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Informist, Thursday, Sept. 25, 2025

 

By Aaryan Khanna

 

NEW DELHI – Most government bond prices ended slightly lower Thursday as primary dealers likely placed short bets to make room for the INR-320-billion gilt supply Friday, dealers said. A rise in the US Treasury yield near the end of the market hours also weighed on prices. The hope of a repo rate cut by the Reserve Bank of India's Monetary Policy Committee next week kept losses limited through the day.

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.81, or a yield of 6.50%, from INR 98.86 or 6.49% yield Wednesday. The bond was likely supported by purchases by state-owned banks as the benchmark yield approached 6.50%, a psychologically crucial level. Trade was choppy throughout the day, though the 10-year gilt's price traded in a narrow band.

 

The government will sell INR 160 billion each of the 6.68%, 2040 gilt and 6.90%, 2065 gilt at auction Friday. Since both gilts are illiquid, traders were placing short sales in the 6.33%, 2035 bond through most of the day, though some short bets were placed in the 15-year gilt, dealers said. Towards the end of the trading session, the 10-year US Treasury yield rose 2 basis points intraday to 4.16% at 1700 IST, which also led some traders to sell gilts, they said.

 

Demand at the auction was seen firm from both traders and investors, with the share of 30-50 year gilts in the Oct-Mar borrowing calendar expected to be lower by 3-5% from the 35% share in Apr-Sept, dealers said. This led to the 2065 gilt ending higher, likely due to traders taking positions before the announcement of the borrowing calendar. Informist exclusively reported Thursday, quoting a senior finance ministry official, that the calendar would be released at 1700 IST on Friday.

 

"The market is in a wait-and-watch mode before the borrowing calendar and the MPC," a dealer at a primary dealership said. "In such a situation, trading activity is all over the place, but the only certainty is that the auction is coming and that we need to prepare for it."

 

Dealers said life insurers may be keen to pick up the 40-year bond at auction, but were uncertain about demand from banks for the 15-year bond. Insurance premium collections have improved after the goods and tax rejig, effective Monday, brought down rates on insurance premiums to zero from 18%, dealers said. Demand for long-term state bonds at auction has also improved in the last two weeks, signalling there was appetite to add bonds to their portfolios. However, short-term bonds were out of favour as the borrowing calendar, which will be released before the MPC, is expected to increase the share of the bonds in Oct-Mar.

 

"The rally in the short-term bonds has happened, so traders have booked profits and come out of there in the last two to three days," a dealer at a private-sector bank said. "In the long-end (long-term bonds), both supply and demand need to improve. Hopefully, the government understands that and investors also get a boost from the GST changes."

 

Traders expect the five-year benchmark 6.01%, 2030 gilt's yield to fall below 6.08% only if the MPC cuts the policy repo rate on Wednesday by 25 basis points to 5.25%. The expectation has built up in the run-up to the policy as nominal GDP growth was subdued in the June quarter and CPI inflation is expected to average well below the RBI's estimate of 3.1% for 2025-26 (Apr-Mar), dealers said. The GST rejig may lead to the central bank bringing down its forecast by as much as 70 bps for the current fiscal year, and traders will also watch out for the forecast for Apr-Jun 2026, which was projected at 4.9% at the last meeting and is seen as a significant deterrent to rate cut bets, dealers said.

 

According to an Informist poll, only four of 15 economists expected a 25-basis-point rate cut in October. The majority said the MPC is likely to keep interest rates on hold for the second consecutive meeting next month after real GDP growth was much quicker than expected in the June quarter, at 7.8%, a five-quarter high. The consensus view among traders remains that the tone and commentary of RBI Governor Sanjay Malhotra will be softer than in June and August, and he will leave the door open for further policy easing in December.

 

"The panel has shown an intent to frontload rate cuts, and the consumption boost will be much more relevant in October than in December. So it could very well cut (the repo rate) if it wants to," the private-sector bank dealer quoted above said.

 

Turnover in the government bond market was INR 445.80 billion, down from INR 510.80 billion Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades using the wholesale digital rupee pilot for the second straight day Thursday.

 

OUTLOOK

On Friday, bond prices may fall due to a rise in US Treasury yields after key economic data in the world's largest economy. The fall may be amplified ahead of the INR 320 billion weekly gilt auction at 1030-1130 IST, dealers said.

 

US government data released after Indian market hours showed that US GDP grew 3.8% in Apr-Jun, higher than the 3.3% estimated earlier. Moreover, US initial jobless claims fell by 14,000 on week to 218,000, lower than expected and the second straight week with a sharp fall. The 10-year US Treasury yield rose to as high as 4.20?ter the data, from 4.16% at 1700 IST, as traders pared bets on a rate cut by the US Federal Reserve.

 

Traders may also place short bets on gilts ahead of the weekly gilt auction, dealers said. The government will sell INR 160 billion each of the 6.68%, 2040 gilt and 6.90%, 2065 gilt at auction Friday. Demand is expected to be firm in the last gilt auction of Apr-Sept as the government is expected to reduce the supply share of long-term bonds in Oct-Mar, dealers said.

 

As caution sets in before the three-day MPC meeting starting Monday, traders are seen preferring the liquid 10-year benchmark bond over the relatively illiquid bonds, dealers said. Traders will also place their bets ahead of the Oct-Mar borrowing calendar. The calendar is likely to be released after market hours Friday, according to an Informist report, quoting a senior finance ministry official.

 

Bond traders expect the government to reduce the share of bonds maturing in 30 to 50 years in the Oct-Mar calendar by 3-5%, from 35% in Apr-Sept, following market feedback and poor demand from institutional investors. It may increase the share of borrowing in bonds maturing up to 10 years, market participants said. The once-in-four-week auction cycle for a particular bond is expected to remain unchanged, and no new tenures of issuance are expected to be added.

 

However, positive sentiment may push prices up later in the day as traders are optimistic the RBI's rate-setting panel could open the door to further rate cuts next week, either by raising concern about India's growth prospects amid external headwinds or cutting the CPI inflation forecasts further.

 

Traders may refrain from aggressively placing bets ahead of the release of the gilt borrowing calendar for Oct-Mar, seen as the next cue for the market. However, purchases of longer-term bonds may pick up on the expectation of lower supply in the segment in the second half of the financial year, dealers said. 

 

Traders may also take cues from developments on the India-US trade talks. Bond traders may also track the movement of crude oil prices. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.42-6.54%.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.8100	6.4972%	98.8550	6.4908%
6.79%, 2034	101.5200	6.5638%	101.5400	6.5608%
6.01%, 2030	99.3500	6.1654%	99.3500	6.1653%
6.68%, 2040	98.4900	6.8425%	98.5400	6.8370%
6.90%, 2065	95.4125	7.2534%	95.2500	7.2665%

 

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India Gilts: Steady; long-term bonds up ahead of Oct-Mar borrowing calendar

 

	1620 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.90	98.91	98.78	98.87	98.86
YTM (%)	6.4851	6.4826	6.5015	6.4887	6.4908

 

MUMBAI--1620 IST--Government bond prices were steady as dealers avoided placing aggressive bets ahead of Friday's gilts auction and also because of the lack of fresh domestic cues, dealers said. Some traders picked the 40-year bond on hopes of a reduction in the share of gilts maturing in 30-50 years in the Oct-Mar borrowing calendar. The borrowing calendar is likely to be released after 1700 IST Friday, Informist reported Thursday, quoting a senior finance ministry official.

 

Some traders said the market is being supported by muted activity by foreign portfolio investors and limited buys. "Traders are also receiving in overnight indexed swap (rates) which is giving gilts some support," a dealer at a private-sector bank said. OIS rates in one- to three-year contracts inched lower as traders bet on a rate cut by the Reserve Bank of India's Monetary Policy Committee next week. 

 

Some traders expect a reduction of 20–45 basis points in CPI inflation projections for the financial year 2025-26 (Apr-Mar) while others believe the cut could be as much as 60–70 bps following the rejig of the goods and services tax. The RBI has a CPI forecast of 3.1% for FY26. Traders are also eyeing the forward CPI inflation data, especially the projection of 4.9% for the June quarter of FY27.

 

Friday, the government will seek bids for INR 160 billion of the 6.68%, 2040 bond and another INR 160 billion of the 6.90%, 2065 bond at the weekly gilts auction. Some traders expect strong demand from provident funds and insurance companies for the 40-year gilt. Demand for the 15-year gilt is seen to be modest. Traders are placing short bets in the most-traded 10-year benchmark paper as both the bonds at the auction are illiquid, dealers said. Some traders are cautious about placing aggressive short bets before the rate-setting panel's meeeting begins Monday, with most participants expecting a positive outcome, unlike at the last two policy meetings.

 

The turnover in the gilts market was INR 406.25 billion, similar to INR 428.90 billion at 1630 IST Wednesday, 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 6.45-6.52%.  (Muskan Lodhi)

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India Gilts: In thin band; PDs trim holdings to make room for gilt auction

 

	1435 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.89	98.91	98.78	98.87	98.86
YTM (%)	6.4858	6.4826	6.5015	6.4887	6.4908

 

MUMBAI--IST 1435--Prices of most government bonds moved in a thin band. Long-term bonds unexpectedly rose, likely due to investors picking up the gilts expecting the Oct-Mar borrowing calendar to show a lower share of issuance through 30-50 year gilts, dealers said. Gains were capped as primary dealerships trimmed their gilt holdings ahead of the weekly gilt auction Friday, they said.

 

Traders expect the government to reduce the share of 30-50 year bond supply by 3-5% from the 35% in Apr-Sept, which is largely priced in. Most traders see the additional supply being distributed between gilts maturing in three and 10 years, weighing on demand for these bonds. Additionally, traders expect the Centre's short-term borrowing through Treasury bills to increase in Oct-Dec, the quarterly calendar of which is also expected along with the calendar for dated securities, dealers said.

 

"The government might increase the supply share in T-bills to cover for the loss of revenue due to the US tariff imposition and GST rate cut," a dealer at a primary dealership said.

 

At the same time, hopes of a repo rate cut by the Monetary Policy Committee have made traders favour short-term gilts, dealers said. Some traders picked up the 6.33%, 2035 gilt as the 10-year bond yield touched the psychologically crucial 6.50% level.

 

Long-term bonds may remain under pressure in the second half of the day, with the government looking to sell INR 160 billion each of the 6.68%, 2040 gilt and 6.90%, 2065 gilt. So far in the month, the 15-year benchmark bond's yield has fallen 15 basis points to 6.83%. Traders are expected to bid actively for the 15-year bond and book profit in the secondary market, whereas the 40-year bond might see firm demand from life insurers and pension funds.

 

The turnover in the gilts market was INR 307.95 billion, similar to INR 320.80 billion at 1435 IST Wednesday, according to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.45-6.52%.  (Janwee Prajapati)

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India Gilts: Slightly up on rate cut hopes at Oct MPC meet; volume picks up

 

	1010 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.88	98.91	98.81	98.87	98.86
YTM (%)	6.4880	6.4826	6.4972	6.4887	6.4908

 

MUMBAI--1010 IST--Government bond prices rose slightly in thin trade Thursday as some traders expect the Reserve Bank of India's Monetary Policy Committee to cut the policy repo rate by 25 basis points at its upcoming meeting next week, dealers said. The gains were limited as the majority market view remained that the panel would hold rates next week, and on caution before the government's Oct-Mar borrowing calendar. Bond prices had opened steady and were only thinly traded in the first 20 minutes of trade.

 

Some traders expect the MPC to resume rate cuts due to CPI inflation likely undershooting the RBI's forecast of 3.1% in 2025-26 (Apr-Mar), opening up space to bring down the policy rate from the current 5.50%. The real policy rate compared with current quarterly inflation trends is well above the neutral range of 1.4-1.9% indicated in an RBI paper, making monetary policy restrictive, dealers said.

 

"Everyone is waiting, everyone is expecting a 25-bp rate cut," a dealer at a state-owned bank said. "But there's not much pricing of the cut yet, so yields have some room to run in my opinion."

 

However, most traders do not see the monetary authority acting next week after a strong June quarter growth print of 7.8%, a five-quarter high and well above analyst estimates. The majority hopes RBI Governor Sanjay Malhotra might adopt a neutral tone on rates and will open the door to a rate cut in the December MPC meeting, which will come after Jul-Sept GDP growth numbers are out, dealers said.

 

Long-term bonds were under pressure as primary dealers likely made room for the INR-320-billion supply at auction Friday, dealers said. The government will sell INR 160 billion each of the 6.68%, 2040 bond and the 6.90%, 2065 bond. Short selling activity had ramped up since Wednesday when primary dealerships were net sellers, trimming INR 11.11 billion worth of gilts in the secondary market. 

 

The government's Oct-Mar borrowing calendar is expected to bring down the share of 30-50-year gilts by 3-5% from the 35% share in Apr-Sept, dealers said. The reduction in the share of supply is broadly priced in. Traders expect the borrowing calendar to be released by Monday, and the uncertainty over the date is leading to caution on large bets before the policy outcome Wednesday.

 

The turnover in the gilts market was INR 70.35 billion, higher than INR 57.90 billion at 0945 IST Wednesday, 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 6.45-6.52%.  (Janwee Prajapati)

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India Gilts: Seen tad dn before auction; bets of soft policy to limit losses

 

MUMBAI – Prices of government bonds are seen opening a tad lower Thursday ahead of the INR-320-billion gilt auction Friday, dealers said. 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 Wednesday, the bond ended at INR 98.86 or 6.49% yield. The yield on the benchmark US 10-year Treasury note was 4.15% as of 0800 IST, a tad higher than 4.12% at 1700 IST Wednesday.

 

Closer to Friday's auction, short sales before fresh supply may weigh on bond prices, dealers said. At the auction, the government will sell INR 160 billion each of the 6.68%, 2040 bond and the 6.90%, 2065 bond, both of which are relatively longer-term gilts. Primary dealerships and private sector banks were net sellers Wednesday due to short bets before the auction.

 

However, traders are unlikely to place aggressive short bets and prices are expected to be buoyed by expectations of a soft policy outcome by the Reserve Bank of India's Monetary Policy Committee next week, dealers said. Traders expect the tone and commentary of the rate-setting panel and of RBI Governor Sanjay Malhotra to signal the scope for a 25-basis point rate cut at the panel's meeting in December, while some traders are also positioning for a 25-bps rate cut next week itself. Traders expect the RBI to also downgrade its CPI inflation forecast for 2025-26 (Apr-Mar) by 20-40 bps due to the latest rejig in the goods and services tax structure. 

 

Bond prices may track the movement of the rupee against the dollar, as the local currency is seen depreciating at market open. However, bond traders are largely comfortable with the rupee trading in a 85.00-90.00 range, except for initial kneejerk reactions whenever there is a sharp movement in the local currency, they said.

 

Before the policy outcome, the Centre is likely to publish its borrowing calendar for Oct-Mar, dealers said. Dealers expect the release either on Friday or Monday, and anticipate that the supply of bonds maturing in 30-50 years could be reduced to 30-31% from 35% seen in Apr-Sept. The balance supply could either be through Treasury bills or through additional supply in the 5- to 10-year gilt segment, dealers said. Traders are refraining from large positions in specific tenures across the yield curve until the calendar provides clarity, they said.  (Cassandra Carvalho)

End

 

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

 

Edited by Saji George Titus

 

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