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Informist, Wednesday, Sept. 10, 2025

By Cassandra Carvalho

MUMBAI – Prices of most government bonds ended up Wednesday, near the day's high, reversing early losses on likely purchases by foreign portfolio investors, dealers said. As of 1700 IST, FPIs net purchased gilts worth INR 4.91 billion through the fully accessible route, according to data from Clearing Corp. of India. FPI have net purchased gilts worth INR 29.18 billion so far in September, after purchases worth a little more than INR 100.00 billion in August. 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.93, or a yield of 6.48%, against INR 98.83, or 6.49%, Tuesday. The bond yield moved in a range of 5 basis points in a choppy trading session.

"There is definitely FPI interest today (Wednesday), you can see it in the numbers, and we are also hearing it. PSU banks (state-owned banks) have also been on the buying side," a dealer at a foreign bank said. "As for the sellers, nobody really knows, but since it was mutual funds yesterday (Tuesday) and the activity seemed similar in nature, it is easy for the market to point fingers at mutual funds."

FPIs were likely purchasing gilts on bets of the US Federal Open Market Committee cutting rates by at least 25 bps next week, with some betting on a 50 bps cut as well, 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 to foreign investors. Further, comments by US President Donald Trump and Indian Prime Minister Narendra Modi overnight on continuing negotiations to address trade barriers between the two countries also improved expectations of a bilateral trade deal, dealers said. 

Prices were down earlier on likely sales from mutual funds, dealers said. Traders speculated that mutual funds were selling gilts to invest in state and corporate bonds, dealers said. Mutual funds have net sold gilts worth around INR 50.47 billion as of Tuesday this month, according to data from Clearing Corp. of India.

When prices fell earlier in the day, some state-owned banks purchased gilts when the yield on the benchmark 10-year gilt rose near the 6.53% level, which is its 200-day moving average, dealers said. "Whenever the levels are good, we were buying at like 6.5200%-6.5250%," a dealer at a state-owned bank said. "Benchmark 10-year only is the best right now in gilts, and there's some interest in SDL (state bonds) from some PSUs (state-owned banks) and PFs (pension funds)." 

Traders have been closely tracking technical levels in yield movement for over a month, primarily due to a lack of firm positive triggers on rate cuts and a lower supply of bonds, which had subsequently diminished buying interest in gilts, dealers said. September witnessed some reversal of the upward trend in bond yields seen in August, and the 10-year benchmark yield is not expected to sustain a rise above 6.60%, with some expecting the rise in bond yields to have peaked, dealers said. However, at the same time, the benchmark 10-year yield is not seen falling below 6.38% until the RBI's Monetary Policy Committee meeting in October, which has left traders closely tracking technical levels for any "breakout", which would signify a fresh direction for the bond market.   

"I think market has to price in this much amount of volatility now (on a daily basis) because when there's negative sentiment no one wants to buy, and due to regulation, that PSU (state-owned banks') buying we used to see which used to support the market is no longer there," a dealer at a private sector bank said. "There is only some buying coming in at the technicals now." 

Traders also covered short bets, which spurred the rise in prices near the end of trade, dealers said. Some traders expect bond prices to rise further next week due to the US FOMC meeting and covered short bets to avoid losses later, dealers said. Traders who had placed short bets expecting the 10-year benchmark yield to rise above the 6.60% level it touched in late August were already suffering losses due to the recent rise in bond prices, dealers said. 

Demand for state bonds improved, due to lucrative yield spreads over gilts of similar maturity, dealers said. Some domestic banks picked up state bonds maturing in 8-10 years for their held-to-maturity books, while pension schemes and insurers likely picked up longer-term state bonds, dealers said. 

Turnover in the government bond market was INR 693.60 billion, up from INR 478.40 billion Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades using the wholesale digital rupee pilot Wednesday, as against four trades for a total of INR 1.00 billion in the 6.75%, 2029 gilt Tuesday. 

OUTLOOK

Thursday, bond prices will track the overnight movement in US Treasury yields at the opening, dealers said. If US yields are little changed, then bond prices may open steady. Traders will closely track technical levels for cues. On Friday, traders will track CPI inflation data for August. 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 to traders. The central bank met with primary dealers on Wednesday for feedback on the central government's borrowing plan for the second half of the year, according to dealers. Sales or purchases from mutual funds will also impact bond prices. 

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 following signs of a thaw in the relationship between the two countries. 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 6.40-6.60%.

India Gilts: Recover most losses on bks' buys near 6.52% yld on 10-year gilt

India Gilts: Recover most losses on bks' buys near 6.52% yld on 10-year gilt

MUMBAI--1430 IST--Government bonds prices recovered most losses as state-owned banks stepped up purchases when the 10-year 6.33%, 2035 gilt's yield topped 6.52%, which they considered lucrative, dealers said. Prices were sharply down earlier due to persistent sales from traders, likely from mutual funds.

The technical support for the 10-year gilt is around 6.53% yield, which is its 200-day moving average, dealers said. State-owned banks were also picking up gilts near the day's low in their available-for-sale portfolios, with the 10-year gilt's yield seen at the top of the current trading range. Concerns over fiscal slippage have eased after comments from Finance Minister Nirmala Sitharaman that the goods and services tax rejig would not lead to fresh borrowing, dealers said.

"There is heavy buying coming in, and it looks like the selling pressure has faded slightly as mutual funds could be done with whatever stock they wanted to exit," a dealer at a primary dealership said. "PSUs (state-owned banks) are definitely there, but some traders are also buying near the 200-DMA."

The market sentiment remained subdued as traders did not see any immediate positives to drive demand for gilts, dealers said. Rising spreads in recent state bond auctions, including Tuesday's, suggested dull appetite for fresh supply. Despite the fall in US Treasury yields over the past few days on firming hopes of a rate cut cycle in the US in 2025, traders do not expect any further rate cuts in India after the 100 basis points of rate reduction in Feb-Jun. Moreover, when the 10-year gilt's yield failed to fall below the psychologically crucial 6.44% mark Tuesday, traders shed positions at a profit after picking up gilts while the benchmark yield retreated from its five-month high of 6.66% hit in August.

"Yesterday, we were expecting support at 6.45% (yield on the 10-year gilt) but it was breached. I think traders are exiting positions which they held earlier," a dealer at a private-sector bank said.

Meanwhile, traders expect the market's feedback to the Reserve Bank of India on bringing down the share of long-term bond supply to be implemented in the government's Oct-Mar borrowing calendar, dealers said. Some banks were wary of picking up bonds maturing in 5-10 years as the fall in long-term bond supply may lead to an increase in the supply of other gilts. The government's borrowing through 30-50 year bonds in Apr-Sept was 35% of the calendar, while a quarter of the issuance was through the 10-year bond. Regardless, losses were limited in short-term bonds due to banks' preference for those securities in their held-to-maturity book, while long-term gilts continued to fall.

Separately, traders also expect the record pace of Apr-Aug state bond supply to slow after the market's feedback to the central bank. Banks had asked the RBI to ask states to match their notified weekly issuance close to the indicative calendar, and bring down the weighted average duration of supply. The glut of long-term bonds from both Centre and states had led to a rout in the market in August amid poor appetite from long-term investors. 

The turnover in the gilts market was around INR 379.95 billion, higher than INR 270.80 billion at 1430 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 6.47–6.54%.  (Muskan Lodhi)

India Gilts: Down as MFs likely sell; PSU banks' buy limits losses

MUMBAI--1306 IST--Government bond prices were sharply down on likely sales from mutual funds, dealers said. Traders from private sector banks also likely trimmed some of their positions as the yield on the 10-year benchmark 6.33%, 2035 bond topped 6.50% levels, triggering some stop-losses in light volumes, they said. 

"Mutual funds are selling and since we breached 6.50% (yield on the 2035 bond), most PSUs (state-owned banks) are now waiting for 6.53-55% levels to buy. That (6.55-6.56% level) should be a hard support," a dealer at a state-owned bank said. "And most of the sales are also concentrated in the 10-year gilts." Buys from state-owned banks increased, but was not seen aggressive, as the yield on the 2035 bond was around 6.52%, dealers said.

Hopes of the Reserve Bank of India providing support to the market also faded, with most traders now expecting only the downward revision in concentration of longer tenure in the Oct-Mar calendar for gilts which will be released later this month, dealers said. Further, CPI inflation in India is also expected to have risen to 2.1% in August from an eight-year low of 1.55% 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. With no significant positives seen in the near term, buys from banks were limited, they said. 

Rise in US Treasury yields to 4.09% from 4.07% at 1700 IST Tuesday also limited buys in gilts, dealers said. With some expectations of a 50-basis-point rate cut by the US Federal Open Market Committee later this month, buys from foreign portfolio investors and banks should pick up over the week, but may not be aggressive, dealers said. 

The turnover in the gilts market was around INR 263.25 billion, slightly higher than INR 217.05 billion at 1230 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 6.47-6.56%.  (Srijita Bose)

India Gilts: Steady on lack of fresh cues after volatility on Tuesday

NEW DELHI--0945 IST--Government bond prices traded in a thin band as traders awaited fresh cues after volatile trade on Tuesday. Lack of conviction on further domestic rate cuts and uncertainty about investor demand at auction continued to weigh on trader sentiment, dealers said.

Traders took profits on Tuesday after labour market weakness in the US led to a slump in US Treasury yields, in tandem with mounting expectations of a rate cut by the US Federal Open Market Committee next week. A downward revision in prior jobs data after Indian market hours Tuesday did not impact the 10-year US Treasury yield, and therefore had little impact on gilt prices, dealers said.

Moreover, traders do not expect the US rate cut to necessarily spur rate cuts by the Reserve Bank of India's Monetary Policy Committee. Some traders await India's CPI data for August on Friday for the next cue on domestic rate cuts, though the reading is largely expected to be at the lower bound of the central bank's 2-6% target band and is priced into gilts, dealers said. CPI inflation in India likely rose to 2.1% in August from an eight-year low in July because of fading of the statistical effect of a favourable base and a rise in food and gold prices, according to an Informist poll of 12 economists.

Demand for state bonds at the modest INR-153-billion auction on Tuesday signalled investors may continue to demand higher yields to pick up fresh supply, which may keep pressure on bond prices, dealers said. While traders likely continued to trim their gilt holdings, state-owned banks were likely buyers in the secondary market as the 10-year benchmark 6.33%, 2035 bond's yield briefly topped 6.50%.

"Traders had built up positions for the event (US non-farm payrolls) and exited those positions," a dealer at a private sector bank said. "The only reason we are here is because PSU banks bought, so it looks like the market is supported." On Tuesday, gilt prices surged early in the day before slumping by the close, with the 10-year yield in a 6.44-6.50% range.

Meanwhile, a perceived softening in geopolitical tensions between India and the US did not immediately lend direction to gilt prices, dealers said. US President Donald Trump said he was "pleased" to announce that India and the US were continuing negotiations to address the trade barriers between the two nations, and that there should be no difficulty in successfully concluding a trade deal. Mirroring Trump's promising sentiment on India-US trade negotiations, Prime Minister Narendra Modi Wednesday said the two countries' respective teams were working to conclude the discussions at the earliest.

The turnover in the gilts market was around INR 79.90 billion, slightly lower than INR 92.20 billion at 0930 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 6.45-6.53%. (Aaryan Khanna)

India Gilts: Seen opening steady, may fall on rupee weakness

MUMBAI – Government bond prices are seen opening steady Wednesday as traders await fresh cues, dealers said. Any sharp fall in the rupee could lead to a fall in gilts during the day due to potential impact of tariffs, after US President Donald Trump asked the European Union to impose up to 100% tariffs on India and China. 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.44-6.52% during the day. On Tuesday, the bond ended at INR 98.83 or 6.49% yield.

Traders await further cues from the Reserve Bank of India after having bought in the past week on hope of support to the gilts market, dealers said. Traders will also track CPI inflation data for August, due Friday. CPI inflation in India likely rose to 2.1% in August from an eight-year low of 1.55% 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. Domestic traders may book profits on their gilt positions after the 10-year benchmark bond has fallen from highs of nearly 6.61% in August, dealers said. 

Foreign portfolio investors and banks may be on the buying side on expectation of a rate cut by the Federal Open Market Committee this month, dealers said. However, the buys may not be aggressive as the US Treausury yield rose slightly overnight to 4.09% at 0836 IST from 4.07% at 1700 IST Tuesday. 

US President Donald Trump early Wednesday said his administration is continuing negotiations with India to address trade barriers and he is looking forward to speaking with Prime Minister Narendra Modi in the upcoming weeks. However, on other hand, Trump Tuesday asked the Europrean Union to impose up to 100% tariffs on India and China over purchase of oil from Russia by the two countries, the Financial Times reported. The rupee may drag down gilts during the day due to the uncertainty over tariffs on India, dealers said. The rupee ended at 88.10 against the dollar on Tuesday.

Fall in long-term gilts during the day is expected to be limited as traders expect the concentration of these bonds to fall in the Oct-Mar calendar for gilts which will be released later this month. (Srijita Bose)

End

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

Edited by Saji George Titus

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