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Informist, Monday, Oct. 6, 2025

 

By Srijita Bose

 

MUMBAI – Government bond prices ended mixed Monday. Longer tenure bonds ended higher due to the lower-than-expected indicative borrowing calendar of state bonds for the December quarter, dealers said. However, a rise in US Treasury yields and traders shifting to long-term bonds led gilts maturing in up to 10 years to erase gains and end lower than the previous close, they said.

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.67, or a yield of 6.52%, against INR 98.72, or 6.51% yield, Friday. The 10-year benchmark gilt traded higher in early trade. However, the outgoing benchmark gilt yield could not fall below the 6.49% level due to traders switching to the newly issued 6.48%, 2035 bond, and the bond gave up gains later in the day, dealers said. Meanwhile, trade volume on the 6.48%, 2035 bond picked up, with the bond being the second most traded gilt with INR 109.65 billion worth of trades on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform.

 

"State borrowing came lower so that was a positive," a dealer at a private sector bank said. "But the 10-year (6.33%, 2035 bond) did not break INR 98.84 on the upside and it has been rallying since Wednesday, so the interest was not much there and was a little given in towards the end," a dealer at a private sector bank said.

 

Foreign portfolio investors sold shorter-tenure bonds Monday as US yields rose. The uncertainty surrounding the US Federal Open Market Committee's potential rate cut in October, combined with the delayed key economic reports due to the US government shutdown, also deterred investors from picking Indian bonds, dealers said. The 10-year benchmark US yield rose to 4.16% from 4.09% at 1700 IST. FPIs sold INR 16.80 billion worth of gilts through the fully accessible route, data from Clearing Corp. of India showed.

 

Meanwhile, gilts maturing in 30-40 years rose Monday. These gilts were up more in early trade as states are pegged to borrow INR 2.8 trillion of bonds in the current quarter, sharply lower than a median of INR 3.3 trillion worth of borrowing expected by traders. Traders picked up longer-tenure gilts to capture the possible price appreciation, dealers said. Some insurers and pension funds also purchased longer-term bonds, they said. However, with a supply of INR 280 billion in the 15- and 40-year tenures on Friday, gains in these two bonds were erased, dealers said. State-owned banks likely sold gilts to book profits, dealers said. 

 

 

Five states are set to borrow INR 94.10 billion Tuesday. Traders expect the spread between the 10-benchmark bond and the state bonds of similar maturity to contract after the Reserve Bank of India Governor Sanjay Malhotra's comments that yields ought to be lower. The cut-off yield on the state bonds Tuesday is expected to be lower, which will narrow their spread over gilts. Monday, around INR 27 billion of state bonds were traded in the secondary market as banks and some mutual funds picked up these gilts at attractive spreads over gilt yields, dealers said.

 

However, some dealers were cautious as states have a tendency to overshoot their borrowing needs over the indicative borrowing plan. "I think overall the calendar was positive, but the smaller amount of borrowing in October (through state bonds) was partly due to the Centre's devolution to states," a dealer at a state owned bank said. "Overall there will still be some supply pressure going forward so I won't want to frontload much of it right now."

 

The possibility of a rate cut at the December monetary policy meeting will largely depend on the result of the ongoing trade deal negotiations between India and the US and the overall geopolitical situation, dealers said. However, how domestic GDP growth shapes up in the September quarter and beyond is expected to form the basis for the interest rate cut. The yield curve is seen steepening at the shorter end as traders price in the rate cut expectation. Higher supply of shorter-tenure gilts weighed on bond prices, especially those maturing in five years, dealers said.

 

The turnover in the government bond market was INR 544.30 billion, lower from INR 603.90 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 eighth straight day Monday.

 

OUTLOOK

On Tuesday, government bond prices may take cues from the overnight movement in US Treasury yields at open. Gilts may take cues from the results of the state bond auction later in the day, dealers said. Five states are set to borrow INR 94.10 billion Tuesday.

 

The smaller-than-expected state bond borrowing could continue to push up prices on longer-tenure bonds, dealers said. 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 Tuesday.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.6650	6.5186%	98.7150	6.5114%
6.79%, 2034	101.4900	6.5681%	101.5500	6.5592%
6.01%, 2030	99.5500	6.1171%	99.6000	6.1049%
6.68%, 2040	98.8400	6.8043%	98.8700	6.8010%
6.90%, 2065	96.4200	7.1735%	96.2800	7.1845%

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India Gilts: Mixed; up to 10-yr erase gains, traders switch to long bonds

 

	1543 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.69	98.84	98.65	98.84	98.72
YTM (%)	6.5151	6.4936	6.5208	6.4936	6.5114

 

MUMBAI--1543 IST--Government bonds were mixed. While most longer tenure bonds remained up owing to the lower-than-expected indicative borrowing calendar of state bonds for the December quarter, gilts maturing in up to 10 years traded in a thin range after giving up most gains as traders switched to longer tenure gilts, dealers said. A rise in US Treasury yields also led gilts to erase gains, they said. 

 

"People are seeing that the belly still has a fair rise left, so they are shifting there," a dealer at a private sector bank said. "There is also scope for the 30-40 year papers to see a fall (in yields)."

 

Traders sold some positions in the shorter tenure bonds while picking up longer tenure gilts to capture the possible price appreciation, dealers said. Insurers and pension funds also purchased longer-term bonds, they said. However, with a supply of INR 280 billion in the 15- and 40-year tenures on Friday, some gains in these two bonds were erased, dealers said. 

 

Traders were also picking up the newly issued 6.48%, 2035 bond while selling the outgoing 10-year benchmark 6.33%, 2035 bond, dealers said. The 6.48%, 2035 bond was the second most traded gilt with INR 76 billion worth of trades on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform.

 

Foreign portfolio investors sold shorter-tenure bonds Monday as US yields rose. The uncertainty surrounding the US Federal Open Market Committee's potential rate cut in October, combined with the delayed key economic reports due to the US government shutdown, also deterred investors from aggressively picking Indian bonds, dealers said. The 10-year benchmark US yield rose to 4.16% from 4.09% at 1700 IST. 

 

At 1543 IST, turnover in the gilt market was INR 455.35 billion, lower than INR 463.30 billion at 1530 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 6.45-6.55%. (Srijita Bose) 

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India Gilts: Remain up on lower state bond supply; PSUs book profit 

 

	1320 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.76	98.84	98.73	98.84	98.72
YTM (%)	6.5054	6.4936	6.5097	6.4936	6.5114

 

MUMBAI--1320 IST--Government bond prices remained higher due to the lower-than-expected supply of state bonds for the current quarter. Bond prices erased some gains as state-owned banks booked profits at around 6.50% yield, dealers said. Traders expect yields to rise following the increase in US Treasury yields. 

 

Five states are set to borrow INR 94.10 billion Tuesday. Traders expect the spread between the 10-benchmark bond and the state bonds of similar maturity to contract after the Reserve Bank of India Governor Sanjay Malhotra's comments that yields ought to be lower. The cut-off yield on the state bonds Tuesday is expected to be lower, which will narrow their spread over gilts. The borrowing calendar released Friday after market hours showed states plan to issue INR 2.8 trillion of bonds in the current quarter, lower than the INR 3.5 trillion that was expected to be issued.   

 

The possibility of a rate cut at the December monetary policy meeting will largely depend on the result of the ongoing trade deal negotiations between India and the US and the overall geopolitical situation, dealers said. However, how domestic GDP growth shapes up in the September quarter and beyond is expected to form the basis for the interest rate cut. The yield curve is seen steepening at the shorter end as traders price in the rate cut expectation. Higher supply of shorter tenure gilts will weigh on bond prices and will likely cap gains.

 

Traders are likely to gradually add the new 6.48%, 2035 bond to their portfolio as the spread between the 10-year benchmark bond and the new 6.48%, 2035 bond narrows. "After a few auctions, the new 10-year will become the most liquid paper on holding bias, and traders will start picking the 6.48%, 2035 actively," a dealer at a primary dealership said. 

 

At 1321 IST, turnover in the gilt market was INR 331.30 billion, higher than INR 243.90 billion at the same time 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 6.45-6.55%. (Janwee Prajapati)

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India Gilts: Prices rise on lower state bond supply, gilt curve may steepen

 

	0949 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.78	98.84	98.76	98.84	98.72
YTM (%)	6.5022	6.4936	6.5050	6.4936	6.5114

 

India Gilts: Prices rise on lower state bond supply, gilt curve may steepen

 

MUMBAI--0949 IST--Government bond prices rose across tenures on account of lower than expected supply of state bonds in the Oct-Dec quarter, dealers said. The rise was supported by reduction in the share of longer-tenure bonds in the Oct-Mar borrowing calendar and traders' expectations of easing of interest rates at the December Monetary Policy Committee meeting. The borrowing calendar released Friday after market hours showed states plan to issue INR 2.8 trillion of bonds in the current quarter, against INR 3.5 trillion they were expected to issue.   

 

The 6.33%, 2035 benchmark bond is likely to see some sales as traders may shift to the new 6.48%, 2035 bond. Traders prefer the benchmark bond as it remains the most liquid paper. State-owned banks were seen adding the benchmark paper to their held-t-maturity books.

 

"Lower state borrowing is a good news for the market, and with rate cut expectations there is a further scope for fall in yields," a dealer at a primary dealership said. "I think right now, 15-year looks like a good buy, it is giving you a good carry."

 

Traders prefer longer-tenure bonds as life insurers and pension funds were seen buying these papers. The yield curve is expected to steepen at the shorter end as traders expect a rate cut at the next Monetary Policy Committee meeting scheduled in December. However, the higher share of shorter-tenure bonds will keep the gains capped. Government bond prices had recovered losses across tenures after Reserve Bank of India Governor Sanjay Malhotra's comments following the Monetary Policy Committee meeting Wednesday.

 

At 1016 IST, the turnover in the gilt market was INR 181.20 billion, sharply higher than INR 117.50 billion at the same time 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 6.45-6.55%. (Janwee Prajapati)

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India Gilts: Seen up after smaller-than-view Q3 state bond supply

 

MUMBAI – Government bond prices may open higher after a smaller-than-expected supply of state bonds in Oct-Dec, dealers said. The rise in prices may, however, be limited due to the rise in US Treasury yields, they said. 

 

The yield on the 6.33%, 2035 gilt is seen moving in a range of 6.45-6.55% during the day. On Friday, the 2035 gilt ended at INR 98.72 or 6.51% yield. The new 10-year 6.48%, 2035 bond may be continued to be picked up by traders after a strong demand at auction Friday, dealers said. 

 

On Friday after market hours, the Reserve Bank of India said states would borrow INR 2.82 trillion through bonds in Oct-Dec. This was much lower than the expectation of INR 3.2 trillion to INR 3.5 trillion, which could lead to a rise in longer-tenure bonds Monday. Lower supply of state bonds combined with a lower supply of longer tenure gilts in the Oct-Mar calendar could lead traders to ramp up positions in longer tenure bonds Monday, dealers said. Traders may also pick up these bonds to capture the price gain as expectations of rate cuts by the RBI's Monetary Policy Committee has also gained ground, they said.

 

Shorter tenure bonds may also rise with expectations of a steepening in the yield curve due to rate cut bets, dealers said. However, concern of a higher supply in these bonds in Oct-Mar, though broadly played out, could limit the rise in prices, they said. 

 

The 10-year US Treasury yield rose to 4.14% at 0824 IST from 4.09% at 1700 IST on Friday. US government shutdown delayed key economic reports Friday and left investors wondering how the US Federal Reserve would evaluate the health of the labour market. The uncertainty may deter foreign portfolio investors from buying gilts aggressively, dealers said.  (Srijita Bose)

End

 

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

 

Edited by Deepshikha Bhardwaj

 

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