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Informist, Monday, Sept. 29, 2025

 

By Srijita Bose

 

MUMBAI – Government bond prices ended mixed Monday. The 10-year benchmark gilt ended sharply lower after its share of supply in the Centre's Oct-Mar borrowing plan was increased to 28.4%, and ahead of the fresh supply at auction Friday, dealers said. Longer tenure bonds outperformed others as the supply of these bonds was reduced in the borrowing plan, but most gave up some gains by the end of the day. 

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.41, or a yield of 6.55%, from INR 98.63 or 6.52% yield Friday. The 2035 bond had fallen more during the day after stop-losses were triggered as the yield topped 6.55%, with the yield rising to 6.5748% intraday, highest level Sept. 2. However, some losses were recovered near the end of the session on likely buys from state-owned banks to boost up valuations as the Jul-Sept quarter end neared, dealers said. 

 

The 10-year bond was the worst hit during the day as traders exited some of their long positions and placed fresh short bets on the heavy supply, dealers said. The government will sell INR 320 billion of a 10-year bond at auction Friday. Friday's auction will be the second supply of a 10-year bond in two weeks, with INR 300 billion of the 2035 bond already sold on Sept. 19. The heavy supply of the 10-year bond in the short span will be difficult for the market to absorb, which led prices on the gilt to fall sharply, dealers said. Many traders expect the RBI to announce issuance of a new 10-year bond at auction Friday. The announcement is expected after market hours.

 

"If there is a fresh bond issuance this week then the burden is a little less and shorts may not go up, otherwise I see the 10-year fall further," a dealer at a private sector bank said. "But before MPC (Reserve Bank of India's Monetary Policy Committee outcome Wednesday), the 6.60% zone will not break." 

 

Monday, Moody's Ratings affirmed India's long-term local and foreign-currency issuer ratings and the local-currency senior unsecured rating at 'Baa3'. The agency also maintained its stable outlook for the economy. It said India's fiscal consolidation was not enough to improve its debt affordability, which some said led to a further fall in gilts. 

 

Some traders picked up gilts maturing in 30-40 years as the supply of these bonds was reduced in the Oct-Mar borrowing calendar. The 6.90%, 2065 bond was up the most, ending at INR 95.68, nearly 2 basis points lower at 7.23%. Longer tenure bonds were up more but gave up gains in the latter half of the day due to the fall in the 10-year 2035 bond. Dealers also said part of the cut in supply was already priced in, which limited further rise in prices.

 

Further, traders also expect the indicative state bond calendar for Oct-Dec which will be released this week to come at INR 3.2 trillion to INR 3.5 trillion, higher than INR 2.87 trillion indicated for Jul-Sept. So far, states have borrowed INR 2.66 trillion in the current quarter, and with INR 341 billion supply at Tuesday's auction, traders refrained from picking up longer tenure gilts aggressively. 

 

Meanwhile, though the gilt Oct-Mar calendar increased the share of supply of gilts maturing in three and five years, fall in these gilts was limited compared to the 10-year gilt Monday. Traders have already priced in the higher supply of shorter-tenure bonds in the previous session, limiting fall in these gilts Monday, dealers said. Moreover, with expectations of a soft policy outcome Wednesday, traders held on to their long positions in shorter-tenure gilts, though in light volumes, they said.

 

"Short term already fell so much Friday that the fall was not as pronounced today," a dealer at a primary dealership said. "There's expectation of a dovish policy so people want to stay invested in short end to capture the gain, and these are still giving good carry."

 

Traders remained cautious and refrained from placing aggressive bets before the RBI's Monetary Policy Committee decision on Wednesday, dealers said. Traders expect a soft tone by the panel at the outcome, with a downward revision in the CPI inflation for the current financial year ending March by 30-70 basis points from 3.1% currently. However, with the increase in supply in most gilts maturing in up to 15 years in Oct-Mar, and some fears of the forecast for GDP to be increased for FY26, some traders shed their long positions ahead of the event Wednesday, dealers said. 

 

Turnover in the government bond market was INR 535.45 billion, up from INR 623.80 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 for the fourth straight day Monday.

 

OUTLOOK

On Tuesday, government bond prices could take cues from the results of the larger-than-indicated state bond auction, dealers said. However, prices may trade in a thin band ahead of the RBI Monetary Policy Committee's outcome Wednesday.

 

On Tuesday, 13 states will raise INR 341 billion through the sale of bonds. The indicative calendar for state borrowing for Jul-Sept showed 10 states would borrow INR 151.00 billion on Tuesday. This is the last scheduled auction in the September quarter. Traders expect the state bond calendar for Oct-Dec, which will be released this week, to come at INR 3.2 trillion to INR 3.5 trillion, higher than INR 2.87 trillion indicated in the Jul-Sept calendar. This could limit investors from picking state bonds at auction Tuesday, dealers said. 

 

The 10-year benchmark gilt may continue to underperform after the government increased the share of the gilt to 28.4% in the Oct-Mar borrowing plan and ahead of the fresh supply at auction Friday, dealers said. However, buys from state-owned banks to mark a higher valuation at the end of the September quarter could lead to a rise in prices, others said. 

 

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 rate-setting panel's decision, dealers said. 

 

Traders are optimistic the RBI's rate-setting panel could open the door to further rate cuts Wednesday, 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 6.50-6.60%.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.4100	6.5547%	98.6300	6.5231%
6.79%, 2034	101.2100	6.6095%	101.3500	6.5888%
6.01%, 2030	99.1500	6.2146%	99.2575	6.1882%
6.68%, 2040	98.3400	6.8590%	98.4200	6.8502%
6.90%, 2065	95.6800	7.2321%	95.4500	7.2505%

 

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India Gilts: 10-yr gilt falls more as stop-losses hit, long-term off highs

 

	1522 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.33	98.69	98.31	98.57	98.63
YTM (%)	6.5658	6.5146	6.5698	6.5318	6.5231

 

MUMBAI--1522 IST--The 10-year benchmark 6.33%, 2035 government bond fell further and was near the day's low Monday as traders continued to place short bets ahead of the expected issuance of a new 10-year bond at auction Friday, dealers said. Some longer-tenure bonds were off highs as traders booked profits on these bonds before the heavy state bond supply Tuesday, they said.

 

"The 10-year was actually performing slightly better than expected since morning mostly because people were covering shorts placed Friday," a dealer at a private sector bank said. "But there is fresh short selling today (Monday) and some stop-losses were also triggered, so the fresh fall came and that only is migrating to your long bonds as well." The government will sell INR 320 billion of a 10-year bond at auction Friday. 

 

The 10-year gilt fell sharply after stop-losses were triggered as the yield on the bond topped 6.55%. Moody's Ratings on Monday affirmed India's long-term local and foreign-currency issuer ratings and the local-currency senior unsecured rating at 'Baa3'.

The agency also maintained its stable outlook for the economy. It said India's fiscal consolidation was not enough to improve its debt affordability, which some said led to a further fall in gilts. However, buys from state-owned banks around 6.57% are expected to hold and limit further losses in the gilt, dealers said. The yield on the 10-year benchmark gilt has risen to the highest intraday level since Sept. 3.

 

Some traders picked up gilts maturing in 30-40 years as the supply of these bonds was reduced in the Oct-Mar borrowing calendar. However, dealers said part of the cut in supply was already priced in. Further, a fall in the 10-year 2035 bond also led longer tenure bonds to give up gains, they said. 

 

Traders remained cautious and refrained from placing aggressive bets before the Reserve Bank of India's Monetary Policy Committee decision on Wednesday, dealers said. Traders expect a soft tone by the panel at the outcome, with a downward revision in the CPI inflation for the current financial year ending March by 30-70 basis points from 3.1% currently. However, with the increase in supply in most gilts maturing in up to 15 years in Oct-Mar, and some fears of the forecast for GDP to be increased for FY26, traders limited their long positions ahead of the event Wednesday, dealers said. 

The turnover in the gilts market was INR 407.35 billion at 1522 IST, a tad lower than INR 443.20 billion at 1530 IST Friday, 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 6.50-6.60%.   (Srijita Bose)

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India Gilts: 10-yr benchmark gilt down on short sales; long-term remain up

 

	1210 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.53	98.69	98.47	98.57	98.63
YTM (%)	6.5375	6.5146	6.5461	6.5318	6.5231

 

MUMBAI--1210 IST--The 10-year benchmark 6.33%, 2035 gilt price fell on likely short sales by traders after the bond yield rose above 6.53%, dealers said. Dealers speculated that a single investor offloaded positions in the 10-year gilt ahead of the Reserve Bank of India's Monetary Policy Committee meeting outcome Wednesday. Moreover, fresh supply of a 10-year gilt this Friday led to traders placing short bets on the bond, dealers said. Long-term gilts remained up after their share of supply in the Centre's Oct-Mar borrowing plan was reduced to 29.5%, which was lower than expectations.

 

"Its a technical break below 56-60 paisa (INR 98.56–INR 98.60 on the 10-year gilt)," a dealer at a private-sector bank said. "Now there could be a further upside (in yields) if it (price) falls below INR 98.46 level but 6.55% yield level should hold." The 6.55% yield on the 10-year gilt is seen as lucrative to buy gilts, especially if the MPC is seen cutting rates either in October or December. Before the policy outcome, short bets were unlikely to spike to levels of around INR 200 billion seen in the week to 10-year gilt auctions recently, dealers said. 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 at 1210 IST showed trades worth INR 120.56 billion in the 6.33%, 2035 gilt, slightly higher than INR 117.14 billion Friday.

 

Most traders expect the government to issue a new 10-year paper Friday instead of the current benchmark 6.33%, 2035 gilt Friday as the latter's outstanding is nearly INR 2.00 trillion. The announcement is due Monday. Supply in a new gilt would be preferred by most traders, and could prevent a further fall in the price of the current benchmark. Traders are also dealing with heavy supply of state bonds this week, supply of which is concentrated in bonds maturing in more than 10-years. Several traders said that large state bond supply offset the positive triggers from lower long-term gilt supply in the Centre's Oct-Mar borrowing calendar. States plan to raise INR 341 billion through bonds at auction Tuesday, against INR 151 billion in the Jul-Sept calendar.

 

Due to expectations of a soft policy outcome on Wednesday, some traders expect the yield on the 10-year benchmark to hit 6.50% by the end of trade Tuesday. Closer to the policy outcome, the state bond auction could also fare better than expectations, dealers said. 
 

"The maturities (of Tuesday's) auction are spaced out, if you see Maharashtra is not borrowing long-term (state bonds)," a dealer at a state-owned bank said. "In August there weren't any state bonds in short-term, (now there are). And long-term gilt supply has decreased so spreads (of state bond yields over gilts) will not increase from last week."  

 

The turnover in the gilts market was INR 194.30 billion, a tad higher than INR 163.60 billion at 1130 IST Friday, 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 6.50-6.56%. (Cassandra Carvalho)

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India Gilts: Mixed; long-term bonds surge as supply share in Oct-Mar cut

 

	1010 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.61	98.69	98.57	98.57	98.63
YTM (%)	6.5264	6.5146	6.5321	6.5318	6.5231

 

	1010 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	95.75	95.80	95.62	95.75	95.45
YTM (%)	7.2265	7.2225	7.2369	7.2265	7.2505

 

MUMBAI--1010 IST--Government bonds traded on a mixed note after the release of the Oct-Mar borrowing calendar post market hours Friday. Bonds maturing in 30-50 years were up as the share of their supply in the calendar was lower than expected, while losses in other bonds were limited ahead of the Monetary Policy Committee outcome on Wednesday, dealers said. The calendar increased the share of supply of gilts maturing in three, five and 10 years.

 

The share of supply in the 30-50-year gilts was reduced to 29.5% in the Oct-Mar borrowing calendar from 35.0% in Apr-Sept, spurring buys in those securities. Traders had priced in a 3-5 percentage point decrease in the supply share, so the reduction was slightly more than anticipated, dealers said. In contrast, the prices of the five-year benchmark 6.01%, 2030 gilt and 10-year benchmark 6.33%, 2035 bond opened lower but recovered losses, likely due to purchases from state-owned banks.

 

Traders remained optimistic about the MPC outcome as the three-day meeting of the panel begins Monday. Some traders are expecting a 25-basis-point repo rate cut to 5.25%, while others expect Reserve Bank of India Governor Sanjay Malhotra to signal comfort on inflation while looking to boost growth, dealers said. This may pave the way for a rate cut in December, they said.

 

"The 10-year had reacted badly on Friday already, so the calendar was on expected lines," a dealer at a state-owned bank said. "It's difficult to see a big sell-off from here in the belly or short-term since the MPC (outcome) is also expected to be dovish."

 

The larger-than-expected supply of state bonds this week weighed on gilt prices, and capped gains in long-term bonds as well, dealers said. States plan to raise INR 341 billion through bonds at auction Tuesday, against INR 151 billion in the Jul-Sept calendar. This is the last auction in the September quarter, and traders look ahead to the Oct-Dec state borrowing calendar for further cues, especially on spreads between the two instruments and the outlook for long-term bonds.

 

The turnover in the gilts market was INR 105.90 billion, higher than INR 100.50 billion at 1030 IST Friday, 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 6.48-6.54%. (Janwee Prajapati)

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India Gilts: Seen down; heavy state bond supply to offset long-end gains

 

MUMBAI – Prices of government bonds are seen largely lower Monday as any rise in prices due to lesser supply of gilts maturing within 30-50 years in Oct-Mar is likely to be offset by larger-than-indicated supply of state bonds this 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. The bond is seen opening largely steady with a downward bias. A few traders, however, expect bond prices to open around 5-10 paise higher. On Friday, the bond ended at INR 98.63 or 6.52% yield. 

 

The Centre released its borrowing plan for Oct-Mar Friday. Long-term bond yields may briefly fall by around 4-5 basis points Monday after their share of supply was cut more than expected, to 29.5% from 35.0% in Apr-Sept. The balance supply is largely dumped into bonds maturing in 10 years or less, which may fall Monday, dealers said. In Oct-Mar, 28.4% of gilt issuances will be through the sale of 10-year paper, higher than the 26.2% share in Apr-Sept. This excess supply will weigh on the bond's price, especially with a large supply of INR 320 billion of this tenure lined up this week. Several traders expect the government to issue a new 10-year paper instead of the current benchmark 6.33%, 2035 gilt as the latter's outstanding is nearly INR 2.00 trillion. 

 

Heavy supply of state bonds this week, especially since it's the end of the Jul-Sept quarter, may likely override any positive triggers from the borrowing calendar, dealers said. The Reserve Bank of India Friday said 13 states will raise INR 341 billion Tuesday, whereas the indicative calendar for state borrowing for Jul-Sept showed 10 states would borrow INR 151.00 billion. Only five of the bonds being issued are maturing in 10 years or less. 

 

Some traders expect prices to be buoyed by expectations of soft commentary at the RBI's Monetary Policy Committee meeting outcome Wednesday. The three-day meeting kicks off Monday. Traders expect the tone and commentary of the rate-setting panel and of RBI Governor Sanjay Malhotra to signal 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 Wednesday 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. Short-term bond prices are likely to hinge on the MPC outcome, and could rise despite heavier supply in these tenures if the MPC adopts a softer tone, dealers siad. 

 

The yield on the benchmark US 10-year Treasury note was 4.17% as of 0800 IST, the same as 1700 IST Friday, after hitting a high of 4.20% over the weekend after consumer spending in the US was slightly more than expected in August. US personal consumption expenditures inflation rose to 2.7% on year in August from 2.6% in July, while the annual core inflation rate was unchanged at 2.9%. The prints were in line with expectations. (Cassandra Carvalho)

End

 

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

 

Edited by Deepshikha Bhardwaj

 

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