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Informist, Friday, Sept. 26, 2025

By Srijita Bose

MUMBAI – Prices of most government bonds ended lower Friday as traders booked profit ahead of the release of the gilt borrowing calendar for Oct-Mar, which was expected to be released after market hours, dealers said. The 10-year benchmark gilt ended sharply lower as traders placed some short bets in anticipation of a higher supply in shorter tenure gilts, they said. 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.63, or a yield of 6.52%, from INR 98.81 or 6.50% yield Thursday. Some traders feared supply of the 10-year gilt could be increased in the second half of the financial year, which led the 2035 bond to fall sharply near the end of the day, dealers said. In Apr-Sept, the government borrowed 26.2% of the INR 8 trillion borrowing amount through 10-year bonds. 

"There is some panic that the supply of the 10-year along with either three- or seven-year bonds could go up," a dealer at a state-owned bank said. "Plus even after the auction prices have been falling and investor demand is not there in the secondary market." Traders expect the supply of bonds maturing in 30-50 years to be reduced in Oct-Mar by around 3-6% from 35% in Apr-Sept, dealers said.

Traders unwound their long positions after picking up INR-320-billion worth of gilts at the weekly auction Friday, dealers said. Traders picked up large stock of the 6.90%, 2065 bond at the auction and sold the gilt in the secondary market as investor demand waned, they said. 

Traders had built positions in the 2065 gilt before the auction in anticipation of prices rising due to expectation of lower supply of these bonds in the second half of the financial year, dealers said. Prices had risen in the 6.68%, 2040 and 6.90%, 2065 gilts immediately after the auction result. The 2065 gilt hit the day's high at INR 95.85 as the Reserve Bank of India set the cut-off price on the bond at INR 95.60, against INR 95.50 expected in an Informist poll. The auction drew firm demand from a state-owned insurance company for the long-term bonds, dealers said. But caution before the release of the calendar limited aggressive buys from investors, which led long-term bond to erase all gains, they said.

Meanwhile, mutual funds and some state-owned banks were aggressive in bidding for the 2040 gilt. Corporate houses also picked up stock of the 15-year bond at the last auction of Apr-Sept calendar, dealers said. The 15-year benchmark gilt's cut-off price was in line with expectations.

Some traders said stop-losses on the 6.01%, 2030 gilt were triggered as foreign portfolio investors sold the bond, dealers said. According to Clearing Corp. of India data, FPIs sold INR 3.20 billion of the five-year benchmark gilt. Traders avoided adding bonds despite the slide in prices until the release of the Oct-Mar borrowing calendar and outcome of the Reserve Bank of India's Monetary Policy Committee meeting Wednesday, dealers said. However, near the end of trade, the five-year gilt recovered some losses on expectation that the supply of the five-year gilt may not be increased significantly in the Oct-Mar borrowing calendar, they said. 

"The five-year triggered the fall in other tenures and initiated the panic in the market, but later there was some leak that the five-year supply may not be increased so we saw some recovery," a dealer at a primary dealership said. "People are also shorting because of weekend and next week we have the policy so no one wants to go aggressive here." 

A slight overnight rise in the 10-year US Treasury yield weighed on gilt prices early in the day. However optimism around a softer monetary policy guidance next week limited the fall in gilts, dealers said. Traders are expecting the rate-setting panel to revise down the inflation guidance by 30-70 basis points for 2025-26 (Apr-Mar), which is currently at 3.1%. However, a report by the ICICI Securities Primary Dealership Ltd. said the RBI panel may upgrade the GDP estimate for the year from 6.5% currently. While, a marginal section of market still expect the panel to cut the repo rate by 25 bps next week, most remained cautious and refrained from placing aggressive bets before the event, dealers said. 

Turnover in the government bond market was INR 627.90 billion, up from INR 445.80 billion Thursday, 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 third straight day Friday.

OUTLOOK

Gilts are not traded Saturdays. On Monday, government bond prices could take cues from the movement in US Treasury yields at open. The 10-year benchmark gilt may fall after the government increased the share of the gilt to 28.4% in the Oct-Mar borrowing plan, dealers said. The borrowing calendar also changed the issuance of the 10-year bond to once in five weeks, from once-in-four-week auction cycle earlier.

Long-term gilts will likely rise after the government slashed the shares of 30-50 year gilts to 29.5% in Oct-Mar from 35% in Apr-Sept. However, traders may refrain from placing aggressive and large bets on caution ahead of the RBI's MPC meeting, which begins Monday, dealers said. 

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 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%.

India Gilts: Most fall as traders trim long positions after auction result

MUMBAI--1615 IST--Government bond prices fell as traders unwound their long positions after picking up INR-320-billion worth of gilts at the weekly auction, dealers said. These bonds, which had risen during and after the auction bidding, were off highs despite better-than-expected cut-off prices on the 40-year gilt at auction.

Traders booked profits after prices rose in the 6.68%, 2040 and 6.90%, 2065 gilts even immediately after the auction result. The 2065 gilt hit the day's high at INR 95.85 as the Reserve Bank of India set the cut-off price on the bond at INR 95.60, against INR 95.50 expected in an Informist poll. The auction drew firm demand from a state-owned insurance company for the long-term bonds, while mutual funds and some state-owned banks were aggressive in bidding for the 2040 gilt, dealers said. The 15-year benchmark gilt's cut-off price was in line with expectations. 

However, traders also trimmed their bond-holdings on caution ahead of the release of the Oct–Mar borrowing calendar, likely after market hours, according to an Informist report, quoting a senior finance ministry official. While the 40-year benchmark gilt drew demand from long-term investors, the sharp price action in the secondary market was likely because traders had also built positions in the gilt, dealers said. Traders expect the government to reduce the share of supply of long-term bonds in Oct-Mar, and add that share into short-term gilts.

Some traders said stop-losses on the 6.01%, 2030 gilt were triggered as foreign portfolio investors sold the bond, dealers said. According to Clearing Corp. of India data, FPIs sold INR 3.20 billion of the five-year benchmark gilt. Traders avoided adding bonds despite the slide in prices until the release of the Oct-Mar borrowing calendar and outcome of the Reserve Bank of India's Monetary Policy Committee meeting Wednesday, dealers said.

The turnover in the gilt market was INR 520.05 billion, higher than INR 388.75 billion at 1630 IST Thursday, 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 6.46-6.54%.  (Muskan Lodhi and Srijita Bose)

India Gilts: Bonds at auction surge after bidding; robust demand expected

NEW DELHI--1155 IST--Prices of government bonds being sold at auction rose, indicating that appetite for the fresh supply of gilts was robust. A combination of traders and end-investors were seeking to add the 15- and 40-year benchmark gilts amid significant positive momentum for long-term bonds Friday, dealers said. Most of the other bonds traded in a thin band, with the 10-year benchmark little changed. 

The government offered to sell INR 160 billion each of the 6.68%, 2040 bond and the 6.90%, 2065 bond at the auction held from 1030-1130 IST. Prices of both gilts rose during and after the bidding, highly unusual with fresh supply incoming, as traders were of the view that large investors would mop up the supply at the auction, especially for the long-term gilt. Life insurers were said to have received bunched inflows from a spurt of policies written this week after the new goods and services tax regime brought down the indirect tax on premiums down to nil from 18% earlier, dealers said.

Investors are looking to lock in current yield levels on long-term gilts on expectations that the share of supply in 30-50-year bonds is likely to fall in the Oct-Mar borrowing calendar, likely to be released after market hours Friday. Forward-rate agreements of up to INR 30 billion were also seen adding to the demand for the 2065 gilt, dealers said.

"One of the things is that after the GST changes, insurers stopped getting flows and now all of them are getting bunched up," a dealer at a primary dealership said. "So there is both forward-rate agreement demand and cash demand at the auction, which means at least one of the bonds – likely the 40-year – will get swept."

As for the 15-year bond, public-sector banks and mutual funds were keen to pick up the gilt at auction, dealers said. Some state-owned lenders are likely to park the 15-year gilt in their held-to-maturity portfolios, though most were seen picking up the bond for trading books. Mutual funds were also betting on the bond to outperform the 10-year benchmark 6.33%, 2035 gilt in terms of capital gains, especially with some sections of the market expecting a rate cut by the Reserve Bank of India's Monetary Policy Committee next week, dealers said. 

Gilts across other tenures traded in a thin band, as traders awaited the borrowing calendar and the MPC outcome on Wednesday. A slight overnight rise in the 10-year US Treasury yield weighed on gilt prices early in the day, but was offset by the optimism around the auction sailing through and softer monetary policy guidance, dealers said. The 6.33%, 2035 gilt may underperform as traders may short sell the liquid security to manage the risk on their portfolios, while piling into long-term and short-term bonds betting on a rate cut. 

The turnover in the gilt market was INR 194.50 billion, higher than INR 178.85 billion at 1230 IST Thursday, 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 6.46-6.54%. (Aaryan Khanna)

India Gilts: Recover losses; demand seen firm at auction ahead of H2 calendar

MUMBAI--1020 IST--Government bond prices recovered most losses, after opening lower due to a rise in US Treasury yields. Demand is seen firm at the INR 320-billion weekly gilt auction as the Oct-Mar borrowing calendar, expected after market hours Friday, may cut the supply share of long-term bonds, and some traders are also betting on the Monetary Policy Committee cutting the repo rate next week, dealers said. Moreover, state-owned banks likely stepped up purchases as the 10-year benchmark 6.33%, 2035 bond's yield topped the psychologically crucial 6.50% mark.

The government will sell INR 160 billion each of the 6.68%, 2040 and 6.90%, 2065 gilts, at 1030-1130 IST. Both long-term bonds are seen well bid, with traders ramping up purchases hoping for a rise in prices after the borrowing calendar announcement, dealers said. Traders expect the government will reduce the supply share of 30-50 year bonds by up to 5% from 35% in Apr-Sept. Informist exclusively reported Thursday, quoting a senior finance ministry offical, that the government is likely to release the calendar after 1700 IST, Friday.

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 services tax rejig, effective Monday, brought down rates on insurance premiums to zero from 18%, dealers said.

"The market is well supported, and these bonds actually did well yesterday (Thursday)," a dealer at a private-sector bank said. "So I think there is a lot of demand right now in the market, especially for this tenure. It is what they call a perfect storm."

Some banks may pick up the longer-tenure bonds as a potential rate cut by the MPC may deliver greater capital gains in these bonds, where prices rise much more sharply per-basis-point fall in yields, rather than short-term gilts. While bonds maturing under seven years may rise on a potential rate reduction next week, traders also fear additional share of supply in the borrowing calendar may limit potential gains, dealers said. 

The turnover in the gilts market was INR 54.95 billion, higher than INR 19.80 billion at 0930 IST Thrusday, 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 6.46-6.54%. (Aaryan Khanna and Janwee Prajapati)

India Gilts: Seen down on fresh supply of INR 320 bln, rise in US yields

MUMBAI – Prices of government bonds are seen opening down Friday due to fresh supply of longer-term bonds worth INR 320 billion at the weekly gilt auction and a likely fall in the rupee against the dollar. On the global front, an overnight rise in US Treasury yields after economic data in the US indicated strength in the world's largest economy may weigh on prices, dealers said. However, after bidding at the auction ends, prices are seen rising as the auction is likely to sail through, 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.

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen moving in a range of 6.45-6.55% during the day. On Thursday, the bond ended at INR 98.81 or 6.50% yield. The yield on the benchmark US 10-year Treasury note was 4.18% as of 0800 IST, a tad higher than 4.17% at 1700 IST Thursday, hitting a high of 4.20% overnight.

Traders may be cautious during the day ahead of the release of the Centre's borrowing calendar for Oct-Mar, dealers said. Citing a senior finance ministry official, Informist reported that the Centre may release the Oct-Mar borrowing calendar after 1700 IST Friday. Dealers anticipate that the supply of bonds maturing in 30-50 years could be reduced to 30-31% from 35% seen in Apr-Sept, which is why Friday's auction is expected to sail through. This expectation led to the 6.90%, 2065 gilt ending higher Thursday, likely due to traders taking positions before the announcement of the borrowing calendar. 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. If long-term supply is reduced, the balance supply could either be through Treasury bills or through additional supply in the 5- to 10-year gilt segment, dealers said. 

Bond prices may also track the movement of the rupee against the dollar at open, as the local currency is seen depreciating at market open after US President Donald Trump imposed a 100% tariff on branded and patented pharmaceutical products from Oct. 1. (Cassandra Carvalho)

End

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

Edited by Akul Nishant Akhoury

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