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Informist, Tuesday, Oct. 7, 2025

 

By Srijita Bose

 

MUMBAI – Government bond prices ended mixed Tuesday. Most gilts maturing in seven to 10 years ended higher while most longer tenure gilts gave up day's gains as traders sold them at a profit, dealers said. This was despite results of the state bond auction held early in the day being slightly better than expected, they said.

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.73, or a yield of 6.51%, against INR 98.67, or 6.52% yield, Monday. Trade volume of the newly issued 6.48%, 2035 bond surpassed that of the 10-year benchmark 6.33%, 2035 bond. Total trade volume of the 6.48%, 2035 bond was INR 188.95 billion compared with INR 181.35 billion of the outgoing benchmark paper, data from Clearing Corp. of India showed.

 

"It was mostly trading demand only. People want to stay in liquid segments so the punts in the new 10-year is bullish," a dealer at a primary dealership said. "Longer tenure are also not really seeing much real investor demand so trading profits are being taken."

 

Most longer tenure bonds gave up gains as traders booked profits after their yields fell Monday, dealers said. Moreover, supply at the gilt auction Friday is tilted towards the longer end of the yield curve, with INR 280 billion of the 6.68%, 2040 gilt and the 6.90%, 2065 gilt combined to be sold at the auction. This resulted in prices of the two bonds giving up gains. However, the overall supply of longer tenure gilts is lower in the second half of this financial year than in the first half, which is expected to keep these gilts from falling significantly. 

 

Demand at the state bond auction was firm. Banks and mutual funds picked up state bonds maturing in 11 years, while life insurers and pension funds preferred the longer tenure bonds. The cut-off yields on the state bonds were slightly lower, with that on Gujarat's eight-year paper set at 7.06%, slightly lower than the Informist poll's estimate of 7.08%. The smaller-than-expected supply of state bonds in the December quarter is expected to lower the spread on state bonds over gilts of similar maturities, some dealers said.

 

However, some expect states to borrow more in the second half than the first half of the year. In 2024-25 (Apr-Mar), states had borrowed INR 7.69 trillion in the second half, more than double the INR 3.33 trillion they had borrowed in the first half that year. Also, states have a tendency to borrow more than the amounts they indicate in their calendar. Traders did not aggressively pick up state bonds on these views.

 

Traders instead picked up gilts maturing in seven to 10 years as traders found yields attractive, they said. "There is scope of the belly (of 7-15 year bonds) to perform better right now, so I am going long there," a dealer at a state-owned bank said. "In the short end too there could eventually be some steepening but right now rate cut bets are too early to take and that segment has already seen the gains somewhat."

 

Foreign portfolio investors also likely bought gilts maturing in seven to 15 years on expectations of a rate cut by the Reserve Bank of India's Monetary Policy Committee. However, FPIs were likely selling some longer tenure gilts and extreme shorter tenure gilts, dealers said. At 1820 IST, data from Clearing Corp of India showed FPIs had sold INR 5.76 billion of gilts through the fully accessible route. A rise in yield on the 10-year US Treasury note to 4.17% during the day also turned FPIs cautious on fear that the yield may rise above 4.20%, dealers said.

 

Even as the yield curve is seen steepening at the shorter end due to rate cut expectations, rise in these gilts was limited. This was due to dearth of fresh domestic cues and a higher supply of shorter-tenure gilts in Oct-Mar. Some traders are still unsure about a rate cut by the Monetary Policy Committee in December and are waiting for domestic economic data and news of a trade deal with US to place bets, dealers said. 

 

Turnover in the gilt market was INR 626.10 billion, higher than INR 542.05 billion Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were four trades in the 6.33%, 2035 bond worth INR 400 million using the wholesale digital rupee pilot Tuesday, after a dry spell for eight sessions.

 

OUTLOOK

On Wednesday, government bond prices may take cues from the overnight movement in US Treasury yields. The movement in gilts across tenures may be divergent due to different supply pressures, dealers said.

 

While some dealers said the smaller-than-expected state bond borrowing in Oct-Dec could continue to push up prices of longer-tenure bonds, others said the INR 280 billion of auction of the 15- and 40-year benchmark gilts on Friday could limit their rise. Expectations of a steepening in the yield curve due to rate-cut bets could lead some traders to buy shorter tenure bonds, dealers said.

 

Traders expect gilts to continue to rise after the 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 scheduled Friday and the CPI inflation for September for further cues, dealers said.

 

Traders may also take cues from any developments in India-US trade talks. Bond traders may also track the movement of crude oil prices. The movement of 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 Wednesday.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.7250	6.5101%	98.6650	6.5186%
6.79%, 2034	101.5475	6.5595%	101.4900	6.5681%
6.01%, 2030	99.5750	6.1111%	99.5500	6.1171%
6.68%, 2040	98.8400	6.8043%	98.8400	6.8043%
6.90%, 2065	96.3300	7.1806%	96.4200	7.1735%

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India Gilts: Longer tenure bonds give up gains on profit booking

 

	1609 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.76	98.79	98.68	98.69	98.67
YTM (%)	6.5047	6.5008	6.5173	6.5158	6.5186

 

MUMBAI--1609 IST--Government bonds gave up some gains as traders booked profits despite results at the state bond being slighty better than expected. Foreign portfolio investors as well as traders likely sold gilts after prices rose in early trade, dealers said.

 

"Its mostly trading volumes, there are no triggers but since in the morning prices rose, so traders are booking profits at these levels," a dealer at a state-owned bank said. "I am still going long because from here there should be more positive news, but the caution is also there so until a fresh domestic trigger comes, we are not seeing much real money investments."

 

Most longer tenure bonds gave up gains as traders booked profits after the yields on these bonds fell Monday, dealers said. The supply of INR 280 billion tilted towards the longer end of the yield curve limited gains the auction papers 6.68%, 2040 gilt and the 6.90%, 2065 gilt, they said. However, the overall supply of longer tenure gilts reduced in the second half of the financial year is expected to keep these gilts from falling significantly. 

 

The cut-off yields on the state bonds were slightly lower due to firm demand in the auction by banks in the eight-year segment, whereas life insurers and pension funds preferred the longer tenure state bonds. The firm demand at the auction was backed by low supply of state bonds in the current quarter. The cut-off on Gujarat's eight-year paper was set at 7.06%, slightly lower than the Informist poll's estimate of 7.08%.

 

The turnover in the gilts market was INR 562.65 billion at 1609 IST, higher than INR 491.30 billion at 1635 IST Monday, 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 6.48-6.55%. (Janwee Prajapati and Srijita Bose)

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India Gilts: Ten-year and more bonds up on strong state bond auction demand

 

	1253 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.75	98.79	98.68	98.69	98.67
YTM (%)	6.5065	6.5008	6.5173	6.5158	6.5186

 

MUMBAI--1253 IST--Government bond prices remained up. Gilts maturing in 10 years and above were up more as traders expected strong demand at the state bond auction, dealers said. Some also picked up in gilts maturing in seven to eight years as traders found yields attractive, they said. 

 

"There is money to be made in the belly, its looking really good right now," a dealer at another private sector bank said. Foreign porfolio investors also likely bought gilts maturing in seven to 15 years on expectations of a rate cut by the Reserve Bank of India's Monetary Policy Committee. At 1249 IST, data from Clearing Corp of India showed FPIs bought INR 10.21 billion through the fully accessible route.

 

Demand at the INR 94.10 billion state bond auction was firm, with demand seen across market participants, dealers said. The cut-off yield on Gujarat's eight-year bond is seen at 7.08%, according to the median of estimates of bond dealers polled by Informist. Banks and mutual funds also traded state bonds in the secondary market with INR 30.5 billion worth of traded so far both on screen and over the counter, data from Clearing Corp. of India showed. Traders expect yields on state bonds to compress to 30-40 basis points over the respective gilts and found current spreads attractive to buy state bonds, deaers said. At the state government bond auction on Sept. 30, the cut-off yield on Tamil Nadu's 10-year re-issue bond was 7.27%, a spread of 70 basis points over the 10-year benchmark 6.33%, 2035 bond issued by the Centre.

 

"The sentiment is positive and untill there is some negative news yields will see a downward trend," a dealer at a private sector bank said. "The smaller state bond calendar is still playing in the market. There was good demand at the auction and yield spreads should compress."

 

Provident funds and banks also picked up gilts in the secondary market, dealers said. Traders expect yield spreads of longer tenure gilts over the 10-year benchmark gilt to narrow due to the lower supply in the segment in the second half of the current financial year, they said. Traders also picked up these gilts to capture the higher price appreciation compared to shorter tenures on hopes of domestic rate cuts, dealers said. However, other traders likely booked profits on longer tenure bonds, limiting the rise in prices, they said. 

 

Meanwhile, shorter tenure bonds underperfomed other tenures even as the yield curve is seen steepening at the shorter end as traders price in the rate cut expectations. However, due to dearth of fresh domestic cues and a higher supply of shorter-tenure gilts in Oct-Mar, the rise in gilts maturing in five years was limited, dealers said. 

 

At 1230 IST, the turnover in the gilt market was INR 262.90 billion, slightly lower than INR 274.60 billion at the same time Monday, 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%.  (Srijita Bose)

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India Gilts: Up as traders await state bond auction result; demand seen firm

 

	0913 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.73	98.73	98.68	98.69	98.67
YTM (%)	6.5094	6.5094	6.5173	6.5158	6.5186

 

MUMBAI--0913 IST--Government bond prices were up as traders await cues from the result of the state bond auction later in the day. Five states are set to borrow INR 94.10 billion Tuesday. The lower-than-expected size of the state borrowing calendar for the current quarter supported bond prices across tenures.

 

Traders expect the spread between the 10-year benchmark gilt and state government bonds of similar maturity to contract as the fear of supply pressure from state government bonds has subsided after the announcement of the calendar. Demand is likely to be firm at the weekly state bond auction Tuesday. Banks are likely to buy the 8-year to 10-year state government paper, whereas longer-tenure bonds are likely to be favoured by mutual funds, pension funds, and life insurers.  

 

The 6.33%, 2035 bond price is likely to face some pressure on account of the increased supply in this segment. Further, demand for the 10-benhcmark bond is expected to decline gradually as traders are likely to shift to the new 6.48%, 2035 bond as the spread between these two contracts. Mutual funds are likely to shift to gilts from state bonds if the spread between the state government bonds and gilts contracts as yields on state bonds fall. 

 

Foreign banks and foreign portfolio investors are likely to take cues from the movement of US treasury yields as the yield differential between US and India is contracting. However, expectations of US policy rate cuts may attract foreign investors to buy Indian government bonds on expectations of a higher yield differential after the US rate cut. Trade volumes are likely to remain thin. 

 

At 1016 IST, the turnover in the gilt market was INR 134.75 billion, lower than INR 189.30 billion at the same time Monday, 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 steady; may take cues from results of state bond auction

 

MUMBAI – Government bond prices may open steady and take cues from the results of the state bond auction at 1030-1130 IST, dealers said. The movement in gilts across tenures may diverge due to different supply pressures, they said.

 

The yield on the 6.33%, 2035 gilt is seen moving in a range of 6.45-6.60% during the day. On Monday, the 2035 gilt ended at INR 98.67 or 6.52% yield. Traders may continue to shift to the newly issued 10-year 6.48%, 2035 gilt which could keep prices on the benchmark 6.33%, 2035 bond under pressure, dealers said. 

The smaller-than-expected state bond borrowing calendar for Oct-Dec could continue to push up prices on longer-tenure bonds, dealers said. Five states are set to borrow INR 94.10 billion Tuesday.

 

Some dealers were of the view gilts maturing in up to 10 years could move in a thin range due to lack of fresh domestic triggers. However, others said that these bonds could trade lower tracking the rise in US yields. The 10-year benchmark US yields rose to 4.16% and traders fear that the uncertainty in the US due to government shutdown could lead the US yield to rise above 4.20%. 

 

Traders may also place bets on a rate cut by the Reserve Bank of India's Monetary Policy Committee and that of steepening yield curve, dealers said. However, most traders may wait for further triggers to take bets on the same, they said.  (Srijita Bose)

End

 

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

 

Edited by Ashish Shirke

 

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