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Informist, Monday, Sept. 22, 2025

 

By Srijita Bose

 

MUMBAI – Government bond prices ended mixed Monday. Prices of most shorter tenure papers were up on bets of softer policy commentary by the Reserve Bank of India's Monetary Policy Committee next week, dealers said. However, gilts maturing in 10 years and above were under pressure ahead of the larger-than-indicated state bond auction Tuesday.

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.87, or a yield of 6.49%, unchanged from Friday. The 10-year gilt was choppy during the day. On Friday, post market hours, the central bank said that 11 states would raise INR 270 billion through the sale of bonds on Tuesday, against INR 201 billion as indicated in the borrowing calendar for Jul-Sept. This led to the 2035 gilt being short sold as traders moved to other shorter tenure gilts, dealers said.

 

However, others covered short bets placed last week as Friday was likely the last auction of the 2035 bond, dealers said. The total outstanding of the 2035 bond after Friday's auction has increased to INR 1.8 trillion and traders widely expect the central bank to announce a new 10-year gilt at the next auction in October. Expectations of a softer policy and a lower concentration of borrowing in longer tenure bonds also helped the 10-year gilt to recover from the fall, dealers said.

 

"There are still chances of a rate cut and borrowing will also be a positive for the market so there were a lot of bids in the 10-year and its mostly trading demand," a dealer at a private sector bank said. "Going long is favourable now, because even if there is no rate cut this time around, it (policy) should be slightly dovish."

 

Traders are betting the MPC's commentary may hint at a rate cut in the December policy review, especially if the Jul-Sept GDP growth data that will be detailed at the end of November is weak, dealers said. A minority section of the market expects a 25-basis-point rate cut next week. These expectations have grown after State Bank of India Group Chief Economic Advisor Soumya Kanti Ghosh, in a report earlier Monday, said that a quarter percentage point rate cut was the "best possible option" for the RBI. Economists polled by Informist showed no changes in rates and stance in the upcoming policy meeting. However, four of the 15 respondents expect a 25-bps cut in the repo rate from the current 5.50%.

 

Shorter-tenure bonds have been outperforming their longer-tenure counterparts over the past week despite expectations that their share of supply will increase in the Oct-Mar borrowing calendar. Some traders expect the impact of the higher supply of shorter tenure bonds to be limited as they expect the supply to be distributed across two auctions per month. "This will reduce the impact of the higher supply. Plus, anyway only 5% of longer-tenure is expected to be reduced, so overall the impact should not be much," a dealer at another private sector bank said.

 

The five-year benchmark 6.01%, 2030 gilt was up for the third straight trading session. The bond ended at INR 98.48 with the yield down nearly 2 bps at 6.13% Monday. Short-term bonds are expected to gain the most if the RBI's rate-setting panel suggests it is worried about growth or decides to cut the policy repo rate by 25 bps, dealers said. Foreign banks and foreign portfolio investors may further increase their purchases in the run-up to the Monetary Policy Committee's decision next week. Corporate houses are also buying short-term gilts, they said.

 

Prices of longer tenure bonds remained sharply down during the day and prices did not recover much. In addition to the higher state bond supply Tuesday, the Centre will also sell INR 160 billion each of a 15-year and a 40-year paper on Friday. Traders await the Centre's borrowing calendar for Oct-Mar, states' indicative calendar for Oct-Dec, as well as the Treasury bill issuance calendar for Oct-Dec. Traders expect the indicative calendar for state bond borrowings in Oct-Dec to be around INR 3.7 trillion. Traders also expect an increase in Treasury bill supply from the INR 2.69 trillion gross issuance scheduled in the September quarter.

 

A slight rise in US Treasury yields did not have much impact on domestic bond prices, though the three-day rise has increased concerns. This was in spite of the US Federal Open Market Committee cutting rates by 25 bps last week and pencilling in further 50 bps of cuts in the rest of 2025. The 10-year US Treasury yield rose to 4.15% Monday, from 4.14% at 1700 IST Friday. However, foreign portfolio investors likely remained buyers, with most buys concentrated in longer tenure bonds and selling shorter tenure gilts, dealers said. As of 1844 IST, data from Clearing Corp. of India showed FPIs sold gilts worth INR 2.40 billion through the fully accessible route on Monday.

 

Turnover in the government bond market was INR 472.40 billion, lower than INR 631.60 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were two trades Monday worth INR 250 million in the 10-year benchmark using the wholesale digital rupee pilot. There were no trades using the same method Friday.

 

OUTLOOK

When the market open Tuesday, bonds may take cues from the overnight movement of US yields, dealers said. The larger-than-indicated size of state bond auction Tuesday may keep prices, especially those bonds maturing in 10 years or above, under pressure.

 

Results of the INR 270-billion auction may lend cues to the market later in the day, dealers said. Demand from banks for state bonds maturing under 10 years is expected to be firm both at the auction and in the secondary market, they said. 

 

Some traders are hopeful of a rate cut by the 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 towards 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%.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.8700	6.4885%	98.8700	6.4885%
6.79%, 2034	101.5425	6.5605%	101.5725	6.5561%
6.01%, 2030	99.4800	6.1336%	99.4000	6.1530%
6.68%, 2040	98.6200	6.8282%	98.6975	6.8197%
6.90%, 2065	95.2800	7.2640%	95.5800	7.2399%

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India Gilts: Mixed; short-term gilts up on bets of softer MPC comments Oct

 

	1625 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.92	98.93	98.73	98.88	98.87
YTM (%)	6.4814	6.4803	6.5081	6.4871	6.4885

 

MUMBAI--1625 IST--Government bond prices were mixed. Bonds maturing in 10 years and above remained under pressure ahead of the larger-than-indicated state bond auction Tuesday. Short-term gilts remained in favour as traders expected the Reserve Bank of India's Monetary Policy Committee to soften its tone at its meeting next week, dealers said.

 

Shorter-tenure bonds have been outperforming their longer-tenure counterparts over the past week despite expectations that their share of supply will increase in the Oct-Mar borrowing calendar. This is because traders are betting the MPC meeting would open the door to further rate cuts, especially if GDP growth for Jul-Sept, scheduled for release just before the December policy review, is weak, dealers said. A minority of the market also expects a 25-basis-point rate cut next week. These expectations have grown after State Bank of India Group Chief Economic Advisor Soumya Kanti Ghosh, in a report earlier Monday, said that a quarter percentage point rate cut was the "best possible option" for the RBI. 

 

"People are expecting a dovish policy, some are expecting a (rate) cut," a trader at a private-sector bank said. "I think there won't be a cut in this policy, but there will be preparation (the MPC will set the ground) for it in the next policy. Obviously, in the run-up to policy, short-term will do well."

 

The price of the 10-year benchmark 6.33%, 2035 was choppy, but ultimately remained in a thin band near the previous close. State-owned banks picked up the gilt as its yield topped 6.50?rlier in the day, with some banks trying to protect the valuations of their portfolios at the end of the September quarter, dealers said. Some traders also covered their short bets, especially with the 10-year US Treasury yield easing slightly intraday.

 

Traders await the October MPC meeting and the government's Oct-Mar borrowing calendar, expected by Friday, for further cues. At 1630 IST, the turnover in the gilts market was INR 392.05 billion, lower than INR 527.80 billion at the same time 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 6.46-6.55%. (Janwee Prajapati)

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India Gilts: Mixed; 10-year bond recovers losses on buys from PSU bks, FPIs

 

	1425 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.85	98.93	98.73	98.88	98.87
YTM (%)	6.4917	6.4803	6.5081	6.4871	6.4885

 

MUMBAI--1425 IST--Government bond prices traded on a mixed note. The 10-year benchmark 6.33%, 2035 bond recovered all losses on likely purchases from state-owned banks and foreign portfolio investors as its yield topped 6.50%, which are considered lucrative, dealers said. Bonds maturing in 15 years and more remained down ahead of heavy supply this week, while short-term bonds were up on bets the Reserve Bank of India's Monetary Policy Committee may cut rates at next week's review.

 

Gilts were down earlier after the RBI announced states will sell INR 270 billion worth of bonds at the auction Tuesday, against INR 210 billion indicated in the Jul-Sept calendar. The cut-off yields are expected to rise 2-3 basis points from last week's auction. Some traders are holding long positions ahead of the auction, expecting firm purchases from state-owned banks and long-term bond investors ahead of the MPC outcome next week.

 

"The SGS (state bond auction) is the only reason the market sees some pressure. Otherwise, there are no fresh cues in the market," a dealer at a state-owned bank said.

 

In addition to the higher state bond supply, the Centre will also sell INR 160 billion each of a 15-year and a 40-year paper. This kept long-term bonds out of favour, and these did not recover as much, dealers said. Even after the recovery, the 10-year gilt could not rise as traders trimmed their holdings of the gilt when its yield approached 6.48%, dealers said. 

 

On the other hand, the five-year benchmark 6.01%, 2030 gilt was up for the third straight trading session. Short-term bonds are expected to gain the most if the MPC suggests it is worried about growth or decides to cut the policy repo rate by 25 bps, dealers said. Foreign banks and foreign portfolio investors may further increase their purchases in the run-up to the MPC decision, while corporate houses were also buying short-term gilts, they said.

 

Traders remained cautious ahead of the Centre's borrowing calendar for Oct-Mar, expected by the end of this week, dealers said. The turnover in the gilts market was INR 253.25 billion at 1420 IST, lower than INR 313.90 billion at 1430 IST on 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 6.46-6.55%. (Muskan Lodhi)

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India Gilts: Fall as state bond auction larger than view, US yields tad up

 

	1000 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.77	98.88	98.73	98.88	98.87
YTM (%)	6.5035	6.4871	6.5081	6.4871	6.4885

 

MUMBAI--1000 IST--Government bond prices fell on account of larger than indicated state government bond auction on Tuesday. So far in Jul-Sept, states have borrowed 96% of the indicated amount, helped by modest auctions in the last two weeks. Typically, states undershoot the calendar by 10-20%, but the supply pressure has been substantial after states' record borrowing through bonds in the June quarter, dealers said.

 

The Reserve Bank of India post market hours Friday said that 11 states would raise INR 270 billion through the sale of bonds on Tuesday, against INR 201 billion that the indicative calendar for Jul-Sept showed for this week. Prices of government bonds may fall further in the day as traders take positions before the auction, especially with the large supply of long-term bonds at the debt sale and the scheduled issuance of INR 320-billion of gilts maturing in above 15 years this Friday, dealers said.

 

A slight rise in US Treasury yields did not have much impact on domestic bond prices in early trade, though the three-day rise was a mounting concern. This was in spite of the US Federal Open Market Committee cutting rates by 25 basis points last week and pencilling in further 50 bps of cuts in the rest of 2025. The 10-year US Treasury yield was at 4.15%, a tad higher than 4.14% at 1700 IST Friday. On Friday, gilt prices had not taken any cue from the rise in US yields as foreign portfolio investors remained buyers, dealers said. 

 

Traders await the Centre's borrowing calendar for Oct-Mar and states' indicative calendar for Oct-Dec, as well as the Treasury bill issuance calendar for Oct-Dec. A slight decrease in the supply share of long-term bonds is expected for gilts, which is likely to be passed into slightly higher supply spread out over shorter term bonds, dealers said. Traders also expect an increase in Treasury bill supply from the INR 2.69 trillion gross issuance scheduled in the September quarter.

 

The RBI's Monetary Policy Committee meeting is also a significant trigger for traders. An Informist poll of economists showed the median estimate was that there would be no changes in rates and stance. However, four of the 15 respondents expect a 25-bp repo rate cut from the current 5.50%. Some sections of the market also expect a rate cut, and may pick up short-term gilts through the week, dealers said. 

 

The turnover in the gilts market was INR 32.85 billion, lower than INR 42.05 billion at 0930 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 6.46-6.55%. (Janwee Prajapati)

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India Gilts:Seen dn on larger-than-indicated state bond supply, US ylds rise

 

MUMBAI – Prices of government bonds are seen opening lower Monday after the Reserve Bank of India said post market hours Friday that 11 states will raise INR 270.00 billion through the sale of bonds on Tuesday. The indicative calendar for state borrowing for Jul-Sept showed 12 states would borrow INR 201.00 billion on Tuesday. Of the 13 state bond auctions announced so far in Jul-Sept, seven of them have had notified auction sizes larger than indicated. If states had not rejected some bids either wholly or partially, at auctions, their borrowing would be largely on par with the indicated borrowing for Jul-Sept.

 

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen moving in a range of 6.46-6.52% during the day. On Friday, the bond ended at INR 98.87 or 6.49% yield. The yield of 6.52-6.53% on the 10-year gilt is seen as a psychologically crucial level to buy gilts, dealers said. The yield on the benchmark 10-year Treasury note was 4.15% as of 0800 IST, tad higher than 4.14% at 1700 IST, Friday. The 10-year US Treasury yield has risen above the key level of 4.10% in spite of the US Federal Open Market Committee cutting rates by 25 basis points last week and pencilling in further 50 bps of cuts in the rest of 2025.    

 

Recently, higher-than-expected state borrowing at auctions has been a pain point for bond traders, they said. Moreover, the tenure of these papers has been concentrated in the longer-end of the curve, which traders are already averse to due to large gilt supply in these tenures and low risk appetite. Share of state bonds maturing in more than 10 years in the total issuance increased sharply to 71% in 2025-26 (Apr-Mar) from 22% in FY18, according to a report from State Bank of India's research team. 

 

Later in the day, traders may prepare for fresh supply of INR 160 billion each of a 15-year and a 40-year paper this week, the last scheduled gilt auction for Jul-Sept. Traders anticipate the release of the Centre's Oct-Mar borrowing calendar, expected at the end of this month. They hope the Centre will reduce supply of gilts maturing in 30 to 50 years after feedback from market participants to the RBI. Research analysts from Nomura expect the share of long bonds to be reduced from 35% to 31-32% of the calendar, similar to the expectation of bond traders.

 

A likely fall in the rupee against the dollar may also weigh on bond prices during the day, dealers said. (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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