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Informist, Wednesday, Oct. 8, 2025

 

By Srijita Bose

 

MUMBAI – Most government bonds ended off the day's highs Wednesday as traders booked profits due to lack of fresh domestic triggers. Bonds had risen during the day tracking a fall in US Treasury yields and as state-owned banks bought, dealers said.

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.78, or a yield of 6.50%, against INR 98.73, or 6.51% yield, Tuesday. Traders booked profits after the yield on the 10-year benchmark fell slightly below 6.49%, dealers said.

 

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 about India-US trade deal to place bets, dealers said. The CPI inflation print for September, which will be detailed Monday, will be the next cue for the market, they said.

 

"Most people are just playing in a trading market and taking intraday bets because there is still some uncertainty on whether a rate cut will come," a dealer at a private-sector bank said. "There is also the (weekly) auction, so people don't want to go very aggressive at these levels but the fall in US yields was somewhat playing today." 

 

Some foreign portfolio investors likely bought shorter tenure gilts as they found their yields attractive and as the 10-year US Treasury yield fell to 4.10% from 4.18% at 1700 IST Tuesday, dealers said. As at 1739 IST, data from Clearing Corp. of India showed FPIs bought INR 10.61 billion worth of gilts through the fully accessible route.

 

"Some offshore guys today were buying the short end of the curve while also receiving (fixed rates) in OIS (overnight indexed swap rates)," a dealer at another private sector bank said. "The extreme short end is performing well considering there are expectations of rate cut and the (duration) risk is also lower."

 

Gilts maturing within five years rose as some mutual funds and banks bought as they chose to lower the duration risk while betting on a rate cut by the Reserve Bank of India's rate-setting panel in December, dealers said. Comfortable liquidity surplus in the banking system owing to cuts in the cash reserve ratio announced by the RBI in August, which will bring the CRR down to 3.0% also led banks to invest in shorter tenure gilts, dealers said. Meanwhile, higher supply of the five-year bond in the second half of the financial year limited the rise in bond prices, they said. Some traders also preferred to buy gilts maturing in seven to 15 years as they found their yields attractive on the possibility of future rate cuts. 

 

Most longer-tenure bonds gave up gains as traders booked profits after they rose early in the day, dealers said. Gilts also gave up gains as 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. Meanwhile, some pension funds likely picked up longer tenure bonds in the secondary market, dealers said.

 

Turnover in the gilt market was INR 600.20 billion, slightly lower than INR 625.25 billion Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades Wednesday using the wholesale digital rupee pilot. On Tuesday, there were four trades in the 6.33%, 2035 bond worth INR 400 million using the same method.

 

OUTLOOK

On Thursday, government bonds may take cues from the overnight movement in US Treasury yields. The movement across tenures may be mixed due to different supply pressures, dealers said.

 

US yields could take cues from the minutes of the Federal Open Market Committee's meeting in September, which in turn could lend triggers to domestic gilts Thursday, 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 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%.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.7750	6.5030%	98.7250	6.5101%
6.79%, 2034	101.6175	6.5491%	101.5475	6.5595%
6.01%, 2030	99.5875	6.1080%	99.5750	6.1111%
6.68%, 2040	98.8800	6.8000%	98.8400	6.8043%
6.90%, 2065	96.4900	7.1680%	96.3300	7.1806%

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India Gilts: Erase gains as traders book profits, no fresh domestic cues

 

	1620 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.76	98.87	98.72	98.78	98.73
YTM (%)	6.5055	6.4894	6.5109	6.5023	6.5101

 

MUMBAI--1620 IST--Prices of most government bonds gave up gains as traders sold at a profit, dealers said. Lack of fresh domestic triggers led traders to book intraday profits after the yield on the 10-year benchmark fell slightly below 6.49% levels, they said. 

 

"The sentiment is positive but unless there is more clarity on the rate front, people don't see the 6.42-6.43% levels break (on the newly issued 10-year 6.48%, 2035 bond), and today (Wednesday) it fell to 6.43%, so traders booked profits," a dealer at a primary dealership said. "That is what triggered the move in other tenures also...a similar movement we have seen in the past two sessions." 

 

Some traders are still unsure about a rate cut by the Monetary Policy Committee in December and are waiting for domestic economic data and developments over a trade deal between India and the US to place bets, dealers said. The CPI inflation print for September, to be released on Monday, will be the next cue for the market, they said. However, some foreign portfolio investors also likely bought gilts maturing in seven to 10 years on expectations of a rate cut by the Reserve Bank of India's rate-setting panel and as the 10-year US treasury yield fell to 4.11% from 4.18% at 1700 IST Tuesday.

 

Most longer-tenure bonds gave up gains as traders booked profits after the rise in early trade, dealers said. Some pension funds likely picked up longer tenure bonds in the secondary market in early trade, dealers said. However, 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.

 

At 1620 IST, the turnover in the gilt market was INR 540.45 billion, lower than INR 582.95 billion at 1630 IST Tuesday, 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%.  (Srijita Bose)

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India Gilts: Remain up on buying by state-owned banks; sentiment positive

 

	1330 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.82	98.87	98.77	98.78	98.73
YTM (%)	6.4966	6.4894	6.5045	6.5023	6.5101

 

MUMBAI--1330 IST--Government bond prices remained higher as state-owned banks bought the 10-year government bond at 6.50% yield, dealers said. The 8-year to 10-year state government paper was the most favoured tenure due to ample liquidity. The expectation of a rate cut at the next monetary policy meeting is likely to steepen the bond yield curve.

 

The lower-than-expected supply of state bonds in the current quarter supported government bond prices, as dealers expect the supply of state government bonds in the current quarter to be as per the borrowing calendar. Traders shifted to gilts from state bonds following a contraction in the spread between state-owned bonds and government bonds. "The spread will only see compression from here on (in the current quarter) as the supply pressure (of state-owned bonds) has reduced," a dealer at a private bank said.

 

Longer-tenure bonds outperformed their shorter-tenure counterparts as state-owned banks picked up longer-tenure gilts for their held-to-maturity books before the weekly gilts auction Friday. Prices of bonds across tenures were supported due to overall positive sentiment in the market after Reserve Bank of India Governor Sanjay Malhotra's comments last week that yields ought to be lower, a reduction in the share of longer-tenure bonds in the Oct-Mar borrowing calendar for gilts, and the lower supply of state government bonds.

 

Foreign banks and foreign portfolio investors are likely to pick up Indian government bonds as a fall in US treasury yields led to a widening of the yield differential between the safe-haven asset and emerging market bonds. However, the trade volume is likely to remain thin. The Indian bond market is expected to take cues from US treasury yields if there is any significant movement in US treasury yields, as traders fear that the uncertainty in the US due to the government shutdown could lead to a rise in US yields.

 

At 1330 IST, the turnover in the gilt market was INR 388.70 billion, higher than INR 327.90 billion at the same time Tuesday, 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: Up on fall in US treasury yields; lacks fresh cues

 

	0937 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.80	98.82	98.77	98.78	98.73
YTM (%)	6.5002	6.4966	6.5045	6.5023	6.5101

 

MUMBAI--0937 IST--Government bond prices rose Wednesday on account of a fall in US treasury yields, dealers said. However, traders expect these price gains to remain limited as the market lacks fresh domestic cues. 

 

Overall, the market sentiment remains positive due to lower supply of state bonds and traders' expectations of an interest rate cut at the December Monetary Policy Committee meeting. "The sentiment is positive and right now the trigger is fall in US yields," a dealer at a private sector bank said. "But the movement will be range-bound only until it breaks (above) INR 100.35 on the 10-year (newly issued 6.48%, 2035 bond) or sees more receiving in OIS (overnight indexed swap rates)."

 

The 6.33%, 2035 bond is likely to face some pressure later in the day as some traders are expected to sell this bond and move to the 6.48%, 2035, the new 10-year benchmark. Further, demand for the current 10-benhcmark bond is also expected to decline gradually as traders are likely to prefer the new 6.48%, 2035 bond as the spread between these two contracts. 

 

Foreign banks and foreign portfolio investors are likely to pick up Indian government bonds as a fall in US treasury yields led to a widening of the yield differential between the safe-haven asset and the emerging market bonds. Further, expectations of US interest rate cuts is likely to attract foreign investors to buy Indian government bonds on expectations of a higher yield differential after the US rate cut.

 

Some traders expect a rate cut after the RBI's Monetary Policy Committee meeting in December which will likely steepen the bond yield curve. However, the higher supply of shorter tenure bonds will likely limit gains. The lower supply of longer-tenure bonds in the Oct-Dec quarter has supported prices of these bonds, which led to traders booking profits after the yields on these bonds fell. The movement in gilts across tenures may be divergent due to different supply pressures.

 

The turnover in the gilt market was INR 73.15 billion at 0930 IST, sharply higher than INR 34.10 billion at the same time Tuesday, 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 as US ylds fall, traders await fresh domestic triggers

 

MUMBAI – Government bond prices may rise Wednesday tracking the overnight fall in US Treasury yields, dealers said. However, traders will await for fresh domestic triggers which could cap gains, 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 Tuesday, the 2035 gilt ended at INR 98.73 or 6.51% yield. The movement in gilts across tenures may be divergent due to different supply pressures, they said. 

 

On Tuesday, trade volumes on the newly issued 6.48%, 2035 bond overtook that on the 10-year benchmark gilt 6.33%, 2035 bond. Traders may continue to shift to the new 10-year gilt Wednesday, dealers said. The new bond is expected to take over as the benchmark gilt after the next auction of the bond in November. 

 

Yield on the 10-year US Treasury note fell to 4.13% at 0827 IST, from 4.18% at 1700 IST Tuesday. Foreign portfolio investors could pick up Indian bonds due to the slight fall in US yields but the buys are not seen aggressive, 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 auction of the 6.68 40 bond and 6.90%, 2065 gilt cumulatively on Friday could limit their rise.

 

Expectation 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 Reserve Bank of India's Monetary Policy Committee opened the door to the possibility of 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 clarity on domestic economic data and any deal with the US on trade to take further cues, dealers 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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