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Informist, Friday, Oct. 3, 2025

 

By Sriijita Bose

 

MUMBAI – Most government bonds ended higher Friday after the Reserve Bank of India Governor Sanjay Malhotra's commentary following the Monetary Policy Committee meeting Wednesday. Gains on the 10-year benchamrk were erased as traders trimmed portfolio of the gilt to pick up the new 6.48%, 2035 bond auctioned Friday, dealers said. 

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.72, or a yield of 6.51%, against INR 98.68 or 6.52% yield, Wednesday. Money markets were shut Thursday for Gandhi Jayanti. Traders absorbed the fresh supply of the new 10-year gilt at the INR-320-billion weekly auction. Traders refrained from picking up the outgoing 10-year benchmark bond after the auction as the strong demand for the new bond at auction led them to pick up the new 10-year gilt, dealers said. 

 

The new 10-year bond received aggressive bids from all sections of the market at auction, dealers said. In the secondary market, the 6.48%, 2035 bond became the second-most traded paper with the last trade at INR 101.15, or 6.46% yield. This drove the spread between the 6.33%, 2035 gilt over the newly issued bond to 5 basis points. They said the spreads between the two bonds might widen further in the coming days as traders pile into the new gilt. The weighted average price at the auction suggested most participants had bid at 6.48%, and that the new bond had gone to state-owned banks rather than traders, leading to the rise in the bond's price in the secondary market, dealers said. The new bond was bid well over four times at the auction. 

 

"At the auction we saw 50% partial allotment, so the strong demand came to the new paper in the secondary market as well and some people were offloading the 6.33%, 2035 bond," a dealer at a private sector bank said. "Also, the state bond calendar is yet to be announced, so some caution was seen because of that as well." 

 

The 10-year benchmark gilt rose in early trade as traders covered short bets placed in previous sessions as they expected the higher supply of the new bond auction to gain momentum over the next one month, dealers said. However due traders sales after the auction and fears of heavy state bond auction supply for Oct-Dec, the 10-year benchmark gilt gave up most gains in the latter half of trade. 

 

Traders expect states to announce a calendar between INR 3.2 trillion and INR 3.5 trillion for Oct-Dec, likely to be announced after market hours Friday. In Jul-Sept, states raised a total of INR 3 trillion, against INR 2.87 trillion in the indicative calendar.

 

Long-term bonds had outperformed through the day on purchases from insurance companies and pension funds. However, they fell off highs after the auction result and before the likely release of the Oct-Dec indicative calendar for state borrowing, dealers said. With the supply likely to be concentrated in bonds maturing in 10 years or more, traders expect the gilt yield curve to steepen for the bonds maturing up to 15 years as short-term bonds may come in favour on bets on a rate cut in December, dealers said.

 

"There was some real-money demand in long bonds today, I think insurers and PFs (pension funds) were there," a dealer at a state-owned bank said. "But overall, people are seeing some steepening in the curve so its better to go for shorter tenures. But you see, short bonds have rallied since Wednesday, so today before the weekend there was some pause and trading was mostly range-bound." 

 

Menawhile, mutual funds likely picked up shorter tenure gilts Friday on hope of rate cuts by the RBI's rate-setting panel in the next policy meeting in December, dealers said. The higher supply of shorter-tenure gilts in Oct-Mar was mostly absorbed, dealers said. However, even as traders held on their positions on shorter-tenure bonds, foreign portfolio investors likely sold these gilts, they said.  

 

The turnover in the government bond market was INR 609.05 billion, sharply lower from INR 1.07 trillion Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Trade volume in the 10-year benchmark, usually the most traded bond in the market, was the most since Apr. 29. There were no trades using the wholesale digital rupee pilot for the seventh straight day Friday.

 

OUTLOOK

Gilts are not traded Saturdays. On Monday, government bond prices may take cues from the movement in US Treasury yields. 

 

On Friday after market hours, the RBI said states will borrow INR 2.82 trillion though bonds in Oct-Dec. This is lower than expectations of INR 3.2 trillion to INR 3.5 trillion, which could lead to a rise in longer tenure bonds Monday. However, with expectations of a steepening in the yield curve due to rate cut bets, more traders may prefer shorter tenure bonds, dealers said. 

 

Traders expect gilts to continue to rise after the RBI's Monetary Policy Committee opened up doors for a rate cut in the future. The 2035 bond yield is seen falling up to 6.40-6.45% levels, but traders will wait for the auction and the CPI inflation for September as the next trigger to take further cues, dealers said.  

 

Traders may also take cues from developments in India-US trade talks. Bond traders may also track the movement of crude oil prices. The movement in the rupee against the dollar and US Treasury yields could also lend cues to gilts, dealers said. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.45-6.60% on Monday.

 

	FRIDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.7150	6.5114%	98.6775	6.5166%
6.79%, 2034	101.5500	6.5592%	101.4800	6.5696%
6.01%, 2030	99.6000	6.1049%	99.5500	6.1170%
6.68%, 2040	98.8700	6.8010%	98.7500	6.8141%
6.90%, 2065	96.2800	7.1845%	95.9900	7.2075%

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India Gilts: Give up gains post auction result, state borrow calendar eyed

 

	1615 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.71	98.81	98.64	98.75	98.68
YTM (%)	6.5128	6.5007	6.5229	6.5078	6.5166

 

MUMBAI--1615 IST--Government bond prices gave up some gains as traders absorbed the fresh supply of a new 10-year gilt at the INR-320-billion weekly auction. Demand at the auction was robust, and the Reserve Bank of India set the coupon on the new bond at 6.48%, in line with traders' expectations, dealers said. The off-the-run 6.33%, 2035 bond gave up all gains after the auction result, while some long-term bonds were off highs on caution ahead of the expected Oct-Dec indicative borrowing calendar for states after market hours. 

 

As traders had expected, the new 10-year bond received aggressive bids from all sections of the market, dealers said. In the secondary market, the 6.48%, 2035 bond traded at INR 101.14, or 6.46% yield. This already drove the spread between the 6.33%, 2035 gilt over the newly issued bond to 5 basis points. The weighted average price at the auction suggested most participants had bid at 6.48%, and that the new bond had gone to state-owned banks rather than traders, leading to the rise in the bond's price in the secondary market, dealers said.

 

To pick up the new bond, some traders shed their holdings of the 6.33%, 2035 gilt, while others still preferred to hold onto it as the 6.48%, 2035 bond may take until mid-November or early December to become the most-traded, liquid and benchmark gilt, dealers said. They said the spreads between the two bonds might widen further in the coming days as traders pile into the new gilt. However, the 10-year benchmark 6.33%, 2035 bond found buyers as its yield climbed to 6.52%, limiting losses. 

 

Long-term bonds had outperformed through the day on purchases from insurance companies and pension funds. They fell off highs after the auction result and before the likely release of the Oct-Dec indicative calendar for state borrowing, dealers said. Traders expect states to announce a calendar between INR 3.2 trillion and INR 3.5 trillion. With the supply likely to be concentrated in bonds maturing in 10 years or more, traders expect the gilt yield curve to steepen for the bonds maturing up to 15 years as short-term bonds may come in favour on bets on a rate cut in December, dealers said.

The turnover in the gilts market was INR 517.15 billion, sharply lower than INR 922.40 billion at 1630 IST Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. India's financial markets were shut on Thursday for Gandhi Jayanti and Dussehra. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.48-6.55%. (Muskan Lodhi)

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India Gilts: Remain up; 6.33%, 2035 off highs after bidding at auction ends

 

	1205 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.70	98.81	98.69	98.75	98.68
YTM (%)	6.5136	6.5028	6.5146	6.5078	6.5166

 

MUMBAI--1205 IST--Government bond prices remained up but the 6.33%, 2035 gilt was off its high after bidding for the new 10-year bond at the auction ended at 1130 IST. Traders said demand for the new 2035 bond was firm at the weekly gilt auction. With the optimism around rate cuts following the Monetary Policy Committee decision Wednesday, bonds of all tenures rose, with some investors ramping up bets on larger capital gains by picking up long-term gilts, dealers said.

 

There was widespread demand for the new gilt at the auction despite it offering a lower return than other bonds maturing in 2034 and 2035. Traders across institutions want to get the new 2035 gilt into their portfolio as it will eventually become the benchmark paper, dealers said. Moreover, traders speculated that the Reserve Bank of India would announce measures to bring down gilt yields, including through open market purchases, after RBI Governor Sanjay Malhotra said it had contemplated ways to bring down yields. He also said the 10-year gilt yield should be lower, as part of monetary policy transmission.

 

"It's a new 10-year bond. Everybody in the market will want to get their hands on it, no matter what they're telling you," a dealer at a private-sector bank said. "The governor has gotten traders' spirits going."

 

Some traders were less enthusiastic about the auction sailing through without weighing on secondary market prices especially with the large INR 320-billion supply. Moreover, the bond would only take nearly two months to become well-traded or "liquid", based on the past experience of the Apr-Sept period, which had a similar pattern for auctions, dealers said. The median estimate in an Informist poll of 15 dealers saw the coupon on the new bond at 6.49%, with four estimates of 6.48% and a single estimate at 6.50%. Even if the coupon is in line with the expectations, traders may trim their holdings of other gilts after the result after piling onto the new bond, dealers said.

 

"One sentence (from the RBI) can only hold the market for so long. If truly everybody is so enthusiastic about the market now from a single policy, let them show it at auction," a dealer at a primary dealership said. "I am not convinced, and I don't feel the need to bid for myself (for proprietary trades)."

 

Meanwhile, bonds maturing in 30 to 50 years outperformed gilts of other maturities likely due to demand from mutual funds, dealers said. Traders were hoping the spread of the 30-year and above bonds over the 10-year gilt may contract as rate cut expectations ramp up. Moreover, with the significantly lower share of supply of long-term gilts in the Oct-Mar borrowing calendar, these bonds may see firmer bids than the 10-year gilt at auction, dealers said.

 

Turnover in the gilt market was INR 205.50 billion, lower than INR 358.85 billion at 1130 IST Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. India's financial markets were shut on Thursday for Gandhi Jayanti and Dussehra. During the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.48-6.55%. (Aaryan Khanna)

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India Gilts: Tad up on RBI Malhotra commentary; demand seen firm at auction

 

	1005 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.73	98.81	98.70	98.75	98.68
YTM (%)	6.5089	6.5060	6.5093	6.5078	6.5166

 

MUMBAI--1005 IST--Government bond prices were slightly higher after Reserve Bank of India Governor Sanjay Malhotra's commentary following the Monetary Policy Committee meeting Wednesday, dealers said. Demand at the auction to sell a new 10-year bond worth INR 320 billion is seen firm after Malhotra said the 10-year gilt yield should fall more.

 

Bond prices were buoyed by these comments, as well as with the MPC's statement that current macroeconomic conditions and the outlook for growth and inflation had opened up policy space for further supporting growth. This led to traders betting on a rate cut at the next MPC meeting in December, dealers said. State-owned banks are expected to bid aggressively for the new 2035 bond at the auction.

 

However, some traders were seen to be cautious about the demand in the auction of the new 10-year benchmark bond. In the special repo segment of the Clearcorp Repo Order Matching System, the volume of the 6.33%, 2035 gilt was INR 184.95 billion as at 1005 IST. The number of trades in a paper in the special repo segment of the Clearcorp Repo Order Matching System is a proxy for the short sales in that bond. 

 

"The demand in the auction might not be as firm, because the supply is really large and there are no shorts (short sales) to cover," a dealer at a private bank said. "The auction will go through, but the cut-off yield is expected to be on the higher side." Traders expect the coupon on the new 10-year bond to set at 6.48-6.50%.

 

The turnover in the gilt market was INR 71.55 billion, sharply higher than INR 27.55 billion at 0930 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 6.48-6.55%. (Janwee Prajapati)

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India Gilts:Seen up after MPC, RBI Malhotra signal; auction demand seen firm

 

MUMBAI – Government bond prices may extend gains from Wednesday on hopes the Reserve Bank of India's Monetary Policy Committee will cut rates at its December meeting and with a building up of positive sentiment from RBI Governor Sanjay Malhotra's remarks, dealers said. Demand for the new 10-year bond at its INR-320-billion auction at 1030-1130 IST is seen firm, though the 10-year benchmark 6.33%, 2035 bond may underperform gilts in other tenures ahead of the fresh supply.

 

The yield on the 6.33%, 2035 gilt is seen moving in a range of 6.45-6.54% during the day. On Wednesday, the bond ended at INR 98.68 or 6.52% yield, having its best day in over a month despite the auction coming up. Indian financial markets were shut Thursday for Dussehra and Gandhi Jayanti.

 

On Wednesday, the MPC held the policy repo rate at 5.50% but said room to further support growth by easing monetary policy had opened up. The committee said it was waiitng for the impact of its prior policy actions –the repo rate was reduced by 100 basis points between February and June – to play out and gauge the impact of global headwinds. External MPC members Nagesh Kumar and Ram Singh were of the view that the policy stance should be changed to 'accommodative' from the current stance of 'neutral', seen as an indicator they were keen to cut the repo rate.

 

Addressing the media in a post-policy conference, Malhotra said RBI feels the 10-year gilt yield should head downwards and had contemplated measures in that regard. This led to a spurt of both short covering and fresh purchases across tenures Wednesday, reversing earlier losses. Some traders said this indicated the central bank may restart open-market bond purchases soon, the first since May. Others rubbished the idea amid the durable liquidity surplus of nearly INR 5 trillion in the banking system, and the cash reserve cut for banks expected to add more until November end.

 

Primary dealers were the top net buyers on Wednesday, covering short bets, unusual before an auction. According to Clearing Corp. of India data, primary dealers net bought INR 33.68 billion worth of gilts in the secondary market Wednesday. They may shed some bonds in early trade to make room for the fresh stock at the auction. With a new bond coming up, traders said state-owned banks will likely bid aggressively to get the future benchmark gilt into their portfolios. The coupon for the new bond may be set at 6.48-6.50% at the auction, dealers said.

 

Separately, the central government Wednesday released INR 1.02 trillion to states as an extra tranche of share in taxes for October, the finance ministry said. The payment will be made by Oct. 10. This is seen bringing down the supply of state bonds at least in October. Traders await the borrowing calendar from states for Oct-Dec, likely to be released after market hours Friday, dealers said.  (Aaryan Khanna)

End

 

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

 

Edited by Deepshikha Bhardwaj

 

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