More Stories

Informist, Friday, Sept. 5, 2025

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended sharply higher Friday on purchases by foreign banks and portfolio investors, tracking an overnight fall in US Treasury yields on bets of a rate cut in the US this month. Purchases by domestic traders also aided the rise in bond prices, especially those maturing in 15 years or more, on bets that the Centre would reduce supply of these bonds in its Oct-Mar borrowing plan, dealers said.

The 10-year benchmark 6.33%, 2035 gilt closed at INR 99.03, or a yield of 6.47%, against INR 98.83, or 6.49%, Thursday. The 10-year benchmark gilt yield has fallen around 10 basis points so far in September, reversing around half the near-20-bps rise in August. Prices of long-term bonds continued to surge, with the 7.09%, 2074 bond yield down 6 bps. The yield on the benchmark 10-year US Treasury yield was 4.16% at 1700 IST, down from 4.22% at the same time Thursday.

As of 1700 IST, data from Clearing Corp. of India showed foreign portfolio investors net purchased gilts worth INR 4.15 billion through the fully accessible route Friday, but recorded purchases worth INR 7.19 billion in the 6.33%, 2035 gilt. The total figure showed net sales by FPIs earlier in the day. FPIs were both buying and selling gilts in small quantum, a dealer at a foreign bank said. Foreign banks were also purchasing gilts, dealers said. Some traders expect US non-farm payrolls for August to be lower than consensus estimates of around 75,000. The data is due at 1800 IST. A slew of weak jobs data in the US this week boosted has the case for a rate cut in the world's largest economy.

The US Federal Open Market Committee will meet later this month, and Fed fund futures are almost fully pricing in a 25 basis-point rate cut at the outcome, according to the CME FedWatch tool. If the FOMC does cut rates this month, it will be the first since December, and any such move from the US central bank may nudge the Reserve Bank of India's Monetary Policy Committee to resume its rate cut cycle in India.

"It's just positive sentiment and US yields," a dealer at a private sector bank. "It seems like FPIs are buying."

The fall in the yield of the benchmark 10-year 6.33%, 2035 gilt below the technical level of 6.47% furthered the rise in prices in the last few hours of trade, dealers said. Comments from Finance Minister Nirmala Sitharaman also boosted sentiment, they said. In a televised interview with business news channel CNBC-TV18, Sitharaman said the Centre will continue to keep its own capital expenditure robust while adhering to fiscal consolidation norms. The recent rise in bond yields is unsustainable and is having a bearing on borrowing of both the Centre and the states, Sitharaman said.

"She (Sitharaman) spoke about the fiscal slippage and of course because of US yields, (prices were up) but we also had a technical breakout," a trader at a primary dealership said. "Below the 6.48% level (yield on the 6.33%, 2035 gilt) was a technical breakout. We had an insurers' meeting with RBI also so a lot of positive triggers."

Earlier in the day, the 10-year benchmark gilt gave up some gains after the rupee fell to a record low of 88.3650 per $1. However, the rupee ended off lows on likely intervention by the central bank and the 10-year benchmark bond price rose further on offshore inflows.

Short-term gilts sharply underperformed other tenures, with no certainty about the next rate cut in India, and preference for long-term bonds on expectations that the Centre would slash supply of bonds maturing in 15 years or more in its borrowing for the second half of 2025-26 (Apr-Mar). The balance supply of long-term gilts is expected to be in the 5- to 10-year segment, weighing on short-term bonds. Expectations of the lower long-term bond supply shot up after a slew of meetings between bond market participants and the central bank this week regarding the Oct-Mar borrowing calendar. However, some traders preferred short-term bonds, especially ahead of the first tranche of liquidity inflows from the scheduled cut in the cash reserve ratio starting Saturday. The five-year 6.01%, 2030 bond ended at INR 99.15, 22 paise higher from Thursday's close. A few traders favoured the seven-year 6.28%, 2032 bond for their asset and liability management. 

Preference for state bonds increased, and yield spreads of 10-year state bonds compressed over the 10-year benchmark gilt after shooting past the 100-bps mark at the state bond auction earlier this week. Fresh supply of these bonds next week is also of relatively smaller size, dealers said. Seven states will raise INR 153.00 billion through a bond auction Tuesday, against the notified amount of INR 316.50 billion.

Some bond traders were unable to ascertain their short positions accurately after the RBI changed settlement for Thursday's short sales to Tuesday, dealers said. The central bank Thursday postponed the Id-e-Milad holiday to Monday from Friday, following a notification on the change from the Maharashtra government. 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. The data at 1800 IST showed only two bonds traded in this segment Friday, with eight trades worth INR 7.00 billion in the 6.79%, 2034 gilt, and one trade worth INR 1.30 billion in the 10-year benchmark 6.33%, 2035 gilt. Data for Thursday shows trades worth INR 202.60 billion in the 6.33%, 2035 gilt. The total trades of both Thursday and Friday will be published on Tuesday, dealers said.

"People would've not gotten an indication of how much shorts are being run, etc. because the settlement date has moved on right, so today (Friday) we'll not get any indication of how much was covered yesterday (Thursday)," a dealer at a private sector bank said. Traders estimated short sales worth INR 50 billion to INR 60 billion were covered Thursday, and that CROMS data would fall to INR 150 billion in the 6.33%, 2035 paper Tuesday. Traders who had placed short bets Thursday were at an advantage since they did not need to cover these bets until Tuesday, dealers said.

In spite of several traders being on leave due to the change in holiday, turnover in the government bond market was robust at INR 617.90 billion, but slightly down from INR 744.60 billion Thursday, according to data on the NDS-OM platform. There were no trades using the wholesale digital rupee pilot for the sixth straight day.

OUTLOOK

Gilts are not traded Saturday. The RBI and money markets are shut Monday, as the holiday for Id-e-Milad was rescheduled. On Tuesday, bond prices will track the movement of US Treasury yields after US non-farm payrolls for August showed a rise by 22,000 in August, sharply lower than estimates of 75,000.

Later in the day, traders will track the state bond auction result. Seven states will raise INR 153.00 billion at Tuesday's auction. This is slightly higher than the indicated amount of INR 151.50 billion. Later in the week, traders will track August CPI inflation data.

Details of meetings between the RBI and bank treasury officials may lend cues. Developments on a potential India-US bilateral trade deal will also be watched closely. Bond prices 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 6.42-6.60%.

India Gilts: Sharply up on US rate cut bets, purchases by FPI, foreign banks

India Gilts: Sharply up on US rate cut bets, purchases by FPI, foreign banks

MUMBAI--1533 IST--Government bond prices were near the day's high as foreign banks and portfolio investors bought, betting on a rate cut by the US Federal Open Market Committee at its upcoming meeting in September. Some dealers expect the US non-farm payrolls data to be below consensus estimates, after a slew of poor jobs data in the US recently bolstered bets of a US rate cut this month. A poll by The Wall Street Journal expects 75,000 jobs to have been added in the US in August. The US employment report is due at 1800 IST.

The fall in US yields aided the rise in bond prices, dealers said. The yield on the benchmark 10-year US Treasury note was 4.16% as of 1533 IST, down from 4.28% at 1700 IST Thursday. The CME FedWatch tool now shows traders almost fully pricing in a 25 basis-point rate cut by the FOMC in September. If the FOMC does cut rates this month, it will be the first cut since December, and any such move from the US central bank may nudge the Reserve Bank of India's Monetary Policy Committee to resume its rate cut cycle in India.

On the domestic front, the 10-year benchmark 6.33%, 2035 gilt yield fell below the psychologically crucial level of 6.47%, which furthered the rise in prices. Additionally, the rupee came off its record low hit earlier, ending at 88.2650 per $1 at 1530 IST, compared to its day's low of 88.3650 per $1. Mutual funds were also buying gilts, dealers said.

Bonds maturing in 15 years or more surged on bets that the central government would reduce supply of these bonds in its Oct-Mar borrowing plan. The 6.90%, 2065 gilt last traded 89 paise higher at INR 95.94. Sentiment remained positive, on hopes of support from the Centre or from the Reserve Bank of India as the fiscal slippage from the Centre's goods and service tax rejig is seen lower than expectations.

"Today's closing level will be important, since it's a weekly closing but I think it'll be positive (lower in yield terms) only," a dealer at a private sector bank said. "It should close around 6.45-6.46% (yield on the 10-year benchmark gilt)." Another dealer said the 10-year benchmark gilt could hit 6.44% yield next week.

Turnover in the gilts market was around INR 460.90 billion, slightly up from INR 451.20 billion at 1530 IST Thursday, 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 6.44-6.48%. (Cassandra Carvalho)

India Gilts: Mixed; 10-yr gilt gives up gains on profit booking, rupee's fall

India Gilts: Mixed; 10-yr gilt gives up gains on profit booking, rupee's fall

MUMBAI--1247 IST--Government bond prices were mixed. The 10-year benchmark 6.33%, 2035 bond gave up all gains as traders sold bonds at a profit once the yield fell to its lowest levels in over two weeks, dealers said. A fall in the rupee to record lows during the day also likely led bonds to erase gains, they added. However, prices on most bonds remained up as US Treasury yields fell overnight. 

"Sentiment has improved in the market but these are also good levels to book profits and market has been waiting for these levels," a dealer at a state-owned bank said. "But the upside in yields is limited and if these levels sustain, we will see market test 6.40% levels also next week."

State-owned banks sold bonds at a profit and exited earlier positions when bond yields spiked to 6.65% levels, dealers said. With the long weekend ahead due to holiday declared by the Reserve Bank of India on Monday, traders were cautious before the US non-farm payrolls data is released, dealers said. Foreign portfolio investors likely sold bonds, according to dealers from the foreign exchange market. As of 1229 IST, FPIs have sold INR 751.2 million worth of gilts through the fully accessible route, data from Clearing Corp. of India showed. The rupee fell to a record low of 88.36 to a dollar during the day. 

Apart from the 10-year gilts, most others remained up as market sentiment improved due to lesser-than-feared revenue loss expected from the restructuring of goods and service tax rates. Longer-tenure bonds were up on hopes that the share of supply of bonds maturing in 15 years and above will fall in Oct-Mar from around 50% in Apr-Sept, dealers said. 

The turnover in the gilts market was around INR 209.75 billion, against INR 252.20 billion at 1230 IST Thursday, 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 6.44-6.52%. (Srijita Bose)

India Gilts: Rise on fall in US yields; PSU banks' profit booking caps gains

India Gilts: Rise on fall in US yields; PSU banks' profit booking caps gains

NEW DELHI--1010 IST--Government bond prices rose, tracking a fall in US Treasury yields. Market sentiment was positive as fears of higher borrowing eased after the GST Council's decision, and some traders considered the US Federal Open Market Committee cutting rates could also open the door to further domestic rate cuts, dealers said. Gains in gilts were capped by likely sales by state-owned banks around 6.48% yield on the 10-year benchmark 6.33%, 2035 gilt, which is seen as a psychologically crucial level.

Data after Indian market hours Thursday showed US private sector payrolls increased by 54,000 in August, according to ADP Research data, missing estimates. Further, US jobless claims for the week ended Saturday rose to the highest since June at 237,000. The 10-year US Treasury yield fell to 4.16% from 4.22% at 1700 IST Thursday. Trade volumes in the gilt market as expected to fall in the second half as traders remain cautious before the US non-farm payrolls data, due after market hours. 

The FOMC is almost universally expected to cut its policy rate by 25 basis points as its Sept. 16-17 meeting, according to the CME FedWatch tool, with traders now ramping up bets of further rate cuts in 2025 following constantly weak labour market data. This may also open the door to further rate cuts in India in either October or December, dealers said. However, domestic data will have to be reassessed after the government announced sweeping goods and services tax rationalisation that may provide stimulus to the economy. 

Moreover, after two weeks of sharply higher than expected notified supply of above INR 300 billion, states said they will borrow only INR 153 billion at the bond auction on Tuesday. This was largely in line with the INR 151.50 billion indicated in the Jul-Sept borrowing calendar by states. 

"The market sentiment has turned and is moving towards the buying side, largely because US yields are lending support to buyers," a dealer at a private sector bank said. "The cherry on top is that the state bond supply is manageable and in line with the calendar."

Traders may hit stop-losses on their short sales if the 6.33%, 2035 bond's price rises above INR 99.00. That may lead to a sharp move up in bond prices, and the 10-year benchmark yield may fall the mid-August low of 6.40%, with some selling pressure likely at 6.44-6.45% yield, dealers said. Traders may take intraday bets to capture further price gains, while trimming their holdings of state bonds. Long-term bonds are expected to continue outperforming the 10-year gilt on hopes the share of supply of bonds maturing in 15 years and over will fall in Oct-Mar from around 50% in Apr-Sept, dealers said.

The turnover in the gilts market was around INR 113.70 billion, against INR 121.65 billion at 0955 IST Thursday, 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 6.44-6.52%.  (Aaryan Khanna)

India Gilts: Seen up as US ylds down, heavy state bond supply may limit rise

MUMBAI – Government bond prices are seen opening higher tracking an overnight fall in US Treasury yields, dealers said. However, with the constant pressure of heavy state bond supply, the rise in prices may be limited, they said. 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.42-6.56% during the day. On Thursday, the bond ended at INR 98.83 or 6.49% yield.

US data on Thursday showed private sector payrolls increased by 54,000 in August, according to ADP Research data, missing estimates. Further, US jobless claims for the week ended Saturday rose to the highest since June at 237,000. The 10-year US yield fell to 4.16% at 0824 IST from 4.28% at 1700 IST Thursday.

Traders may also place bets before the US non-farm payrolls data is released post market hours. Economists from Blooomber project that about 75,000 jobs were added in August, while the jobless rate is seen at 4.3%. Four straight months of sub-100,000 payrolls growth would mark the weakest such stretch since the onset of the pandemic in 2020. The CME FedWatch tool now shows traders almost fully pricing in a 25 basis-points rate cut by the FOMC, with at least two rate cuts this year. Foreign banks and portfolio investors may be buyers Friday. 

The RBI, after market hours, said seven states would raise INR 153.00 billion at Tuesday's auction. This is slightly higher than the indicated amount of INR 151.50 billion. This is the third consecutive state bond auction when the supply is higher than indicated. There are concerns that state borrowing will increase due to the GST reforms, dealers said. Meanwhile, some banks are approaching their internal limit on purchasing state bonds, they said. This is likely to increase the spreads of state bonds over gilts. However, banks and mutual funds may prefer to opt for state bonds due to the higher return over gilts, dealers said. 

Towards the end of trade, traders may trim portfolios ahead of the long weekend. Now that Monday is a holiday, trade volumes could be lower Friday since many traders will be on scheduled leave. Details of meetings between the Reserve Bank of India and bank treasury officials may also lend cues during the day.  (Srijita Bose)

End

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

Edited by Ashish Shirke

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.