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Informist, Friday, Sept. 19, 2025

 

By Srijita Bose

 

MUMBAI – Government bond prices ended sharply higher Friday as the cut-off price on the three-year 5.91%, 2028 gilt at the auction was better than expected, dealers said. Cut-off price on the 10-year benchmark 6.33%, 2035 bond at the auction was in line with expectations. Most gilts rebounded from brief losses seen after the auction results on aggressive buys likely from corporate houses and mutual funds, they said. 

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.87, or a yield of 6.49%, against INR 98.69, or 6.51%, Thursday. Prices of bonds maturing in 10 years and more fell soon after the result as traders trimmed their stock of these gilts after picking up the fresh supply of the 10-year benchmark 6.33%, 2035 bond at the auction, dealers said. After the initial dip, investors stepped up purchases of the 10-year gilt near the 6.53% yield level, considered lucrative, and led to a reversal in bond prices to the day's high.

 

With just one auction scheduled until the end of the heavy Apr-Sept calendar, traders said there was some relief in the market after the auction sailed through Friday. "The auction was much better than expected, so even though initially we saw a dip, it reversed the losses," a dealer at a state-owned bank said. "Also, the Bloomberg news has kept the market supported since morning, so after the auction also, the bids were good (in the secondary market)." Bloomberg Index Services Ltd. Thursday sought feedback from investors on whether to include India's fully accessible route bonds in its Global Aggregate Index. 

 

Some traders were initially expecting cut-off price on the 2035 bond to be lower, with the yield to be fixed above 6.52% levels, but strong demand to cover short bets at the auction, and fresh buys across market participants helped improve the market sentiment. The Reserve Bank of India set the cut-off price at INR 98.65 or yield of 6.5198% for 6.33%, 2035 gilt at the auction. Traders also continued to cover short bets placed ahead of the auction in the secondary market in the latter half of the session, aiding the rise in prices, dealers said. However, the number of trades in the 2035 gilt in the special repo segment of the Clearcorp Repo Order Matching System showed total trades worth INR 212.83 billion at 1822 IST, higher than INR 190.96 billion Thursday. This figure is a proxy for tracking short sales in a particular bond.

 

Short-term bond prices rose sharply after the cut-off price on the 5.91%, 2028 gilt exceeded traders' expectations due to firm demand from banks' asset-liability managers, dealers said. The 2028 bond was likely lapped up by a large state-owned bank with only six bids accepted by the RBI at the auction, dealers said. A large corporate house likely bought shorter tenure bonds in the secondary market after the auction results, they said.

 

"Short term is seeing good demand due to risk to carry ratio, and I have heard corporates buying," a dealer at a primary dealership said. "Also, some FPIs (foreign portfolio investors) are also going for the five- and seven-year papers." The 6.01%, 2030 bond yield fell nearly 5 basis points to INR 99.40 or a yield of 6.15%.

 

The potential inclusion of Indian bonds in Bloomberg Global Aggregate Index offset the impact of an overnight rise in US Treasury yields, though traders do not expect an immediate spurt in inflows. The inclusion in index is expected to draw in over $20 billion of inflows but only begin in 12 months at the earliest, dealers said. Still, some traders remained optimistic about active foreign portfolio investors frontrunning the index inclusion, especially as foreign investors have been buying gilts since August. FPIs are seen preferring short-term bonds in the near-term, and churning their portfolios to trim holdings of longer-tenure gilts. As of 1833 IST, FPIs bought gilts worth INR 6.32 billion through the fully accessible route on Friday, data from Clearing Corp. of India showed.

 

Long-term bonds had given up all gains briefly, but rose again as traders remained hopeful the government would reduce the supply share of 30-50 year gilts in the Oct-Mar borrowing calendar, dealers said. The borrowing calendar for the next half-year is seen as the next major trigger for gilts. It is expected to be released towards the end of next week. Insurers and employee provident funds likely bought gilts maturing in 30-40 years, dealers said, with the 7.24%, 2055 gilt yield falling 4 bps to INR 100.80 or a yield of 7.17% Friday.

 

Turnover in the government bonds market was INR 631.60 billion, sharply higher than INR 366.20 billion Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades Friday using the wholesale digital rupee pilot, compared to two traders worth INR 100 million in the 10-year benchmark using the same method Thursday.

 

OUTLOOK

Gilts are not traded on Saturdays. On Monday, bonds may take cues from the movement of US yields, dealers said. Likely inclusion of India bonds in Bloomberg Global Aggregate Index could prompt FPIs to buy, which may lead to rise in prices Monday, they said.

 

Traders will also watch out for comments of RBI Governor Sanjay Malhotra at the 25th anniversary of Clearing Corp. of India Ltd. on Friday. Some traders are hopeful of a rate cut by the RBI's Monetary Policy Committee in December due to anticipated rate cuts in the US, which may lead to rise in shorter-tenure bonds. However, traders may refrain from aggressively placing bets with the gilts borrowing calendar for Oct-Mar seen as the next cue for the market. The calendar is expected to be released near the end of the month.

 

Traders may also take cues from developments on the India-US trade talks after the recent thaw in relations 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%. 

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.8700	6.4885%	98.6900	6.5139%
6.79%, 2034	101.5725	6.5561%	101.3700	6.5859%
6.01%, 2030	99.4000	6.1530%	99.2000	6.2015%
6.68%, 2040	98.6975	6.8197%	98.5550	6.8353%
6.90%, 2065	95.5800	7.2399%	95.3500	7.2583%

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India Gilts: Choppy after auction result; investor buys help reverse losses

 

	1620 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.80	98.82	98.59	98.68	98.69
YTM (%)	6.4984	6.4963	6.5280	6.5155	6.5139

 

 

	1620 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.75%, 2029
PRICE (INR)	99.45	99.45	99.24	99.24	99.20
YTM (%)	6.1408	6.1408	6.1920	6.1920	6.2015

 

MUMBAI--1620 IST--Government bond prices were choppy after the result of the INR-360-billion auction. Prices of bonds maturing in 10 years and more fell soon after the result because traders trimmed their stock of these gilts, after picking up the fresh supply of the 10-year benchmark 6.33%, 2035 bond at auction, dealers said. After the initial dip, investors stepped up buys on the 10-year gilt near the 6.53% yield level, considered lucrative, and led to a reversal in bond prices to the day's high.

 

Dealers speculated mutual funds and corporate houses were on the buying side after prices fell. Traders shed their holdings of long-term gilts as they each received the fresh auction stock, with the auction cut-off for the 2035 bond was in line with market expectations. The RBI accepted 161 bids for the INR 300 billion on offer of the 2035 gilt. However, after realigning portfolios and shedding some risk, several traders covered more short bets as the 10-year gilt's yield approached its 200-day moving average of 6.53%, a key technical resistance.

 

With only one auction scheduled until the end of the heavy Apr-Sept calendar, traders also said there was some relief in the market after the auction sailed through Friday. Long-term bonds had briefly given up all gains, but rose again as traders remained hopeful the government would reduce the supply share of 30-50 year gilts in the Oct-Mar borrowing calendar, dealers said. The borrowing calendar for the next half-year is seen as the next major trigger for gilts. It is expected to be released towards the end of next week.

 

Through all the choppiness, short-term bond prices rose sharply after the cut-off price on the 5.91%, 2028 gilt exceeded traders' expectations due to firm demand from investors, dealers said. "Private banks are probably buying the 6.01%, 2030 paper for their ALM (Asset Liability Management) book after good auction result," a dealer at a state-owned bank said.

 

The turnover in the gilts market was INR 530.25 billion, higher than INR 313.20 billion at 1630 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%. (Muskan Lodhi and Aaryan Khanna)

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India Gilts: Steady post auction result; 5.91%, 2028 bond's cut-off tops view

 

	1315 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.69	98.76	98.67	98.68	98.69
YTM (%)	6.5141	6.5048	6.5170	6.5155	6.5139

 

MUMBAI--1315 IST--Government bond prices were steady after the cut-off price for the 6.33%, 2035 bond at auction was in line with traders' expectations and the fresh supply of bonds at the INR-360-billion weekly gilt auction sailed through, dealers said. Some dealers covered their short bets in the secondary market. The cut-off price for the 5.91%, 2028 gilt was better than expected likely due to investor demand.

 

Traders covered their short positions placed over the past week, especially in the 10-year benchmark 6.33%, 2035 gilt, dealers said. The government sold INR 60 billion worth of 5.91%, 2028 gilt in the auction and INR 300 billion of 6.33%, 2035 benchmark gilt. The number of trades in the 2035 gilt in the special repo segment of the Clearcorp Repo Order Matching System has been consistently around INR 200 billion so far this month. This figure is a proxy for tracking short sales in a particular bond.

 

This likely drove demand from private-sector banks and primary dealerships. Traders were keen to cover large short positions as this may the last auction of the 6.33%, 2035 bond. Traders expect the government to issue a new 10-year security at the next auction as it will come after the release of the Oct-Mar borrowing calendar, dealers said. There is no 10-year supply left in the Apr-Sept calendar. After Friday's auction, the outstanding of the 6.33%, 2035 bond will reach INR 1.80 billion on Monday, close to the unofficial cap the government is comfortable with for a single security.

 

"This is the last auction of the (6.33%, 2035) bond, so there is a lot of demand from private banks and primary dealerships," a dealer at a state-owned bank said. "Short-end (5.91%, 2028 bond) is fairly priced at around par (INR 100.00), it is completely illiquid, but the yield will be close to what other 2028 bonds are giving."

 

The three-year bond sailed through at a cut-off higher than its indicative price on Financial Benchmarks India Ltd. on Thursday, and slightly higher than the expected cut-off price in an Informist poll. The once-a-month issuance of INR 60 billion was likely mopped up by large state-owned banks for their asset-liability management, dealers said.

 

Bloomberg's announcement Thursday that it was seeking feedback on the potential inclusion of Indian bonds in its Global Aggregate Index offset the impact of an overnight rise in US Treasury yields, though traders do not expect an immediate spurt in inflows. The index inclusion is expected to draw in over $20 billion of inflows but only begin in 12 months at the earliest, dealers said. Still, some traders remain optimistic about active foreign portfolio investors frontrunning the index inclusion, especially as foreign investors have been buying gilts since August. FPIs are seen preferring short-term bonds in the near-term, and churning their portfolios to trim holdings of longer-tenure gilts. 

 

"It (the inclusion of the bonds in the Gloabl Aggregate Index) was expected because Bloomberg included Indian bond in the EM (emerging market index) index, so it was natural for them to add India in the global market index," a dealer at a private sector bank said.

 

The turnover in the gilts market was INR 196.90 billion, lower than INR 246.75 billion at 1330 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 6.45-6.55%. (Janwee Prajapati and Aaryan Khanna)

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India Gilts: Steady; short bets limit gains on possible bond index inclusion

 

	1003 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.70	98.75	98.67	98.68	98.69
YTM (%)	6.5134	6.5059	6.5170	6.5155	6.5139

 

India Gilts: Steady; short bets limit gains on possible bond index inclusion

 

MUMBAI--1003 IST--Prices of government bonds were largely steady with an upward bias ahead of the INR-360-billion fresh supply of bonds. Shorts bets before the weekly gilt auction offset some of the optimism due to expected foreign inflows if Bloomberg Index Services Ltd. does include India's fully accessible route bonds in its Global Aggregate Index, dealers said. An overnight rise in US Treasury yields weighed on bond prices, they said. The yield on the benchmark 10-year Treasury note was 4.13% as of 1003 IST, higher than 4.06% at 1700 IST Thursday.

 

On Thursday, the index provider sought feedback from investors on whether to include India's fully accessible route bonds in its flagship index for global investment grade debt. 

 

"It is good news, but who would want to buy now (at higher prices in secondary market) when you can buy for cheap at the auction?" a dealer at a private sector bank said. "We have a very, very large auction today (Friday). There is a greater focus on that. Later on depending on the auction, if auction goes good we can see the momentum (because of the index news) pick up again."

 

Foreign portfolio investors have net purchased gilts worth INR 63.60 billion through the fully accessible route this month till Thursday, according to data from Clearing Corp. of India. FPIs have been switching portfolios from shorter maturities to long-term gilts, dealers said.  

 

At the auction, the government will sell INR 300 billion of the benchmark 10-year 6.33%, 2035 gilt and INR 60 billion of the 5.91%, 2028 bond. Traders placed short bets on bonds to make room for the large supply. Demand at the auction is seen robust from across market segments. Traders have been anticipating this auction since the start of the month, with short sales on the 10-year benchmark gilt hovering at around INR 200 billion since then. Mutual funds, which have largely been net sellers of gilts on a daily basis this month, are also seen bidding at the auction. This may be the last auction of the 6.33%, 2035 bond before a new 10-year benchmark gilt is issued, dealers said. The outstanding of the bond before Friday's auction is INR 1.50 trillion.

 

The result of the auction will lend direction to prices for the rest of the day, dealers said. The turnover in the gilts market was INR 40.10 billion, slightly lower than INR 55.40 billion at 0930 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 6.46-6.55%. (Cassandra Carvalho)

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India Gilts: Seen tad up; Bloomberg seeks feedback on global index inclusion

 

Prices of government bonds are seen opening slightly higher Friday after Bloomberg Index Services Ltd. Thursday sought feedback from investors on whether to include India's fully accessible route bonds in its Global Aggregate Index, dealers said. This is the index provider's flagship index for global investment grade debt and the foreign inflows into gilts could be significant if India is included in the index, they said. So far in September, foreign portfolio investors have net purchased gilts worth INR 63.60 billion through the fully accessible route, according to data from Clearing Corp. of India. Gains are unlikely to sustain due to 10-year bond auction and an overnight rise in US Treasury yields, dealers said.

 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen moving in a range of 6.48-6.56% during the day. On Thursday, the bond ended at INR 98.69 or 6.51% yield. The yield of 6.52-6.53% on the 10-year gilt is seen as a psychologically crucial level to buy, dealers said. The yield on the benchmark 10-year Treasury note was 4.11% as of 0800 IST, higher than 4.06% at 1700 IST Thursday. A rise in US yields may limit a rise in bond prices, dealers said. US yields rose as investors began to price in uncertainty for a longer period of time after US Federal Reserve Chair Jerome Powell said that "there are no risk-free paths now" at the US Federal Open Market Committee's policy meeting outcome.  

 

Bonds will also take cues from the result of the INR-360-billion gilt auction. The government will sell INR 300 billion of the benchmark 10-year 6.33%, 2035 gilt and INR 60 billion of the 5.91%, 2028 bond. Demand for the 10-year bond is expected to be modest as it is widely viewed as the final auction of the bond. However, several traders expect to cover their short bets on the 10-year gilt at the auction. The number of trades in the 2035 gilt in the special repo segment of the Clearcorp Repo Order Matching System has been consistently around INR 200 billion so far this month. This figure is a proxy for tracking short sales in a particular bond. The cut-off yield on the 10-year bond is seen at around 6.53%, dealers said. Demand for the three-year bond is expected to be firm from asset-liability managers of banks and mutual funds, they said. 

 

Nearing the end of trade, some caution may set in before the weekend and traders may trim positions. Reserve Bank of India Governor Sanjay Malhotra is scheduled to speak at the 25-year anniversary event of Clearing Corp. of India Ltd. at 1700 IST. Traders may take cues from the governor's address at market open on Monday. (Cassandra Carvalho)

End

 

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

 

Edited by Ashish Shirke

 

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