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Informist, Tuesday, Sept. 9, 2025

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended sharply lower Tuesday on selling for profit and higher-than-expected state bond cut-off yields at auction, dealers said. The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.83, or a yield of 6.49%, against INR 99.03, or 6.47%, Friday. Money markets were shut Monday for Id-e-Milad. Long-term bonds were down the most, with the 7.09%, 2074 gilt ending 69 paise lower at INR 97.00.

 

"I think it's because auction results are not good (though the secondary gilt) market has rallied in the past 3–4 trading sessions," a dealer at a state-owned bank said. "The (auction) size was also low this time in comparison to the last two auctions, and the quantum was in line with the (indicated state bond borrowing) calendar, still cut-off is not good, so that's why there is some sell-off."

 

Nagaland did not accept any bid for its 10-year bond at the auction. The Reserve Bank of India set a cut-off yield of 7.02% on Bihar's five-year bond, higher than the estimate of 6.95% in an Informist Poll. Six states raised INR 149.00 billion at the auction. Seven states had invited bids to raise INR 153.00 billion.

 

Other traders attributed the fall in prices to profit sales, since traders had accumulated gilts when the yield on the 10-year benchmark 6.33%, 2035 gilt rose to 6.62% at the end of August. "I think it has already run up (prices have risen) a lot, so I was expecting there will be a sell-off, some sudden uptick (in yields) will come at higher level (when prices rise)," a dealer at a private-sector bank said. Till Friday, the 10-year benchmark gilt yield had fallen around 10 basis points in September, reversing half the nearly 20-bps rise in August.

 

Bond prices opened higher, tracking a fall in US Treasury yields, after non-farm payrolls in the US in August rose by 22,000, sharply lower than the consensus estimate of 75,000. This has raised chances of a 50-basis-point rate cut by the US Federal Open Market Committee next week, with traders now fully pricing in at least a 25-bps cut.

 

However, the rise in prices could not be sustained with traders who had purchased gilts at higher yields continuously selling for profit. Moreover, a cut of 25 bps in the policy interest rate in the US is not seen forcing the RBI's Monetary Policy Committee to hasten its own rate-cut cycle, dealers said. If anything, it could be beneficial for Indian bonds with the wider interest rate differential between the two countries bringing in foreign inflows, they said. 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 attractive for foreign investors. Data from Clearing Corp. of India showed foreign portfolio investors net bought gilts worth INR 4.09 billion as of 1940 IST through the fully accessible route Tuesday. If the FOMC cuts rates by 50 bps next week, gilts could start pricing in a 25 bps cut by the RBI's rate-setting panel in October, dealers said. 

 

Traders paid fixed rate contracts in the swaps market, which offset some of the fall in swaps tracking US yields. The paying bias in swaps triggered a further sell-off in the bond market, dealers said, and some hit intraday stop-losses. Traders speculated that mutual funds were selling gilts in the secondary market. Mutual funds have net sold gilts worth around INR 19.29 billion this month, until Friday, according to data from Clearing Corp. of India. 

 

"Towards the end of trade, we were seeing selling pressure in g-sec (government securities) mainly due to profit-booking led by paying in OIS," a dealer at a private-sector bank said. "From the price action, what I infer is that mutual funds were selling. No other participant had such large purchases recently, so there will be some profit-booking from their end; (besides) state-owned banks will not sell so aggressively."

 

At the state bond auction, results were mixed, with some states' cut-off yields being higher and others lower than expectations. However, despite the small size of the auction, the yield spreads of the bonds at the auction over gilts were on the higher side, and only banks' asset and liability managers bid for Maharashtra's bond maturing in less than 10 years, though the state is one traders usually prefer, dealers said.

 

Turnover in the government bond market was INR 478.40 billion, down from INR 617.90 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were four trades for a total of INR 1.00 billion in the 6.75%, 2029 gilt Tuesday, using the wholesale digital rupee pilot. There were no trades using this method Friday.

 

OUTLOOK

Wednesday, bond prices will track the overnight movement of US Treasury yields at the opening, dealers said. If US yields are little changed, then bond prices may open steady. From a technical perspective, the yield on the 10-year benchmark US Treasury yield is seen rising to 4.10%, a dealer said. Later in the week, traders will track CPI inflation data for August, due Friday. CPI inflation in India likely rose to 2.1% in August from an eight-year low in July because of the fading of the statistical effect of a favourable base and a rise in food and gold prices, according to an Informist Poll.

 

Details of meetings between the RBI and bank treasury officials may also lend cues. The central bank is likely to meet primary dealerships Wednesday for feedback on the central government's borrowing plan for Oct-Mar, according to dealers. 

 

By the end of September, some dealers see the 10-year benchmark gilt yield hitting 6.38-6.40% if the FOMC cuts rates and bets of a cut by the RBI's rate-setting panel in October build up. In the near term, an upside in the yield on the 10-year benchmark gilt could be capped at 6.55%, dealers said. Developments on a potential India-US 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%.

 

	TUESDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.8250	6.4942%	99.0300	6.4651%
6.79%, 2034	101.4000	6.5816%	101.6525	6.5446%
6.01%, 2030	99.0200	6.2445%	99.1500	6.2129%
6.68%, 2040	98.4500	6.8467%	98.7450	6.8144%
6.90%, 2065	95.4000	7.2541%	95.8800	7.2156%

 

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India Gilts: Reverse gains; state bond auction cut-off ylds higher than view

 

	1604 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.93	99.24	98.89	99.10	99.03
YTM (%)	6.4800	6.4850	6.4354	6.4552	6.4651

 

MUMBAI--1604 IST--Prices of government bonds were down, reversing early gains after the cut-off yields at the state bond auction were higher-than-expected for some bonds. Some traders said cut-off yields were largely along expected lines, but dealers, who had purchased gilts when the yield on the 6.33%, 2035 bond hit 6.60%, booked profits. Nagaland did not accept any bids for its 10-year bond at the auction. The Reserve Bank of India set a cut-off yield of 7.02% on Bihar's 5-year bond, higher than an Informist poll estimate of 6.95%. 

 

"Cut-offs were not bad, but because of the smaller size we thought the auction would go through," a dealer at a private sector bank said. "Since morning, there has been some profit booking, but sentiment is positive because of US rate cut bets, so the 45 (6.45% level on the 10-year benchmark gilt) may sustain (at close) today (Tuesday)."

 

Domestic banks and mutual funds bid for state bonds maturing in up to 10 years, whereas long-term investors such as insurance companies bid for the longer-term state bonds, dealers said. Several traders had expected the auction to sail through due to its comparatively smaller size, compared to previous weeks, they said. However, six states raised INR 149.00 billion at the bond auction, whereas seven states had invited bids to raise INR 153.00 billion. 

 

Some state-owned banks were purchasing gilts after the yield on the 6.33%, 2035 gilt rose above the 6.45% level, dealers said. Some expect prices to recover, and the 10-year benchmark gilt yield could fall back to 6.45% by the end of trade, dealers said. A fall in US Treasury yields and bets of a rate cut by the US Federal Open Market Committee next week limited the upside in yields, dealers said.       

 

The turnover in the gilts market was INR 359.60 billion at 1530 IST, lower than INR 460.90 billion at the same time Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Money markets were shut on Monday for Id-e-Milad. For the rest of the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.44-6.50%.  (Cassandra Carvalho)

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India Gilts: Remain off highs on profit booking; long-term bonds tad down

 

	1345 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.11	99.24	99.03	99.10	99.03
YTM (%)	6.4542	6.4648	6.4354	6.4552	6.4651

 

MUMBAI--1345 IST--Government bonds remained off highs due to profit booking once the yield on the 10-year gilt fell to the psychologically crucial level of 6.44%, dealers said. Despite the sharp fall in US Treasury yields, which led to a surge in prices near the open, the buying momentum ebbed when prices rose as traders did not expect the Reserve Bank of India's Monetary Policy Committee to cut rates further.

 

Traders had been tracking US yields closely for the past few days on rising hopes the US Federal Open Market Committee would cut rates at its September meeting next week, along with easing fears of additional bond supply. Those hopes were cemented after US non-farm payrolls data for August showed the US added fewer jobs than expected, and the unemployment rate inched up, dealers said.

 

"The market was moving on higher side for some days on (expectation of) RBI rate cut, US rate cut (expectations) but now it is correcting slightly," dealer at state-owned bank said. The 6.33%, 2035 bond's price was on track to rise for the fifth straight session Tuesday. Its yield fell to its lowest since Aug. 18 earlier in the day.

 

Traders took the opportunity to take profits across tenures, including gilts maturing in 15 years and above, which had outperformed the 10-year gilt over the past week. Prices of these bonds were slightly lower than Friday's close. The expectation of a slight reduction in the supply share of these bonds in the government's Oct-Mar borrowing calendar was largely priced in, dealers said.

 

As for the state bond auction, the fresh supply of INR 153 billion is expected to sail through as the notified amount was in line with the Jul-Sept indicative calendar. Moreover, this was the smallest auction of state bonds in four weeks. Mutual funds and insurance companies are expected to pick up the longer-tenure bonds, whereas the uncertainty remains in the shorter tenure, dealers said. Some banks said the current spreads on state bonds were lucrative. Last week, the spread of 10-year state bonds over the 10-year gilt rose above 100 basis points and hit its highest since April 2020.

 

"Demand in the state bond auction seem(s) decent, there might be tail bidding but won't cancel," a dealer at a primary dealership said.

 

The turnover in the gilts market was around INR 244.75 billion, similar to INR 233.80 billion at 1330 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Money markets were shut on Monday for Id-e-Milad. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.42-6.48%.  (Janwee Prajapati)

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India Gilts: Off highs on profit booking; rise on sharp fall in US yields

 

	0935 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.13	99.24	99.10	99.10	99.03
YTM (%)	6.4517	6.4552	6.4354	6.4552	6.4651

 

NEW DELHI--0935 IST--Government bond prices were off highs due to profit booking near the psychologically crucial 6.44-6.45% yield on the 10-year benchmark 6.33%, 2035 gilt. Gilt prices surged early in the day tracking a fall in US Treasury yields on increasing bets of the US Federal Open Market Committee cutting interest rates next week after soft jobs data in the world's largest economy, dealers said.

 

Traders booked profits as the 10-year gilt yield hit its lowest since Aug. 18, after rising to as much as 6.66%. State-owned banks and foreign banks were both likely to have booked profits, with the latter having picked up gilts in the run-up to the US jobs data last week, dealers said.

 

"There is a fair amount of profit booking in coming in at these levels from across the market," a dealer at a private sector bank said. "I think there could still be some more positivity later in the day, but the day's low could be 6.40% (on the 10-year gilt). Upside (in yields) is really not expected."

 

The 10-year US Treasury yield fell to 4.05% from 4.16% at 1700 IST Friday after US non-farm payrolls for August showed a rise of 22,000 in August, sharply lower than estimate of 75,000. This raised hope of a 50-basis-point rate cut by the Federal Open Market Committee this month, with traders now fully pricing in at least a 25-bps cut at the meeting, according to the CME FedWatch tool.

 

Some traders expect any US rate cuts to create more space for the Reserve Bank of India's Monetary Policy Committee to cut the repo rate again in October or December, after standing pat on rates in August. While others do not necessarily expect rate cuts in India, they said lower US yields could drive foreign portfolio flows to emerging markets such as India, as witnessed over the past month, dealers said. 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. The widening interest rate differential in August led to foreign portfolio investors picking up nearly INR 100 billion of fully accessible route gilts; the buys were aided by India's inclusion in FTSE Russell emerging market bond indices.

 

The turnover in the gilts market was around INR 101.30 billion, slightly higher than INR 74.35 billion at 0930 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Money markets were shut on Monday for Id-e-Milad. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.40-6.46%.  (Aaryan Khanna)

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India Gilts: Seen up on fall in US yields, short covering

 

MUMBAI – Government bond prices are seen rising Tuesday due to a fall in US Treasury yields, dealers said. Traders may also look to cover some short bets placed before the long weekend started on Friday, they said. 

 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.40-6.52% during the day. On Friday, the bond ended at INR 99.03 or 6.47% yield. Money markets were shut Monday as the holiday for Id-e-Milad was rescheduled. 

 

The yield on the 10-year US Treasury note fell to 4.05% at 0817 IST Tuesday from 4.16% at 1700 IST Friday after US non-farm payrolls for August showed a rise by 22,000 in August, sharply lower than estimates of 75,000. This has raised chances of a 50-basis-point rate cut by the Federal Open Market Committee this month, with traders now fully pricing in at least a 25-bps cut at the meeting. Foreign portfolio investors and banks may step up buying gilts as the interest rate differential between the safe haven asset and the emerging market bond yield widened, dealers said. 

 

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. Expectations of an increase in borrwing by state governments due to the reform in goods and service tax slabs may keep yield spreads on the state bonds over gilts high at auction, dealers said. However, long-term gilt yields are expected to remain supported as traders expect the concentration of these bonds to fall in the Oct-Mar calendar for gilts which will be released later this month. 

 

Details of meetings between the Reserve Bank of India and bank treasury officials may also lend cues. Any sharp movement in the rupee against the dollar could also lend cues to gilts during the day.  (Srijita Bose)

 

End

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

 

Edited by Rajeev Pai

 

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