More Stories

Informist, Monday, Sept. 15, 2025

By Srijita Bose

MUMBAI – Government bond prices ended lower Monday as traders booked intraday profits and on caution ahead of the decision of the US Federal Open Market Committee later in the week, dealers said. Prices were volatile amid muted trade volumes, with some buys by foreign portfolio investors limiting the fall in prices, they said.

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.81, or a yield of 6.50%, against INR 98.88, or 6.49%, Friday. Traders kept an eye out for the results of the state bond auctions Tuesday and the decision of the US FOMC as the next triggers for the market amid a dearth of domestic cues to trade, dealers said.

The outcome of the INR 300 billion switch auction was seen as mixed, with only INR 66 billion of the amount accepted at the auction, but at significantly higher prices than the Financial Benchmarks India Pvt. Ltd.'s indicative prices for Friday. "People were able to sell at a profit. All these papers were in the money," a dealer at a state-owned bank said. "But the way these auctions are going, it seems like the RBI is trying to compare with the benchmark papers to set cut-offs, and at these levels only the big PSUs (state-owned banks) will be able to give." 

While demand from state-owned banks at the bond switch auction was not aggressive, the central bank was not willing to switch the bonds at prices lower than the prevailing market prices, dealers said

Primary dealers likely placed short bets on the 10-year 2035 bond ahead of the fresh supply of INR 300 billion at auction Friday, dealers said. This also led to a fall in prices near the end of trade, they said.

The fall in prices was limited, and the 2035 gilt traded within a range of 6.47-6.50% yield as some traders covered their short positions once its yield neared the day's highs. Traders expect to cover short positions at the auction on Friday, with some expecting this week's auction will be the last for the 6.33%, 2035 bond, as the outstanding on the bond will reach INR 1.8 trillion after the auction. This may limit short bets placed leading up to the auction day, dealers said.

At 1817 IST, data showed trades worth INR  203.01 billion in the 6.33%, 2035 gilt in the special repo segment of the Clearcorp Repo Order Matching System, a proxy for tracking short sales in a particular bond, as against INR 219.77 billion Friday. 

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. At 1817 IST, data showed trades worth INR  203.01 billion in the 6.33%, 2035 gilt, against INR 219.77 billion Friday. 

With thin trading volumes, marginal purchases from FPIs in fully accessible route bonds lifted the market, dealers said. At 1817 IST, data from Clearing Corp. of India showed FPIs bought gilts worth INR 525.9 million Monday through the fully accessible route. The relative rise in the difference between the yields of the US 10-year Treasury note and India's 10-year gilt, as well as India's inclusion in the FTSE Emerging Markets Government Bond Index, has driven inflows so far this month. However, the FPI buying is unlikely to break the 10-year bond out of its broader trading range, dealers said. 

"FPI inflows have been the main drivers last week, but with some clarity, domestic guys will also come in," a dealer at a private sector bank said. "It's just that we need some clarity on the supply side pressures... but after the (India) CPI (inflation data) is expected to keep room for rate cuts open." Government data released Friday showed India's CPI inflation rose to 2.07% in August from an eight-year low of 1.61% in July. This was the first time since October that inflation rose from the previous month, though it remained at the lower end of the RBI's medium-term inflation target range of 2-6%.

A 25-basis-point rate cut at the US Federal Open Market Committee meeting on Wednesday has already been priced in, dealers said. Some traders are placing short bets on the view that the Fed won't deliver a jumbo cut of 50 bps. Traders were also waiting for the FOMC's indication on the future rate cut trajectory. A projection of a further 75 bps cut could lead to inflows into the gilt market, dealers said. 

The 10-year US Treasury yield rose by 4 bps to 4.08% on Monday, but the impact of that was short-lived due to the smaller state bond supply this week, dealers said. The central bank, post-market hours on Friday, said states will raise INR 184.00 billion through bonds at an auction on Tuesday, lower than INR 236.29 billion indicated in the borrowing calendar for Jul-Sept. The rise in the rupee against the dollar also aided the rise in prices intraday. The rupee closed at 88.2100 a dollar, against 88.2750 Friday.

Meanwhile, banks continued to pick up state bonds for their asset liability management books and some for weekly trades as well, dealers said. Banks hedged these buys by placing short bets on the 2035 gilt or paying fixed rates in overnight indexed swap rates, they said. 

Turnover in the government bond market was at INR 279.50 billion, sharply lower than INR 636.30 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades using the wholesale digital rupee pilot Monday, compared to 10 trades Friday using the same method for a total of INR 5.00 billion in the 6.75%, 2029 bond. 

OUTLOOK

On Tuesday, bond prices may take cues from the overnight movement in US yields, dealers said. Gilts may take cues from the result of the state bond auction later in the day, they said. 

On Tuesday, states will raise INR 184 billion through bonds at auction, much lower than INR 236.29 billion for the week in the indicative calendar.

Traders will look ahead to the US Federal Open Market Committee rate decision on Wednesday.  The US rate-setting panel is widely expected to cut its policy rate by 25 basis points, with the CME FedWatch tool showing a 96.4% chance of a 25 bps cut and 3.6% 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 6.40-6.55%.

India Gilts: Recover all losses on likely FPI buying; trade volume thin

MUMBAI--1543 IST--Government bond prices reversed losses and rose in thin trade, likely on purchases by foreign portfolio investors, dealers said. Gilt prices had started to recover from a shallow fall earlier as the 10-year benchmark gilt neared the psychologically crucial 6.50% level.

The 10-year benchmark 6.33%, 2035 gilt found support as some traders covered their short positions once its yield was 6.50%. Primary dealerships will continue to make room for fresh supply of the bond at Friday's auction, capping gains in prices. Dealers said there were no fresh triggers for the market.

"The market is very range-bound and is really quite dead today," a senior treasury official at a state-owned bank said. "Because of the rains, people only made it to office by 1100 IST, when it feels like half the trading day is gone."

With trade volume thin and the market seemingly headed for the slowest day in months, marginal purchases from FPIs in fully accessible route bonds lifted the market, dealers said. The turnover in the gilts market was around INR 182.45 billion, sharply down from INR 482.45 billion at 1530 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.

The relative rise in the difference between the yields of the US 10-year Treasury note and India's 10-year gilt as well as India's inclusion in the FTSE Emerging Markets Government Bond Index have driven inflows so far this month. However, the FPI buying is unlikely to break the 10-year bond out of its broader trading range, dealers said. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.45-6.53%.

The 25-basis-point rate cut at the upcoming US Federal Open Market Committee meeting on Wednesday has already been priced in, dealers said. Some traders are placing short bets on the view that the Fed won't deliver a jumbo cut of 50 bps. "FPIs were bidding aggressively in the secondary market last week. The market may fall if they don't continue buying gilts," a dealer at another public sector bank said.

The 10-year US Treasury yield has risen marginally since Friday to 4.07%, but the impact of that was short-lived and was offset by lighter state bond supply this week and a small rise in the rupee against the dollar, dealers said. The central bank, post market hours Friday, said states will raise INR 184.00 billion through bonds at an auction Tuesday, lower than INR 236.29 billion indicated in states' borrowing calendar for Jul-Sept. The rupee closed at 88.2100 a dollar, against 88.2750 Friday.

Further, some traders continued to sell the 10-year gilt to make room for fresh supply at the weekly auction Friday. The government will sell INR 300 billion of a 10-year paper and INR 60 billion of a three-year bond.  (Muskan Lodhi)

India Gilts: Tad down in dull trade as US yields rise; switch result awaited

NEW DELHI--0955 IST--Government bond prices were slightly lower Monday due to an overnight rise in US Treasury yields. Trade volumes were dull early in the day as several traders had not yet made it to their desks due to heavy rains in Mumbai, dealers said. The India Meteorological Department has an orange alert for Mumbai Monday.

The 10-year Treasury yield was 4.07%, marginally higher from 4.04% at 1700 IST Friday. Cash trading in the US Treasury notes during Asian hours was shut as Japanese financial markets are closed. The impact of the rise in US yields would be of little importance through the day as traders have already priced in a 25-basis-point policy rate cut by the US Federal Open Market Committee, dealers said. A "jumbo" cut of 50 bps may lead to gilt prices rising as there may then be an outside chance of the Reserve Bank of India's Monetary Policy Committee also potentially cutting rates later in 2025, they said.

"People are giving US yields as the reason for the move, but really, it is not very significant. Everyone knows the FOMC will cut, the question is how much," a dealer at a state-owned bank said. "The 10-year (6.33%, 2035 gilt) is anyway going to be under pressure this week because of the auction."

The 2035 gilt had opened higher as the state bond auction this week was around INR 50 billion lower than what the calendar for Jul-Sept had indicated, at INR 184 billion. However, traders short-sold the 10-year benchmark gilt as it is scheduled to be sold at the weekly gilt auction Friday, erasing all gains and pushing down the bond's price, dealers said. The Centre will sell INR 60 billion of a three-year bond and INR 300 billion of a 10-year bond this week.

Traders said the result of gilt switch auction may lend direction to the market later in the day. The government will switch seven government bonds worth INR 300 billion with five longer-term gilts at auction 1030-1130 IST. State-owned banks are looking to sell bonds at a profit at the auction, but are not keen to aggressively add longer-duration bonds to their portfolios, dealers said. 

The turnover in the gilts market was around INR 14.85 billion, down from INR 21.45 billion at 0955 IST Friday, 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 steady but rise in 10-yr US yld ahead of FOMC may weigh

MUMBAI – Prices of government bonds are seen opening steady Monday with a slight downward bias due to an uptick in US Treasury yields ahead of the outcome of the US Federal Open Market Committee meeting Wednesday, dealers said. Any fall may be limited due a lower state bond auction size for Tuesday.

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen moving in range of 6.45-6.52% during the day. On Friday, the bond ended at INR 98.88 or 6.49% yield. The yield on the benchmark 10-year Treasury note was 4.07% as of 0830 IST, marginally higher from 4.04% at 1700 IST Friday. Cash trading in the US treasury notes during Asian hours was shut, as Japanese financial markets are closed for 'Respect for the Aged' Day.

Traders may be cautious ahead of the US FOMC's rate decision late Wednesday. The CME's Fedwatch tool shows traders fully pricing in a 25-basis-point cut at the outcome while over 3% of them expect a jumbo 50-bps cut. Traders expect 75 bps of cuts for the rest of 2025 due to recent economic data showing softness in the US labour market. If the FOMC does cut rates this week, it would be the first since December. Moreover, traders will also closely track the FOMC's economic projections or 'dot plot'. The meeting outcome comes amid mounting pressure from Trump on the US Federal Reserve to ease rates. Trump predicted a "big cut" from the FOMC this week. "I think you have a big cut," Trump told reporters Sunday. "It's perfect for cutting."

As for state bonds, the Reserve Bank of India post market hours Friday said states will raise INR 184.00 billion through bonds at auction Tuesday, lower than INR 236.29 billion indicated in states' borrowing calendar for Jul-Sept. The lower state bond supply may be a relief to traders after three consecutive weeks of state bond supply being higher than forecast. Last week, state bonds gained traction for their lucrative yield spreads over government bonds, especially for banks' held-to-maturity books. At the start of September, yield spreads of states' 10-year bonds over the 6.33%, 2035 benchmark gilt surpassed 100 bps at the auction, but these spreads compressed to around 80 bps in the secondary market Friday.

Traders may also track the result of the switch auction. The government will switch seven government bonds worth INR 300 billion with five longer-term gilts through an auction Monday. Some banks may be eager to book profits from their held-to-maturity books, dealers said.

Traders may cover short bets intraday, but by the end of trade on a net basis, shorts bets in the benchmark 10-year gilt are likely to remain at around INR 200 billion as they are likely to be only covered at this week's gilt auction. The central government will sell INR 300 billion of a 10-year paper and INR 60 billion of a three-year paper Friday, the announcement of which is expected Monday. 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 showed trades worth INR 219.77 billion in the 6.33%, 2035 gilt Friday.

Bond prices may also take cues from the movement of the rupee against the dollar after the local currency hit a record low last week. (Cassandra Carvalho)

End

US$1 = INR 88.21

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.