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Informist, Friday, Sept. 12, 2025

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended on a mixed note Friday. The 10-year benchmark gilt fell as traders trimmed risk ahead of the weekend. Other bonds ended off highs amid a spate of profit booking, but managed to hold onto some gains due to firm demand from investors at the INR-280-billion weekly gilt auction, dealers said. India's CPI inflation in August was on expected lines and did not have an impact on gilt prices, they said.

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.88, or a yield of 6.49%, against INR 99.02, or 6.47%, Thursday. The five-year benchmark 6.01%, 2030 bond ended at INR 98.95 or 6.26% yield, against INR 98.92 or 6.27% Thursday. The 7.24%, 2055 gilt ended 13 paise higher at INR 100.25, after sliding 88 paise between Tuesday and Thursday.

 

Both the five-year and 30-year bonds had underperformed the 10-year gilt on Thursday. The government sold INR 150 billion of the 2030 bond and INR 130 billion of the 2055 gilt at auction Friday.

 

Cut-off prices were better than what traders had expected, especially for the 30-year bond. The positive surprise had led to bond prices rising after the auction result, including that of the 10-year bond. The 7.24%, 2055 gilt hit a high of INR 100.70 during the day, before traders who picked up the bond at auction at the INR 100.04 cut-off booked profits, dealers said.

 

"You look at yesterday's (Thursday's) movement, 10-year was the only bond which went up while the rest of the market was getting sold," a dealer at a primary dealership said. "This is a return to normalcy after everyone hit the bonds at auction constantly this week, and then some investors came and took all the stock out." 

 

Demand for the five-year gilt was firm from banks' asset-liability managers, dealers said. State-owned banks were especially keen to stockpile the 2030 bond at auction, and a large state-owned bank successfully bid for around INR 8 billion of the bond at the auction, they said. Some traders had expected mutual funds to be keen to pick up the 2030 gilt, but their demand was lacklustre. This was likely due to redemptions from corporate houses ahead of advance tax payments, as well as their preference to invest in Reliance Industries' pass-through certificate offering a similar maturity, dealers said.

 

For the 2055 bond, demand from Employees' Provident Fund Organisation and life insurers was robust and much better than expected. The supply was covered by only 26 bids, showing an average accepted bid size of INR 5.00 billion. Foreign portfolio investors also picked up the gilt despite it being ineligible for the fully automatic route of investment.

 

In the reported deals segment of the Negotiated Dealing System – Order Matching platform, typically used by FPIs and large corporate houses, the 7.24%, 2055 bond was traded 14 times. The trades were worth INR 13.50 billion. The majority of the deals took place after the auction result, and within 7 paise of the cut-off price. Traders said this was likely successful bidders transferring auction stock to clients, including FPIs.

 

The gilt's bid-cover ratio at the auction was 4.2 times, with around 2.8 times considered a sign of firm demand. After the auction, long-term bonds outperformed most other tenures in the secondary market, as investors who missed out on the auction rushed to lock in yields seen as attractive, dealers said. Traders also picked up the 2055 gilt after its sharp slide this week led to the spread over the 10-year gilt yield rising to nearly 80 basis points, considered lucrative.

 

Moreover, traders expect the government to announce a reduction in the share of longer tenure bonds in the second half of the financial year, after market participants were nearly unanimous in giving feedback to the Reserve Bank of India that 30-50-year bonds should be a smaller part of the borrowing calendar. Demand was also buoyed by a lack of supply of 30-50-year gilts next week, dealers said. Some traders also bet that the RBI's Monetary Policy Committee could ease its tone in its Oct. 1 monetary policy review.

 

However, the CPI inflation data at 1600 IST did nothing to alter traders' view on the domestic rate cycle, dealers said. India's CPI inflation rose to 2.07% in August from an eight-year low of 1.61% in July, the statistics ministry said. An Informist poll estimated headline inflation at 2.1% in August, and traders were also expecting a similar reading. Core inflation for August remained on the higher side, at 4.1%, the same as July. Traders had priced in the fact that CPI inflation was likely to have bottomed out in July.  

 

"The market was not really looking at CPI having a large impact, but it is an event that you can't really avoid," a dealer at a private-sector bank said. "At the end of it, it looks like everyone agreed it was discounted and that there was nothing new for the RBI to chew on either."

 

Turnover in the government bond market was at INR 637.65 billion, up from INR 525.65 billion Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were 10 trades using the wholesale digital rupee pilot Friday for a total of INR 5.00 billion in the 6.75%, 2029 bond, compared with 16 trades using the digital rupee Thursday.

 

OUTLOOK

Gilts are not traded on Saturdays. On Monday, bond prices may rise after the state bond auction announced for Tuesday was smaller than indicated. States will raise INR 184 billion through bonds at auction on Tuesday, against INR 236.29 billion in the Jul-Sept indicative calendar.

 

Traders will look ahead to the US Federal Open Market Committee rate decision on Wednesday. The US rate-setting panel is universally expected to cut its policy rate by 25 basis points, with the CME FedWatch tool showing a 7.5% chance of a 50 bps rate cut priced in Fed funds futures.

 

By the end of September, some dealers expect the 10-year benchmark gilt yield to fall below 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 traders 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 6.38-6.55%.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.8800	6.4867%	99.0200	6.4666%
6.79%, 2034	101.5325	6.5621%	101.6400	6.5464%
6.01%, 2030	98.9500	6.2620%	98.9150	6.2703%
6.68%, 2040	98.6900	6.8205%	98.5900	6.8314%
6.90%, 2065	95.2500	7.2662%	95.0500	7.2823%

 

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India Gilts: Fall more; traders trim stocks ahead of weekend as CPI in line

 

	1621 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.85	99.15	98.85	99.04	99.02
YTM (%)	6.4909	6.4487	6.4916	6.4639	6.4666

 

MUMBAI--1621 IST--Prices of most government bonds fell further as traders trimmed stock of gilts before the weekend, after CPI inflation for August had little effect on traders' rate view as the reading was in line with expectations. India's CPI inflation rose to 2.07% in August from an eight-year low of 1.61% in July, the statistics ministry said. An Informist poll estimated headline inflation at 2.1% in August, and traders were also expecting a similar reading. Core inflation for August remained on the higher side, at 4.1%, the same as July. Traders had priced in the fact that CPI inflation was likely to have bottomed out in July.  

 

"CPI was in line, its market expectations only," a dealer at a private sector bank said. "Maybe (the fall in prices is because) weekend clearing. I was expecting some short-covering to come in, but I guess next week's auction is there, 10-year supply will come right, so keeping in mind that there's some positions being cleared." 

 

Traders expect the 10-year benchmark gilt yield to close at around 6.50% levels, with some sales from mutual funds and private sector banks likely. However, primary dealerships were likely the largest sellers as they dumped auction stocks in the secondary market, dealers said. Several traders were also placing short bets ahead of next week's gilt auction. Next week, the central government will sell INR 300 billion of a 10-year paper and INR 60 billion of a three-year paper. The auction is seen as more important to traders than this Friday's auction. 

 

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 1621 IST showed trades worth INR 219.77 billion in the 6.33%, 2035 gilt, up from INR 202.63 billion Thursday. Most of these short sales are likely to be covered only at next week's auction, dealers said. 

 

The turnover in the gilts market was around INR 568.70 billion at 1621 IST, higher than INR 460.00 billion at 1630 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 6.43-6.53%. (Cassandra Carvalho)

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India Gilts: Mixed; long-term bonds rise on strong demand at auction

 

	1525 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.93	99.15	98.88	99.04	99.02
YTM (%)	6.4799	6.4487	6.4863	6.4639	6.4666

 

	1525 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
7.24%, 2055
PRICE (INR)	100.35	100.70	99.90	99.90	100.12
YTM (%)	7.2111	7.1821	7.2476	7.2476	7.2295

 

India Gilts: Mixed; long-term bonds rise on strong demand at auction

 

MUMBAI--1525 IST--Government bond prices were mixed. While prices of most bonds rose after the gilt auction results were better-than-expected, the 10-year benchmark 6.33%, 2034 bond reversed some gains. Traders were likely placing short bets on 10-year gilts to hedge their bets on other bonds and ahead of the weekend, dealers said. 

 

"Auction demand was much better, so that is leading to the rise," a dealer at a state-owned bank said. "But 10-year is underperforming because there is still no firm view on anything and people won't want to go aggressive."

 

Cut-off prices on both the 6.01%, 2030 bond and the 7.24%, 2055 bond were higher than the estimates of an Informist poll. Demand for the five-year gilt was firm from banks' asset-liability managers, dealers said. Some large state-owned bank also likely picked up a large stock of the 2030 bond at auction, they said. Mutual funds were expected to bid actively in the auction but demand from them was seen muted at the auction. The bid to cover ratio for the 2030 bond was 2.7 times, which also resulted in demand for the bond in the secondary market from investors who missed out at the auction, dealers said.

 

For the 2055 bond, demand from employee's provident fund organistaion and life insurers was firm. A large state-owned life insurer likely picked up a major stock of the 30-year bond at the auction, with some demand from foreign portfolio investors also likely, dealers said. The 2055 bond was bid nearly 4.2 times the amount offered at auction.

 

After the auction, long-term bonds outperformed most other tenures in the secondary market, as long-term investors who missed out on the auction rushed to lock in yields seen attractive, dealers said. Traders are expecting the Reserve Bank of India to announce a reduction in the supply of the longer tenure bond in Oct-Mar, which led some traders to pick up longer tenure bonds as well, dealers said.

 

Traders are now waiting for India's CPI inflation data due at 1600 IST for further cues, which also limited rise in trade volumes in the secondary market. CPI inflation likely rose to 2.1% in August from an eight-year low in July, according to an Informist poll. The reading was broadly priced into bonds, and may not move the market if it were on expected lines, dealers said.

 

The turnover in the gilts market was around INR 484.15 billion at 1525 IST, higher from INR 351.15 billion at 1530 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 6.43-6.53%. (Janwee Prajapati and Srijita Bose)

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India Gilts: Recover losses, long-term bonds jump; auction demand seen firm

 

	1225 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	99.06	99.09	98.95	99.04	99.02
YTM (%)	6.4615	6.4569	6.4767	6.4639	6.4666

 

	1225 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
7.24%, 2055
PRICE (INR)	100.30	100.40	99.90	99.90	100.12
YTM (%)	7.2147	7.2066	7.2476	7.2476	7.2295

 

NEW DELHI—1225 IST--Government bond prices recovered all losses before the result of the weekly gilt auction on view that the INR 280 billion supply would sail through in investors' hands. Long-term bonds surged as traders expected robust demand from both investors and traders for the 7.24%, 2055 gilt at auction, dealers said.

 

Trader said they were keen on picking up the 2055 gilt, expecting both a reduction in its share of supply in the Oct-Mar borrowing calendar and on some bets that the Reserve Bank of India's Monetary Policy Committee may ease their tone on monetary policy. This was the last auction of the 30-year bond before the next policy outcome on Oct. 1. Life insurers and provident funds were also seen bidding aggressively for the gilt as the market had stabilised in September and fears of extra borrowing in 2025-26 (Apr-Mar) had ebbed, dealers said.

 

On other hand, dealers said that provident funds and life insurers had picked up state bonds heavily over the last two weeks, and their appetite for fresh gilt supply may be low, especially as state bonds offer higher returns. Moreover, bond forward activity was also seen muted, with only around INR 20 billion likely from the derivatives trade, dealers said. Cut-off estimates for the bond in an Informist poll were in a wide range of INR 99.75–INR 100.05.

 

"There was one auction last month where the long bond had rallied during the auction due to speculation of provident fund demand, which absolutely spoiled the market when it didn't come," a dealer at a foreign bank said. "I'm a bit sceptical INR 130 billion will be absorbed and the market will have appetite to buy more."

 

Meanwhile, the five-year benchmark 6.01%, 2030 bond was likely to have been bid aggressively by asset-liability managers at both state-owned and private-sector banks, dealers said. Some dealers also said mutual funds may pick up the 2030 gilt, though others expected funds' demand for gilts to be muted as they vied to invest in Reliance Industries Ltd. pass-through certificate. The INR-150-billion supply will also likely lead to a cut-off price lower than current market levels, with traders likely to demand higher returns to buy the bond if investors are not able to pick up the entire amount, dealers said.

 

"The short-end is going to be well-bid by banks, there is a lot of demand for it today (Friday)," a dealer at a private-sector bank said. "I think there is a high possibility of a rate cut in one of the next two meetings, so even as a trader we are liking the five-year point."

 

The auction result is likely to lend cues to bond prices before India's CPI data is released at 1600 IST, dealers said. The turnover in the gilts market was around INR 196.00 billion, down from INR 249.55 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 6.43-6.53%. (Aaryan Khanna)

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India Gilts: Tad down before auction; losses limited on fall in US yields

 

	0955 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.97	99.04	98.95	99.04	99.02
YTM (%)	6.4742	6.4639	6.4767	6.4639	6.4666

 

NEW DELHI--0955 IST--Government bond prices were slightly lower Friday as traders placed short bets before the weekly gilt auction at 1030-1130 IST. The fall in gilt prices was limited due to a fall in US Treasury yields overnight and because demand at the auction was seen firm, dealers said. Trade volumes were lacklustre before the auction.

 

Traders placed short bets in the 10-year 6.33%, 2035 bond as both the bonds at the auction are largely illiquid, dealers said. The government will sell INR 150 billion of the 6.01%, 2030 gilt and INR 130 billion of the 7.24%, 2055 bond Friday. "We were expecting a slight gap-up opening, so the flat open was not a good sign for further rally," a dealer at a state-owned bank said. The 10-year US yield fell 2 basis points overnight to 4.03?ter CPI inflation was on expected lines and unemployment data showed further labour market weakness.

 

"The market will move today (Friday) only after the auction result, people will discount any volatility before that," the dealer said.

 

While demand for the five-year paper is seen firm from banks' asset and liability desks, they may demand higher returns due to the large supply on offer, dealers said. Moreover, the 2030 bond offers a lower return than other gilts in comparable maturities, and is much lower than the state bonds, where spreads have ballooned over the last few weeks, dealers said. 

 

The 30-year gilt is expected to sail through, but traders were more unsure on its cut-off. Investors and traders both were interested in picking up the gilt to maximise price gains as the share of long-term bond supply is expected to decrease in Oct-Mar, based on market feedback to the Reserve Bank of India over the past two weeks. However, with some provident funds and life insurers picking up state bonds in the secondary market, the demand from end-investors may be lacking, dealers said. 

 

Dealers said the auction result is likely to lend direction to gilt prices. Some traders also await India's CPI data for August at 1600 IST for cues on domestic interest rates.

 

The turnover in the gilts market was around INR 21.45 billion, down from INR 66.90 billion at 1005 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 6.45-6.53%. (Aaryan Khanna)

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India Gilts: Seen tad up on fall in US ylds; auction, India CPI in focus

 

MUMBAI – Government bond prices are seen slightly higher tracking an overnight fall in US Treausury yields, dealers said. However, the rise in prices may be limited as traders will await the INR-280-billion gilt auction to get over, they said. 

 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.38-6.55% during the day. On Thursday, the bond ended at INR 99.02 or 6.47% yield.

 

The yield on the 10-year US Treasury note fell slightly to 4.03% at 0824 IST from 4.05% at 1700 IST. The Federal Reserve's preferred inflation guage, US core consumer price index rose 0.4%, and excluding the often volatile food and energy categories, increased 0.3% from July along expected lines. The headline CPI inflation rose 2.9% in the month. Further, initial jobless-claims figures for the week ended Sept. 6 jumped to the highest in almost four years, to 263,000, against a Wall Street Journal estimate of 235,000. This cemented chances of a rate cut by the FOMC next week, with the CME's Fedwatch tool shows traders fully pricing in a 25-basis-point cut by the panel next week, and over 7% of them expecting a jumbo 50-bps cut in rates. Traders are expecting a 75-bps cut during the rest of the year. Foreign portfolio investors and banks are likely to pick up gilts, but the buys may not be aggressive, dealers said. 

 

The government will sell INR 150 billion of the 6.01%, 2030 gilt and INR 130 billion of the 7.24%, 2055 bond Friday. While demand for the five-year paper is seen firm from banks' asset and liability desks, that for the 30-year gilt is expected to be mixed. Investors and traders seem interested in picking up the gilt to maximise price gains as the share of long-term bond supply is expected to decrease in Oct-Mar, based on market feedback to the RBI over the past two weeks. However, some demand for long-term bonds may have been erased this week, with some provident funds and life insurers picking up state bonds in the secondary market, due to higher yield spreads on offer.

 

The next cue on domestic interest rates will come in the form of India's CPI inflation data for August at 1600 IST Friday, dealers said. CPI inflation 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. The reading was broadly priced into bonds, and would not move the market if it were on expected lines, 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. Sergio Gor, US President Donald Trump's nominee for US Ambassador to India, said Trump has invited India's commerce and trade minister next week, where they will be meeting US trade representative Jamieson Greer, and that the two countries are close to signing a deal. 

 

Bond prices may also track the movement in crude oil prices and the rupee against the dollar. On Thursday, the rupee closed at a record low of 88.44.  (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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