More Stories

Informist, Thursday, Aug. 28, 2025

 

By Srijita Bose

 

MUMBAI – Government bond prices surged Thursday on hopes of support from the Reserve Bank of India, dealers said. Traders also covered earlier placed short bets, which aided the rise in prices, they said. 

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.55, or a yield of 6.5328%, against INR 98.08, or 6.5997% yield, Tuesday. Markets were closed Wednesday for Ganesh Chaturthi. The yield on the 10-year 2035 gilt ended at its lowest in a week Thursday. 

 

"There are some rumours that RBI was in the market, but mostly people are expecting some announcement by the RBI this week," a dealer at a private sector bank said. "So, for the short sellers also this was a cue to cover them because for some time now the higher trading range should be around 6.60%, so those who took higher than that covered them today."

 

State-owned banks were likely major buyers Thursday, with some private sector banks also likely buying gilts maturing within 15 years, dealers said. Some traders speculated that the RBI was likely buying gilts in the secondary market to support prices before the INR-320-billion gilt auction Friday. Others said that the RBI may announce support through an open market purchase or another buyback of gilts, they said. 

 

The 15-year benchmark 6.68%, 2040 bond at one point erased all gains, even as the rest of the market was sharply higher, as some traders were concerned about demand for the gilt at the auction on Friday. Friday's INR 320 billion auction is split between the 2040 gilt and the 6.90 65bond. Prices of the 2040 bond, however, rose later on, as dealers viewed that the overall sentiment seemed to have improved. Others said the 15-year bond lacks natural investor demand and may be bid poorly at auction, they said.

 

Meanwhile, for the 40-year benchmark, demand from insurers is likely to be firm as yields have turned lucrative, dealers said. Some demand from forward rate agreements was also likely to be present for the 40-year bond at the auction, they said. However, due to a heavy supply of long-term bonds and state bonds this week, trade volumes of longer-tenure bonds in the secondary market remained muted, dealers said. 

 

Some traders may have hit stop losses on their short bets, while others took profits as some of the pessimism in the market regarding the RBI's inaction dissipated, dealers said. Short sales had built up on the view that gilt prices would continue to fall, as they had moved almost unidirectionally downwards until Tuesday's recovery. 

 

"Looks like the market was oversold and because of some positive sentiments on hopes of RBI support, we saw the rise in prices," a dealer at a primary dealership said. "But, 6.50% is also a good resistance, and I don't see a further fall in yields right now. But if the GDP number is a positive surprise (lower than expected GDP growth), then we may see some more rally then."

 

Some traders also expected the April-June GDP data, due to be released on Friday at 1600 IST, to come in lower than the RBI's forecast of 6.5%, and had built some positions accordingly. However, most traders refrained from placing large aggressive bets due to the volatility in prices seen in the recent sessions, dealers said. 

 

Foreign portfolio investors also likely bought gilts Thursday, tracking the fall in US Treasury yields, dealers said. The yield on the 10-year US Treasury note fell to 4.23% from nearly 4.29% on Tuesday. The fall in US yields widens the interest differential between the safe-haven asset and the emerging market yield, making the latter attractive for FPIs to buy, dealers said. 

 

Demand at the Treasury bills auction Thursday was muted from mutual funds due to month-end redemption pressures, dealers said. Some state-owned banks likely bought T-bills, as they trimmed their longer-tenure papers due to the volatility, they said.

 

Turnover in the government bond market was INR 471.30 billion Thursday, slightly lower than INR 503.95 billion Tuesday, according to data on the RBI's Negotiated Dealing System Order Matching platform. There were two trades worth INR 100 million on the 10-year 2035 bond using the wholesale digital rupee pilot Thursday. There were no trades using the wholesale digital rupee Tuesday. 

 

OUTLOOK

On Friday, gilts may open steady ahead of the INR-320-billion gilt auction at 1030-1130 IST, dealers said. Traders are likely to take cues from the auction results later in the day. Traders will also keenly watch the Apr-Jun GDP data due at 1600 IST for further cues on domestic interest rate trajectory, dealers said. 

 

Prices of longer tenure gilts may fall due to the heavy supply of long-term gilts Friday. The government will sell INR 160 billion of the 6.68%, 2040 bond and INR 160 billion of the 6.90%, 2065 bond at the auction Friday. There are also concerns that state borrowing will increase in the current financial year if the proposed reforms to the goods and services tax are announced by Diwali, dealers said. This could lead to muted demand by long-term investors in the secondary market, dealers said. 

 

Most traders expect the GDP in Apr-Jun to be around the RBI's forecast of 6.5%. If the growth is below 6.3%, gilt prices could rise, dealers said. According to an Informist poll, GDP growth is expected at 6.7%.

 

Any sharp overnight movement in US Treasury yields may also provide cues for gilts at the open. Any announcement by the RBI that could provide support to gilt prices will also be closely watched, dealers said. Traders will closely track technical levels on gilts. If sentiment worsens again and the 2035 bond yield tops the 6.65-6.66% level, 6.68-6.70% could be the next psychologically crucial level to watch out for, dealers said.

 

Bonds may also track the movement of crude oil prices and the rupee against the dollar. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.50-6.65%.

 

	THURSDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.5500	6.5328%	98.0800	6.5997%
6.79%, 2034	101.2200	6.6082%	100.8475	6.6630%
6.01%, 2030	98.9200	6.2678%	98.6700	6.3282%
6.68%, 2040	98.0200	6.8938%	97.5600	6.9446%
6.90%, 2065	94.4000	7.3349%	93.9500	7.3719%

 

---

India Gilts: Near day's high on short covering, hopes of lower Q1 GDP growth

 

	1610 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.52	98.58	97.90	98.08	98.08
YTM (%)	6.5377	6.6256	6.5285	6.5998	6.5997

 

MUMBAI--1610 IST--Government bond prices surged and were near day's highs as traders covered short bets on expectation that the Reserve Bank of India may provide some support to the gilt market, dealers said. Some traders also expected the Apr-Jun GDP growth data, due Friday at 1600 IST, to come lower than RBI's forecast of 6.5%, and built some positions for the same, they said.

 

"It mostly looks like short covering because people are expecting some support from the RBI so they don't want to be caught on the wrong foot," a dealer at a private sector bank said. "There is also some chatter in the market on RBI buying in the secondary market but we'll have to see whether that is true. Also, GDP is expected to be lower so that is also giving some suport."

 

Along with state-owned banks, some private sector banks also likely bought gilts maturing within 15 years, dealers said. Some traders speculated that the RBI was likely buying gilts in the secondary market to support prices before the INR-320-billion gilt auction Friday, they said. At the auction Friday, demand for the 15-year 6.68%, 2040 bond is likely to be modest, but better than earlier expectated from banks, dealers said. Others said that the RBI may announce support through buys of gilts through an open market operation or another buyback of gilts, they said. 

 

For the 6.90%, 2065 bond, demand from insurers is likely to be firm as yields have turned lucrative, dealers said. Some demand from forward rated aggreements was also likely to be present for the 40-year bond at the auction, they said. However, due to a heavy supply of long-term bonds and state bonds auction this week, demand for longer-tenure bonds in the secondary market remained muted, dealers said. 

 

Traders also await the GDP data Friday, dealers said. While some traders expected the print to be lower than the RBI's forecast, and hoped the market to recover some of the losses taken since Aug. 14, most refrained from placing large aggressive bets due to the volatility in prices seen in the recent sessions, they said. 

 

Meanwhile, foreign portfolio investors also likely bought gilts Thursday, tracking the fall in US Treasury yields, dealers said. The yield on the 10-year US Treasury note has fallen to 4.23% from nearly 4.29% on Tuesday. A fall in US yields widens the interest differential between the safe heaven asset and the emerging market yield, making it attractive for FPIs to buy the latter, dealers said. 

 

The turnover in the gilts market was around INR 310.10 billion, slightly lower than INR 332.85 billion at 1530 IST Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.52-6.62%.  (Srijita Bose)

---

India Gilts: Reverse losses, sharply up on hopes of RBI support for bonds

 

	1300 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.34	98.41	97.90	98.08	98.08
YTM (%)	6.5627	6.6256	6.5527	6.5998	6.5997

 

MUMBAI--1300 IST--Government bond prices reversed all losses and rose sharply on hopes of support from the Reserve Bank of India, dealers said. State-owned banks also stepped up purchases, and short sellers were uncertain on whether the 10-year benchmark yield would sustain above 6.60%.

 

"It is broadly the same pattern that is playing out," a dealer at a private sector bank said. "There is some short covering, there is chatter in the market that RBI will come in. Especially since RBI has sought feedback from banks now on the rise in yields."

 

Some traders may have hit stop-losses on their short bets, while others were taking profit as some of the pessimism in the market on RBI inaction had dissipated, dealers said. Traders speculated that the central bank was either already active in buying gilts in the secondary market since Tuesday, or would announce an open market operation shortly to buy bonds at auction.

 

Short sales had built up on the view gilt prices would continue to fall, as they had moved almost unidirectionally downwards until Tuesday's recovery. However, the rise in prices lost steam as the yield on the 6.33%, 2035 bond approached 6.55%, a recovery of 11 basis points from Tuesday's five-month high of 6.66%, dealers said. At that level, traders started placing fresh bets while buys from investors were limited.

 

Meanwhile, the 15-year benchmark 6.68%, 2040 bond underperformed the rest of the market ahead of its auction on Friday as traders were concerned about demand for the gilt. The government will sell INR 320 billion worth of gilts at the auction at 1030-1130 IST, Friday, split between the 2040 gilt and the 6.90%, 2065 bond. The 40-year benchmark gilt was hardly traded, while the 6.68%, 2040 bond at one point erased all gains even as the rest of the market was sharply higher. 

 

The turnover in the gilts market was around INR 228.60 billion, slightly higher than INR 212.85 billion at 1330 IST Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.54-6.64%. (Aaryan Khanna)

---

India Gilts: Fall as traders make room for Fri auction, demand concerns weigh

 

	0950 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.02	98.08	97.90	98.08	98.08
YTM (%)	6.6087	6.6256	6.5998	6.5998	6.5997

 

MUMBAI--0950 IST--Government bond prices fell after opening steady as traders placed fresh short bets ahead of the INR-320-billion weekly gilt auction on Friday, dealers said. Lack of expected support from the Reserve Bank of India also disappointed some traders. Losses were limited due to purchases by state-owned banks at levels considered lucrative, with volumes thin so far.

 

The government will sell INR 160 billion each of the 6.68%, 2040 bond and the 6.95%, 2065 gilt at the auction on Friday. While some traders expect end-investors such as life insurers and pension funds to pick up the fresh supply of the 40-year bond, the 15-year benchmark does not have natural investors and may be bid for poorly, dealers said.

 

To mitigate the expected risk, traders are likely to short-sell the most-traded 6.33%, 2035 bond, which will be easy to cover after the auction. Short sellers had covered their bets as bond prices recovered on Tuesday, which may lead to sizeable positions being created on Thursday if the outlook for demand looks bleak, dealers said.

 

"The 15-year is in trouble," a dealer at a state-owned bank said. "There is lack of demand across the market." The dealer said state-owned banks might step up purchases of the 10-year gilt near 6.63% yield, while the market may hit stop-losses if the benchmark yield rises above 6.65%.

 

Concerns about supply outstripping bond demand persist, especially for long-term bonds, dealers said. Investors are also holding back purchases as they are uncertain about the eroding value of their investments, with bond prices often falling sharply daily. The 10-year benchmark yield has risen 20 bps in seven trading sessions as of Tuesday. Some traders expect the RBI to either buy gilts in the secondary market or announce measures such as open market operation buys or an Operation Twist – simulaenously buying and selling gilts of different tenures – to prop up demand and cap yields. The lack of an annoucement or large buys from the 'Others' segment, which includes the central bank, on Tuesday disappointed some dealers.

 

The turnover in the gilts market was around INR 39.75 billion, slightly lower than INR 47.30 billion at 0945 IST Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.56-6.65%.  (Cassandra Carvalho)

---

India Gilts: Seen steady at open; short sales before auction Fri may weigh

 

MUMBAI – Government bond prices are seen opening steady on Thursday. Lack of announcement from the Reserve Bank of India to support the bond market after the sharp rise in yields over the last two weeks may be offset by a fall in US Treasury yields, dealers said. However, gilt prices may remain under pressure ahead of the INR-320-billion weekly gilt auction on Friday.

 

The 10-year benchmark gilt yield is seen in a range of 6.56-6.65% on Thursday. On Tuesday, the 2035 benchmark bond closed at INR 98.08 or 6.60% yield. Prices recovered significant losses Tuesday due to firm buys from investors and short covering as the 10-year benchmark yield hit an intraday high of 6.66%, the highest level since Mar. 19. India's money markets were shut Wednesday for Ganesh Chathurthi.

 

Traders had covered their short sales on Tuesday due to speculation that the central bank would soon announce a measure to limit the recent rout in the bond market. At its worst, the 10-year yield had risen 26 basis points over seven trading sessions as on Tuesday. Moreover, traders were jittery about placing fresh short bets as the 10-year yield had climbed to a five-month high, especially ahead of a holiday, dealers said.

 

There was also speculation that instead of an announcement of open market operations, the RBI was intervening directly by buying gilts in the secondary market through the Negotiated Dealing System – Order Matching platform. Data for Tuesday showed that 'Others', a category that includes the central bank, bought gilts worth INR 10.09 billion, according to Clearing Corp. of India data. Moreover, state-owned banks stepped up purchases at levels considered lucrative.

 

The impact of the US' additional 25% tariff on India, which took effect on Wednesday, is unlikely to have a sharp impact on the bond market as it was already factored in as a temporary measure, dealers said. On the global front, the yield on the 10-year US Treasury note fell to 4.23% at 0825 IST from a high of 4.31% on Tuesday on increasing bets of rate cuts in the world's largest economy. A fall in US yields widens the differential between the safe haven asset and emerging market debt such as India's bonds, making the latter more appealing for foreign investors.

 

As traders covered short sales on Tuesday, they may initiate fresh short positions Thursday ahead of the weekly gilt auction on Friday, dealers said. This is likely to weigh on prices through the day. The government will sell INR 160 billion of the 6.68%, 2040 bond, and INR 160 billion of the 6.90%, 2065 bond at the auction Friday. While longer tenure gilts may fall more due to the heavy supply, traders tend to prefer placing short bets on liquid securities such as the 10-year benchmark 6.33%, 2035 gilt.

 

Traders are also awaiting India's GDP data for the June quarter at 1600 IST Friday for further cues on domestic interest rates. According to an Informist poll, India's GDP is likely to have expanded 6.7% in the first quarter of 2025-26 (Apr-Mar). Most traders expect the GDP growth print to be around the RBI's forecast of 6.5%. If the growth is below 6.3%, gilt prices could rise as dealers increase their bets on a repo rate cut by the Monetary Policy Committee in October or December.  (Aaryan Khanna)

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.