JP Morgan Chase & Co.'s flagship emerging-market index had also put off foreign investors. However, flows could increase in the long term and gilts would likely be the first place to invest, dealers said. 

 

While the rating upgrade is not seen increasing demand for gilts in the near term, it provided a much needed boost to market sentiment, dealers said. Sentiment was sour because of lack of indications of rate cuts from the central bank, and heavy supply matched with reduced risk appetite. The 10-year benchmark gilt yield had risen 15 bps till Wednesday from the day before MPC's August policy meeting. Earlier in the day, traders feared that the yield could rise to 6.53-6.55% next week, but now see the yield hitting 6.35% if geopolitical developments are favourable, dealers said.  

 

As for the weekly gilt auction, the result was largely along expected lines. Domestic banks were the major bidders for the short-term gilt, along with some corporate houses, dealers said. Insurance companies and pension funds picked up the long-term paper. Investors were comfortable buying long-term bonds at current prices, dealers said. Mutual funds bid for both bonds at the auction and were also purchasing gilts in the secondary market, dealers said. Mutual funds were net sellers of gilts the past three trading sessions, due to redemption pressures and to prevent their net asset value from being impacted when bond prices slumped.  

 

Traders also preferred the benchmark five-year paper for bond–OIS swaps. Traders were undertaking bond-swap trades on the view that gilt yields have more scope to fall after the recent rise, while swap rates may not fall sharply further, as they already reflected a further rate cut in India, dealers said. The spread between the five-year gilt yield and the five-year OIS rate had risen to nearly 60 bps this week. 

 

The turnover in the government bond market was INR 715.10 billion, higher than INR 582.45 billion Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were six trades in state bonds for a total of INR 2.97 billion using the wholesale digital rupee pilot Thursday. There were five trades in state bonds for a total of INR 1.60 billion using this method Wednesday. Traders speculated that the central bank likely urged banks with access to this facility to conduct test trades to achieve their targets. 

 

OUTLOOK

Financial markets will be shut on Friday for Independence day. Gilts are not traded on Saturdays. On Monday, bond prices may take cues from geopolitical developments after the meeting between Trump and Putin, and any subsequent actions that may impact tariffs on India. Traders speculated that even if Trump and Putin agree to more favourable ties, Trump is unlikely to immediately revoke tariffs on India. 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. Bonds may also take cues from the movement of US Treasury yields after the release of US economic data.

 

Bond prices may also take cues from the result of the INR-300-billion government switch auction. 

On Monday, the government will switch eight gilts worth INR 300 billion with seven longer-term papers that mature in eight to 14 years, which could put pressure on gilts of this maturity in the secondary market.

 

Traders will closely track technical levels on gilts. If sentiment worsens, traders fear that due to lack of buying interest, the 6.52-6.53% level could be the next psychologically crucial level to watch for on the 10-year benchmark yield. 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. Traders are also preparing for 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. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.35-6.45%.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.4850	6.4003%	98.9100	6.4811%
6.79%, 2034	102.1300	6.4759%	101.5650	6.5581%
6.75%, 2029	102.2500	6.1494%	102.0800	6.1953%
6.68%, 2040	99.1000	6.7759%	98.3300	6.8597%
6.90%, 2065	96.1300	7.1954%	95.3600	7.2568%

 

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India Gilts: Remain up; buying dries after 6.33%, 2035 yld falls below 6.40%

 

	1600 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.43	99.60	98.85	98.96	98.91
YTM (%)	6.4087	6.4897	6.3842	6.4742	6.4811

 

India Gilts: Remain up; buying dries after 6.33%, 2035 yld falls below 6.40%

 

MUMBAI--1600 IST--Prices of government bonds remained sharply up but some gains were erased after the knee-jerk reaction to India's credit rating upgrade. Buyers dried up when the 10-year benchmark 6.33%, 2035 bond's yield fell below the psychologically crucial 6.40% level, which was being constantly tested after the rating upgrade. The 10-year benchmark yield fell nearly 10 basis points from Wednesday's close to 6.3842?ter S&P Global Ratings upgraded India's sovereign credit rating to 'BBB' from 'BBB-' with a stable outlook. This was the highest intraday fall in the 10-year yield since Jun. 6, barring Wednesday's 10 bps fall on account of an erroneous trade. 

 

"We will have to see where the market consolidates. Much of the move could be just euphoric because there will not be a significant change in offshore demand," a dealer at a state-owned bank said. "There is also the weekend and this might be a good time to exit some of the positions."

 

Caution before key geopolitical events and data points, and lack of a major change in the outlook on foreign inflows into gilts limited gains in prices, dealers said. US President Donald Trump is scheduled to meet Russian President Vladimir Putin in Alaska on Friday to discuss a ceasefire and a complete halt of the war in Ukraine. US Treasury Secretary Scott Bessent told Bloomberg Television Wednesday that if talks between the two presidents "don't go well, then sanctions or secondary tariffs (on India) could go up". Post market hours, traders await the weekly jobless claims data in the US for the week ended Saturday, and US producer price index for July. US Treasury yields fell Wednesday on increased expectations of a rate cut by the US Federal Open Market Committee in September.  

 

Bond prices remained up after comments from the economic affairs secretary. The official said the central government expected other rating agencies to follow suit on rating upgrades after S&P Global Ratings. However, traders placed short bets, especially on the 6.79%, 2034 gilt, and re-aligned positions ahead of the key events over the extended weekend, dealers said. Financial markets are shut Friday for Independence day. Traders who bought gilts when prices slumped earlier in the week sold their gilts at a profit. 

 

At 1530 IST, turnover in the gilts market was around INR 488.10 billion, on a par with INR 469.95 billion at the same time Wednesday, 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 6.35-6.45%.  (Cassandra Carvalho)

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India Gilts: Surge as S&P ups India rtg; auction cut-offs in line with view

 

	1434 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.59	99.60	98.85	98.96	98.91
YTM (%)	6.3856	6.4897	6.3842	6.4742	6.4811

 

India Gilts: Surge as S&P ups India rtg; auction cut-offs in line with view

MUMBAI--1434 IST--Prices of government bonds surged immediately after S&P Global Ratings upgraded India's sovereign credit rating to 'BBB' from 'BBB-' with a stable outlook. Bond prices remained up after cut-offs at the INR 280-billion gilt auction were largely along expected lines, despite initial fears that demand from long-term investors could be muted. Purchases from foreign portfolio investors supported gilts, dealers said.  

 

"They just upgraded India to 'BBB' from 'BBB-'," a dealer at a private sector bank remarked on the development. 

 

S&P Global upgraded India's credit rating with the view that the country is prioritising fiscal consolidation, and that US tariffs would not derail India's long-term growth prospects. Foreign portfolio investors bought gilts worth INR 3.37 billion through the fully accessible route Wednesday, according to data from the Clearing Corp. of India at 1430 IST.  

 

As for the weekly gilt auction, the Reserve Bank of India set a coupon of 7.24% on the new 2055 gilt, while an Informist poll had estimated the coupon at 7.25%. The cut-off price on the 6.01%, 2030 gilt was set at INR 98.96, a tad lower than a poll estimate of INR 98.98. State-owned banks were the major bidders for the short-term gilt, along with some corporate houses, dealers said. They said banks' asset and liability managers had already picked stock of gilts at low prices this week and could not offload them at current prices, so demand from them for the short-term bond was slightly weaker than expected. As for the long-term paper, the bond was traded in the secondary market at a yield of 7.21%, lower than its coupon. Investors were comfortable buying long-term bonds at current prices, dealers said. Mutual funds bid for both bonds at the auction and were also purchasing gilts in the secondary market, dealers said. 

 

"There is a bond swap going on in five-year gilts and OIS for some foreign clients," a dealer at a state-owned bank said. "Past few days we're seeing lot of trade in five-year gilts because of demand from foreign (FPIs) and because of auction, etc." The five-year swap rate was last traded at 5.6450%.  

 

Dealers will closely track Thursday's closing levels, for cues on price trajectory next week. For the rest of the day, prices are expected to remain on the higher side of the day's range, and fears of touching the psychologically crucial 6.50% yield on the 10-year benchmark 6.33%, 2035 bond abated. However, pressure on the 10-year benchmark gilt will remain in the near term, as 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. On Monday, the government will also switch eight gilts worth INR 300 billion with seven longer-term papers - which mature in eight to 14 years. The 10-year benchmark yield could rise to the 6.50-6.53% levels next week, but would rebound due to strong buys at those levels, dealers said.   

 

At 1430 IST, turnover in the gilts market was around INR 355.25 billion, on par with INR 392.40 billion at the same time Wednesday, 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 6.35-6.45%.  (Cassandra Carvalho)

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India Gilts: Rise on likely FPI buys as US ylds down; auction results eyed 

 

	1233 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.07	99.08	98.85	98.96	98.91
YTM (%)	6.4587	6.4897	6.4572	6.4742	6.4811

 

India Gilts: Rise on likely FPI buys as US ylds down; auction results eyed 

 

MUMBAI--1233 IST--Government bonds prices rose on likely buys from foreign portfolio investors as US Treasury yields were down, dealers said. However, the rise in prices was limited before the results of the weekly auction and due to caution ahead of the long weekend, they said. 

 

The 10-year US yield fell to 4.24% from 4.28% at 1700 IST Wednesday on increased expectations of a rate cut by the US Federal Open Market Committee in September. Foreign portfolio investors likely bought gilts as the intrerest rate differential between the safe-haven asset and emerging market debt widened, making the latter more appealing to them, dealers said. Foreign portfolio investors bought gilts worth INR 1.76 billion through the fully accessible route Wednesday, according to data from the Clearing Corp. of India at 1230 IST. 

 

A dealer also said a negative reading of the Wholesale Price Index led traders to buy gilts. Wholesale prices in India declined on a year-on-year basis for the second consecutive month in July, with WPI inflation falling to a two-year low of (-)0.58%. However, gilt prices may give up gains near the end of trade as traders may look to place short bets ahead of the weekend. Financial markets are shut Friday for Independence Day.

 

"There is so much volatility in the market and unsurety, so ALM (asset-liability management) guys will also not want to aggressively buy at these levels," a dealer at a state-owned bank said. "Especially in the long bond (the new 2055 bond at auction), we will have to see much demand is there, from what I have heard so far, it will be very scattered only." 

 

At the auction, the government has offered to sell INR 150 billion of the 6.01%, 2030 bond and INR 130 billion of a new 30-year, 2055 bond. While banks' asset-liability managers are expected to pick up the five-year bond at auction, demand is not seen aggressive, dealers said. Traders are expected to remain largely absent from the auction, they said.

 

For the new 30-year gilt, demand from large life insurers is expected, dealers said. Other long-term investors are also likely to pick up the 30-year bond at higher yield returns than the prevailing 30-year benchmark 7.09%, 2054 bond, they said. Insurers demanded around INR 15 billion to INR 30 billion worth of forward rated agreements on the new 30-year bond, dealers said. However, with uncertainty on domestic interest rate path, demand from investors is not expected to be aggressive, they said. 

 

At 1230 IST, turnover in the gilts market was around INR 125.80 billion, lower than INR 156.65 billion at the same time Wednesday, 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: Steady before INR 280-bln auction; opens higher as US ylds down

 

	0920 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.93	98.99	98.91	98.96	98.91
YTM (%)	6.4784	6.4812	6.4706	6.4742	6.4811

 

India Gilts: Steady before INR 280-bln auction; opens higher as US ylds down

 

MUMBAI--0920 IST--Government bond prices were steady as traders waited for the INR 280-billion gilt auction, dealers said. Prices opened higher Thursday due to a fall in US Treasury yields, they said. 

 

"We opened up because of US yields, but we should trade in a range till the auction," a dealer at a state-owned bank said. "There is also the weekend, so we might see some selling in the second half. But we will have to see how the demand is at auction, especially in the long end."

 

At the auction, the government has offered to sell INR 150 billion of the 6.01%, 2030 bond and INR 130 billion of a new 30-year, 2055 bond. While demand for the five-year paper is seen firm from bank asset-liability managers, demand for the new 30-year paper may be mixed. Traders will refrain from buying long-term bonds due to uncertainty on rates and as they look to trim duration risks, dealers said. Long-term investors are expected to pick up the 30-year gilt at higher yield premiums, they said. However, some said due to a sharp rise in yields since last week, investors may wait for yields to consolidate as some still expect yields to rise more, they said. 

 

The 10-year US Treasury yield fell to 4.23% from 4.28% at 1700 IST Wednesday on increased expectations of a rate cut by the US Federal Open Market Committee in September. Over 4% traders are now expecting a jumbo 50 basis-point cut by the FOMC in September, while nearly 96% of them pegged a 25-bps rate cut at the upcoming policy meeting, according to the CME's FedWatch tool. However, due to no domestic rate-cut hopes, rise in gilts was limited, dealers said. 

 

At 0920 IST, turnover in the gilts market was around INR 6.10 billion, much lower than INR 18.60 billion at 0930 IST Wednesday, 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 steady before INR 280-bln auction, results may lend cues

 

MUMBAI – Government bond prices are seen opening steady ahead of the INR 280-billion auction Thursday, dealers said. Bonds may take cues from the result of the weekly gilt auction later in the day, they said. The weekly gilt auction, which is usually conducted on Friday, is being held a day before as financial markets are shut Friday for Independence Day.

 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.45-6.55% during the day. On Wednesday, the bond ended at INR 98.91, or 6.48% yield. Traders will watch out for crucial levels on yields as investor appetite is flailing. The 10-year bond yield on Wednesday topped 6.50%, rising to highest intraday level since April.

 

At the auction, the government has offered to sell INR 150 billion of the 6.01%, 2030 bond and INR 130 billion of a new 30-year, 2055 bond. While demand for the five-year paper is seen firm from bank asset-liability managers, demand for the new 30-year paper may be mixed. However, long-term investors are expected to pick up the 30-year gilt at higher yield premiums, 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. Some traders expect the fall in prices to have bottomed out while others see the yield rising to 6.53-6.56%. Traders may also realign portfolios ahead of the long weekend.

 

Meanwhile, the 10-year US Treasury yield fell to 4.23% at 0825 IST from 4.28% at 1700 IST Wednesday on increased expectations of a rate cut by the US Federal Open Market Committee in September. Traders are now seeing a more than 92% probability of a 25-basis-point rate cut at the upcoming meeting, with some expecting a jumbo 50-bps cut, according to the CME's FedWatch tool. Traders will track the movement of the rupee against dollar during the day, dealers said. 

 

Meanwhile, US Treasury Secretary Scott Bessent on Wednesday warned India of higher secondary tariffs. Bessent also urged the European Union to join in to impose similar secondary sanctions on India. Investors will also keep an eye on talks between Russian President Vladimir Putin and his US counterpart Donald Trump in Alaska on Friday. (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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