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Informist, Thursday, Oct. 16, 2025

By Cassandra Carvalho

MUMBAI –  Prices of government bonds ended sharply lower Thursday as traders made room for fresh supply at the INR 300-billion gilts auction Friday. Traders took profits after the rise in prices Wednesday, dealers said. Sentiment soured slightly after the minutes of the Reserve Bank of India's Monetary Policy Committee's Sept. 29-Oct. 1 meeting failed to cement bets of a rate cut in December, dealers said. The disparity among the members' views weighed on the sentiment. Indications of India and the US nearing a trade deal also added to the fall in prices, since tariffs on Indian exports to the US had accelerated bets of a rate cut owing to the likely hit on GDP growth, dealers said. 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.80, or a yield of 6.50%, as against INR 98.94, or 6.48% yield, Wednesday. The 6.50% yield on the 10-year benchmark bond is the 200-day moving average, and a key technical level, dealers said. If the yield breaks this level, it can hit 6.53% on the upside and 6.48% on the downside. The 6.48%, 2035 bond ended at INR 100.29, or a yield of 6.44%, against INR 100.43 or 6.42% Wednesday. Ahead of its INR 180-billion supply at Friday's auction, the 6.01%, 2030 bond ended at INR 99.46, down 13 paise from Wednesday's close.

The government will also sell INR 120 billion of the 7.09%, 2074 bond Friday. However, the bond ended at INR 98.90, off the day's low of INR 98.75. Investor demand for the paper is expected to be robust at the auction, with some demand for forward-rate agreements. A dealer estimated around INR 15 billion worth of purchases at the auction for these agreements, though others said the number could be higher. Demand for both bonds at the auction is seen to be firm.

"There's just some profit-booking because we have auction tomorrow, there's nothing else," a dealer at a state-owned bank said. "PSUs (public-sector banks) will be on the selling side only... Structurally, it's bullish (seeing a downward move in yields) only, we're seeing 6.40% on the old 10-year (6.33%, 2035 bond) in the medium term."

The minutes of the rate-setting panel's meeting, which were released after market hours Wednesday, left several traders disappointed because the members' comments did not seem to suggest any certainty on a rate cut in December. Traders were largely expecting all six members of the panel to indicate a neutral tone on policy easing with a tilt towards a rate cut. However, external member Saugata Bhattacharya said "a moderation in the inflation rate is not a compelling reason, at this point, to cut the policy rate".

Some traders said comments by RBI Deputy Governor Poonam Gupta also indicated a harsher stance on policy easing. Others said the minutes were on expected lines and the comments of Governor Sanjay Malhotra hinted at a rate cut in December. The other two external members, Ram Singh and Nagesh Kumar, highlighted that the case for cutting rates had strengthened since the August policy meeting. They also favoured changing the policy stance to "accommodative" from "neutral".

"I think the MPC minutes were fine, but market was much more bullish in terms of expectations of a definite cut at the upcoming policy meeting, which didn't happen, so there was some profit-booking," a dealer at a private-sector bank said. "There are also chances of a good trade deal between India and the US, which would reduce the possibility of a cut, so that (too) played out."

US President Donald Trump said Prime Minister Narendra Modi had assured him that India would cease to buy oil from Russia. "Modi is a great man, he loves Trump," Trump told reporters at an event at the White House Wednesday. "He has assured me there will be no oil purchased from Russia." Bets on a trade deal between the two countries were ramped up after the remark, which in turn reduced bets of a rate cut in December. A rise in overnight indexed swap rates also weighed on bond prices, dealers said. The five-year swap rate ended at 5.63%, up 4 bps from Wednesday's close.

The rupee appreciated after Trump's comment, bringing foreign inflows into gilts, dealers said. The rupee was 87.820 per dollar at 1530 IST from 88.075 per dollar at the same time Wednesday. As of 1800 IST Thursday, foreign portfolio investors had net purchased gilts worth INR 6.16 billion through the fully accessible route, according to data from Clearing Corp. of India. Foreign holdings in gilts through the fully accessible route are at a record high of INR 3.09 trillion, and traders expect this number to rise if a trade deal is secured. The yield on the 10-year US Treasury note is being closely tracked by traders as it hovers around the psychologically crucial 4% mark. A fall in US yields widens the interest rate differential between safe-haven assets and emerging market debt, making the latter more appealing to foreign investors.

The 6.68%, 2040 gilt was the second most traded paper on the RBI's Negotiated Dealing System-Order Matching platform. Despite a fall in its price, traders see the paper as lucrative to hold for the price appreciation per basis point value. Some traders also see the bond's yield spread over the 10-year benchmark bond compressing by 4-5 bps.

Trade volumes were low as traders awaited the gilts auction, along with fresh triggers on rates. Traders expect volatility in the gilts market to cool until further triggers such as the GDP growth estimate for Jul-Sept or an India-US trade deal.

Turnover in the gilts market was INR 441.80 billion, sharply down from INR 900.05 billion Wednesday, according to data on the RBI's NDS-OM platform. There were no trades using the RBI's wholesale e-rupee pilot for the second straight day Thursday.

OUTLOOK

Friday, government bonds may open steady ahead of the weekly gilts auction. Bond prices will track the results of the auction later in the day. The overnight movement of US Treasury yields and the movement of the rupee against the dollar will also lend cues to gilts. Geopolitical developments, especially developments on an India-US trade deal, will also be closely tracked. If a trade deal is announced, the appreciation of the rupee against the dollar will be positive for gilts in the short term, but in the longer run, traders will unwind bets of a rate cut and bond prices could slump, dealers said.   

Crude oil price movements may also influence the movement of gilts Friday. The 10-year benchmark bond yield is seen falling to 6.40% before the next policy review in December, dealers said. The yield on the 10-year benchmark 6.33%, 2035 bond on the day is seen at 6.45-6.55%.

India Gilts: Remain down; long-term bonds recover some losses

NEW DELHI--1625 IST--Government bond prices remained down and moved in a narrow band with few fresh cues intraday. The 50-year benchmark 7.09%, 2074 gilt recovered some losses in spite of its upcoming supply as traders anticipated firm demand for the long-term gilt from pension funds and life insurers, dealers said.

"Some buying has come in the longer tenures, they have recovered a little," a dealer at a private-sector bank said. "The volumes are really down today (Thursday) as people don't know what to expect next and where to position." At 1610 IST, turnover in the gilts market was INR 361.70 billion, down sharply from INR 826.45 billion at 1630 IST Wednesday, according to data on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform.

As prices of long-term bonds fell earlier in the day, some traders were of the view that the 40- and 50-year bonds were lucrative purchases while short-selling the most-liquid 6.33%, 2035 bond, dealers said. Moreover, with the state bond auction this week getting good bids and being significantly smaller than indicated, long-term investors are likely to have significant appetite for the fresh supply. The government will sell INR 180 billion of the 6.01%, 2030 gilt and INR 120 billion of the 7.09%, 2074 gilt Friday. Bonds maturing in over 15 years were also dragged down by sales by foreign investors, which ebbed in the middle of the day, dealers said.

Most other bonds traded in a thin band. Traders said the minutes of the RBI's Monetary Policy Committee's Sept. 29-Oct. 1 meeting, released Wednesday, were in line with expectations and kept up hopes of a rate cut in December. However, traders did not take large bets ahead of the gilts auction Friday and because the minutes did not give more certainty on a rate cut, amid uncertainty on the trade talks between India and the US.

For the rest of the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.48-6.52% and on the 6.48%, 2035 bond is seen at 6.41-6.45%.  (Aaryan Khanna)

India Gilts: Remain down on profit booking, rise in OIS rates after MPC minutes

MUMBAI--1352 IST--Government bond prices remained down as banks booked profit after prices rose sharply on Wednesday, dealers said. The rise in overnight indexed swap rates after the minutes of the Monetary Policy Committee's Sept. 29-Oct. 1 meeting also weighed on gilt prices. The one-year OIS was up 2 basis points to 5.44%, while the five-year OIS rate rose 4 bps to 5.62%.

Traders were also cautious in picking up gilts on the unfolding developments in US-India trade talks, especially with an Indian team in the US this week for the next round of talks. US President Donald Trump said at a White House event Wednedsay that Prime Minister Narendra Modi has assured him that India will not be buying oil from Russia, seen as the trigger for the punitive 25% additional tariffs levied by the US on imports from India. Reserve Bank of India Governor Sanjay Malhotra Wednesday acknowledged that India's GDP growth could rise if there was an early resolution to tariffs. Therefore, the easing of tariffs is seen negative for gilts as it would ease the pressure on the MPC to cut rates, dealers said.

Traders still retained firm bets that the rate-setting panel would cut rates at its next meeting. The minutes were seen focused on supporting growth amid low inflation, exactly as the market had expected, but did not seem to show that a December rate cut was a certainty. Moreover, with RBI Deputy Governor Poonam Gupta pointing out the limited space to ease policy further, traders said that a 25-basis-point repo rate cut to 5.25% in December may not necessarily lead to a sharp fall in gilt yields.

"The MPC minutes were similar to what people were expecting. That is why the market did not react to it much," the dealer at a private bank said. "People (traders) are more concerned about the tone after the December MPC meeting, even if there is a cut in the next meeting, the tone will be crucial..."

Foreign banks and foreign portfolio investors are seen buying domestic government bonds maturing in under 10 years as US yields remained near a one-month low. Moreover, the sharp appreciation in the rupee and the optimism on the trade talks were seen buoying the domestic unit in the near-term. This was especially true after the RBI ramped up its intervention to curb speculative bets against the domestic currency, dealers said.

"FPIs likely sold the longer-tenure bonds in the over-the-counter market, which is seen in the reported deals segment..." dealer at a primary dealership said. Bonds maturing above 15 years fell more than the 10-year benchmark bond, while the five-year benchmark 6.01%, 2030 gilt was also under pressure before its INR-180-supply at the weekly gilt auction, dealers said. Traders may increase their short bets before the auction Friday.

At 1349 IST, turnover in the gilts market was INR 276.20 billion, slightly lower than INR 466.75 billion at 1330 IST Wednseday, 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% and on the 6.48%, 2035 bond is seen at 6.42-6.48%.  (Janwee Prajapati and Aaryan Khanna)

India Gilts: Down on profit booking; switch auction news weighs

MUMBAI--1032 IST--Government bond prices fell across tenures as traders booked profits after a rise in gilts Wednesday, dealers said. The Reserve Bank of India announced that the government will switch gilts maturing between eight and 10 years via auction on Monday, which weighed more on gilts maturing in seven to 15 years. Traders are also likely to have placed short bets ahead of the weekly gilts auction on Friday. 

The RBI announced that the government will switch five gilts worth INR 190 billion via auction on Monday. Most of the destination securities offered in the switch auction have a tenure of eight to 10 years. The higher supply of the 10-year gilt in the Oct-Mar calendar further weighed on prices of bonds of similar tenures. 

Minutes of RBI's Monetary Policy Committee meeting ended Oct. 1 boosted expectations of a rate cut in December. However, traders are waiting for more clarity on a trade deal between the US and India or on domestic growth to take further bets on a rate cut, dealers said. Most expect the 10-year benchmark 6.33%, 2035 bond yield to fall to 6.40-6.42% before the December policy meeting as traders ramp up rate cut bets. 

"There are both positive and negative cues in the market right now," a dealer at a state-owned bank said. "Uncertainty over a trade deal, RBI's (dollar) intervention in the market, and fiscal concerns are on the negative side, whereas the increased rate-cut expectation after the MPC minutes yesterday (Wednesday) and a fall in US treasury yields are on the positive side."  

Meanwhile, the government will auction INR 300 billion of the 6.01%, 2030 and 7.09%, 2074 gilts at the weekly gilts auction on Friday. Traders likely placed short bets on the five-year benchmark gilt to make room in their portfolios to buy at a lower price at Friday's auction.  

The turnover in the gilt market was INR 134.65 billion, lower than INR 157.70 billion at 1030 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% and that on the 6.48%, 2035 bond at 6.42-6.48%.  (Janwee Prajapati)

India Gilts: Seen up on positive cues from minutes of MPC meeting

MUMBAI – Government bonds are seen higher as minutes of the Monetary Policy Committee's meeting that ended Oct. 1 were considered positive by most. Most members of the panel seemed in favour of policy easing but were unsure of the timing, dealers said. Traders may take cues from the movement in the rupee against the dollar to track technical levels, they said.

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen moving in a range of 6.45-6.53% during the day. On Wednesday, the 2035 gilt ended at INR 98.94 or 6.48% yield. Meanwhile, the newly issued 10-year 6.48%, 2035 bond is expected to move in a range if 6.40-6.46%. On Tuesday, it ended at INR 100.43 or 6.42% yield. 

The 6.33%, 2035 bond Wednesday ended at the lowest yield since Sept. 23. Traders may book profits if the yield on the bond touches 6.47% and will watch out for the yield to sustain a fall below 6.47% before taking further aggressive bets. Most traders expect the 10-year benchmark gilt to hit a low of 6.40-6.42% yield as they ramp up bets of a rate cut by the MPC in December. However, the fall may be gradual as traders await further clarity on growth and a trade deal with US.

At the MPC's last meeting, all the six members of the panel acknowledged that the sharp fall in inflation had opened up space for further monetary policy easing. External members Ram Singh and Nagesh Kumar were the loudest voices calling for further policy easing, with both seeking to change the policy stance to 'accommodative' from 'neutral' as well. Singh said a stance change might help improve the impact of the policy easing cycle. RBI Governor Sanjay Malhotra said the aim of the policy was to facilitate growth-enabling conditions, even while the panel was unanimous in holding the repo rate at the meeting.

RBI Deputy Governor Poonam Gupta noted that the scope to cut policy rates was limited and seemed to signal that monetary policy might be best served until global uncertainty clears up. External member Saugata Bhattacharya said the impact of prior actions on fiscal and monetary policy, along with banking regulation and other factors, mist be monitored before cutting rates further. The MPC had cut the repo rate by 100 bps between February and June.

Meanwhile, US President Donald Trump Wednesday said that Prime Minister Narendra Modi had vowed to halt purchases of Russian oil, a move that could squeeze global supply. While this could result in the US lowering the 50% tariffs imposed on India, traders will wait for more clarity on a deal before making bets, dealers said. 

Late on Wednesday, the RBI announced that the government will switch five gilts worth INR 190 billion via auction on Monday. As most of the destination securities offered in the switch auction mature in eight to 10 years, the rise in gilts maturing in similar tenures may be limited, dealers said. However, as most banks are expected to park the switched gilts in their investment books, some said the impact of similar tenure gilts in the secondary market may be limited.   (Srijita Bose)

End

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

Edited by Rajeev Pai

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