More Stories

Informist, Friday, Oct. 17, 2025

By Cassandra Carvalho

MUMBAI – Prices of government bonds reversed gains to end the day lower Friday owing to poor demand from investors for the 7.09%, 2074 bond at the weekly gilt auction, dealers said. Bond prices were up until the result of the auction was published, tracking an overnight fall in US Treasury yields as the yield on the benchmark 10-year US Treasury note fell below the psychologically crucial 4% level, dealers said. 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.71, or a yield of 6.51%, as against INR 98.80, or 6.50% yield, Thursday. The 6.48%, 2035 bond closed at INR 100.24, or a yield of 6.45%, against INR 100.29, or 6.44%, the previous session. After their fresh supply at Friday's auction, the 6.01%, 2030 bond ended at INR 99.49, up 3 paise from Thursday's close, while the 7.09%, 2074 bond ended at INR 98.38, down 53 paise from the previous close. The yield on the 10-year US Treasury note was 3.99% at 1700 IST, hitting a six-month low of 3.94%, from 4.03% at the same time Thursday. 

"It was just traders rebalancing their books because they were stuck with the 74 (2074) paper," a dealer at a private sector bank said. "A similar thing happened a few auctions ago in August also. When traders are stuck with long-term illiquid papers, people short (short-sell) 10-year and everything (other liquid papers) they can. People who were long trimmed their 10-year holdings." 

At the auction, the government sold INR 180 billion of the 6.01%, 2030 bond and INR 120 billion of the 7.09%, 2074 bond. The cut-off price on the 2030 bond was better than expectations, on strong demand from private sector banks, state-owned banks and mutual funds on bets of the yield curve steepening if the Reserve Bank of India's Monetary Policy Committee cutting the repo rate in December, dealers said. Some expect the yield on the 2030 bond to fall to 5.90% level before the December policy, they said. The RBI accepted only 79 out of 276 bids for the paper. 

However, the cut-off price on the 2074 bond was below expectations, with the weighed average price even lower. The RBI accepted 128 out of 170 bids for the paper. The Employees' Provident Fund Organisation likely gave the auction a miss as a result of new withdrawal norms detailed earlier this week, dealers said. Provident funds were also active in picking up State Bank of India's tier-II bond, and may have preferred that 10-year corporate issuance to the 50-year government securities, they said. Thus, traders were stuck with stock of the illiquid paper and sold liquid gilts in the secondary market to rebalance their portfolios.

"EPFO was there at the SBI bond bidding today, he picked up almost INR 70 billion there," a dealer at a private-sector bank said. "It looks like there was an internal view to pick up the SBI bond because that issuance has come after a long time. That's why maybe there was no one bidding for 50-year."

Traders were largely focussed on the auction result for most of the day. Earlier in the day, bond prices were up tracking a fall in US yields. Later, when bond prices fell, losses were limited as foreign portfolio investors remained net buyers of gilts for the eighth consecutive session. FPIs net purchased gilts worth INR 14.12 billion through the fully accessible route Friday, taking their total gilt holdings via this route to a record INR 3.10 trillion, according to data from Clearing Corp. Of India. 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.  

Traders closely tracked technical levels, with the 10-year benchmark gilt yield failing to sustain a fall below the key 6.48% yield, and instead rising above the key 6.50% yield Friday- after hovering near 6.50% for most of October. Traders now look to the 6.53% level as the key level to buy gilts, dealers said.  

Turnover in the gilts market was INR 801.65 billion, almost double from INR 441.80 billion Thursday, according to data on the RBI's NDS-OM platform. There were no trades using the RBI's wholesale e-rupee pilot for the third straight day Friday.

OUTLOOK

Gilts are not traded Saturdays. On Monday, government bonds may track the overnight movement of US Treasury yields and the movement of the rupee against the dollar at market open. Later in the day, bonds may also track the result of the INR-170-billion state bond auction and the INR-190-billion switch auction. The state bond auction size is slightly higher than the indicated size of INR 167.50 billion, but due to the relatively small size of the auction--compared to above INR-300-billion sizes seen in Jul-Sept--it may sail through, some dealers said. However, participation from long-term investors will determine the result of the auction, dealers said. As for the switch auction, several dealers expect the auction to be fully switched due to its small size and since many traders have stock of the source securities.

Trade volume may be low next week as some traders may be on leave for Diwali. RBI-administered markets are shut Tuesday and Wednesday for Diwali. The RBI will not conduct the weekly gilt auction next week. With lack of fresh gilt supply to prepare for next week, traders will largely track the movement of US Treasury yields and offshore triggers ahead of the US Federal Open Market Committee's meeting this month, due to lack of domestic triggers, dealers said. The FOMC is largely expected to cut rates by 25 bps this month. Some expect bond yields to fall by 5-7 basis points if the 10-year US yield falls to 3.80%. On Oct. 24, the US Bureau of Labor Statistics will release US CPI data for September, despite of a partial government shutdown, it said.      

If US yields continue to fall, FPIs will continue to purchase gilts. In its investment outlook for Oct-Dec, Singapore-headquartered DBS Bank said Monday that current yields on Indian government bonds make these securities attractive to purchase. However, the bank's senior investment strategist said that Indian government bonds are facing competition from US Treasury notes, with the 10-year US Treasury note currently offering a yield of around 4%, up from 1-2% earlier.

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. 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 6.47-6.57%.

India Gilts: Mixed; short-term bonds gain, long-term gilts slump post auction

India Gilts: Mixed; short-term bonds gain, long-term gilts slump post auction

MUMBAI--1550 IST--Government bonds traded on a mixed note. Prices of short-term bonds were up after the cut-off price on the five-year benchmark 6.01%, 2030 bond was slightly better than expected. However, the cut-off price on the 7.09%, 2074 gilt indicated poor demand for the gilt and bonds maturing in 10 years or more reversed gains and slumped. 

The 50-year benchmark gilt got bids for only twice the notified amount of INR 120 billion, which showed poor demand from long-term investors, dealers said. The cut-off price of INR 98.80 was sharply lower than INR 99.04 seen in an Informist poll. Moreover, with the weighted average price being INR 98.97, well above the cut-off, traders who had bid at a "tail" likely also got auction stock, dealers said. The RBI accepted 128 out of 170 bids for the bond.

The poor demand was unexpected as traders had earlier expected both life insurers and provident funds to pick up the bond. However, the Employees' Provident Fund Organisation likely gave the auction a miss as a result of new withdrawal norms detailed earlier this week, dealers said. Members can now withdraw up to 100% of the eligible balance in the provident fund, including employee and employer shares, and with more withdrawal requests.

Provident funds were also active in picking up State Bank of India's tier-II bond, and may have preferred that 10-year corporate issuance to the 50-year government securities, they said. SBI approached the market after nearly a year, which led to robust demand from investors. Mutual funds also likely gave the INR-300-billion gilt auction a miss due to the heavy supply of corporate bonds from the largest state-owned bank and the National Bank for Agriculture and Rural Development. The two entities sought bids for around INR 150 billion Friday.

On the other hand, demand for the 6.01%, 2030 bond was robust as traders along with banks and primary dealerships bid aggressively for the paper at auction despite the large INR 180 billion supply. The paper got bids 3.8 times the notified amount. Traders bought the paper at a lower price at auction to cover short positions placed earlier this week. The cut-off price for the five-year bond was INR 99.52, slightly higher than the expected level of INR 99.50, according to an Informist poll. Traders who could not get the bond at the auction due to aggressive bidding likely bought the bond in the secondary market, driving up the price of the five-year bond.

Traders also prefer picking up bonds maturing in up to seven years as these bonds are seen outperforming longer-tenure bonds if bets on a December rate cut by the Reserve Bank of India's Monetary Policy Committee build up and if the panel cuts rates. Bets on rate cuts in India increased as US rate cut bets for the rest of 2025 and into 2026 rose, dealers said, adding this led to gilt prices rising in early trade. The yield on the 10-year US Treasury note remained below the crucial 4% mark. 

At 1545 IST, turnover in the gilts market was INR 660.95 billion, up from INR 340.05 billion at 1530 IST Thursday, 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 6.45-6.52% and yield on the 6.48%, 2035 bond is seen at 6.39-6.45%.  (Janwee Prajapati)

India Gilts: Remain up; caution before auction result caps gains

India Gilts: Remain up; caution before auction result caps gains

MUMBAI--1203 IST--Government bond prices remained up tracking an overnight fall in US Treasury yields, dealers said. However, gains were capped as state-owned banks likely booked profits. The rise in prices was also limited due to caution among traders before the results of the INR 300-billion gilt auction, which could give cues to the market later in the day, dealers said.

Foreign portfolio investors and banks likely bought gilts, dealers said. The 10-year US Treasury yield fell below the psychologically crucial 4.00% mark and was at 3.95% at 1147 IST, the lowest since April. The 10-year US yield was at 4.04% at 1700 IST Thursday. This widened the interest rate differential between the safe-haven asset and the Indian bonds, making it attractive for offshore traders to buy the latter, dealers said. 

The fall in US yields and hopes that a trade deal between India and the US could be delayed has also led traders to increase bets on a rate cut by the Reserve Bank of India's Monetary Policy Committee in December. "The view on rates has slightly changed because US yields have fallen. Foreign banks are buying and some big corporates are also there since they were underinvested before this," a dealer at a primary dealership said. "Demand at the auction is good for the five-year (6.01%, 2030 bond) but for the 50-year (7.09%, 2074) paper it could be slightly mixed because it is not a trading paper."

On Friday, the government offered to sell 180 billion of the 6.01%, 2030 gilt and INR 120 billion of the 7.09%, 2074 gilt. The five-year gilt was bid by a varied cross-section of market participants, with both traders and bank asset-liability managers trying to get the paper at the auction, dealers said. Some demand from FPIs and mutual funds was also seen for the five-year gilt, they said.

Meanwhile, for the 50-year gilt, demand was firm from life insurers and employee provident funds, dealers said. Some demand for forward rate agreements for the 2074 gilt was also seen, they said. However, due to lack of traders' interest in the gilt, investors could demand a higher yield for the 2074 paper compared to the current yield at which the gilt is being traded in the secondary market, dealers said. The 2074 gilt is trading at INR 99.20 or 7.15% yield. 

Some traders expect the yield curve to steepen as rate cut bets in December firmed up. This was also as shorter tenure bonds have underperformed over the past several sessions due to the higher supply in the segment in Oct-Mar. Some dealers expect prices in the secondary market to rise after the auction results, while others see state-owned banks' profit booking to limit the rise in prices.

At 1203 IST, turnover in the gilts market was INR 365.25 billion, up from INR 219.55 billion at 1230 IST Thursday, 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 6.44-6.52% and yield on the 6.48%, 2035 bond is seen at 6.38-6.45%. (Srijita Bose)

India Gilts: Up on fall in US yields; demand at weekly auction seen firm

MUMBAI--1025 IST--Government bond prices rose on a fall in US Treasury yields as the case for a softer monetary policy in the US increased, dealers said. This reinforced bets on a softer monetary policy in India as well, including a rate cut at the December meeting of the Reserve Bank of India's Monetary Policy Committee.

The yield on the 10-year US Treasury note fell to 3.95%, below the psychologically crucial 4% mark and its lowest level since April. Recent reports on losses in some US banks led to some concerns about financial stability in the world's largest economy. Traders said this would likely translate to firm buys at the weekly gilt auction at 1030-1130 IST.

The government will sell 180 billion of the 6.01%, 2030 gilt and INR 120 billion of the 7.09%, 2074 gilt. The higher supply of the five-year benchmark paper may lead to some traders bidding at a discount to the secondary market price, hoping to get higher returns. However, with more optimism on rate cuts, banks' asset-liability managers are expected to be aggressive in picking up the gilt, dealers said. Moreover, some traders will also cover short bets in the paper taken in the run-up to the auction. 

Investor demand for the 50-year benchmark paper is expected to be robust at the auction, with some demand for bond forwards and forward-rate agreements as well. The longer tenure paper will likely be picked up by the life insurers and pension funds. Investor demand will be even more robust as there is no auction scheduled next week due to Diwali, and states only plan to raise INR 170 billion on Monday, in line with the indicative amount for the week in the Oct-Dec calendar, dealers said.

At 1025 IST, turnover in the gilts market was INR 212.20 billion, up from INR 127.70 billion at 1030 IST Thursday, 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 6.45-6.52% and yield on the 6.48%, 2035 bond is seen at 6.39-6.45%.  (Janwee Prajapati)

India Gilts: Seen up as US yields fall; results of gilt auction to lend cues

MUMBAI – Government bond prices are likely to open higher Friday tracking the overnight fall in US Treasury yields, dealers said. However, most traders could wait for the results of the INR 300-billion gilt auction to take further cues. 

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 Thursday, the 2035 gilt ended at INR 98.80, or 6.50% yield. Meanwhile, the newly issued 10-year 6.48%, 2035 bond is expected to move in a range of 6.40-6.46%. On Thursday, it ended at INR 100.29 or 6.44% yield. 

The government will sell INR 180 billion of 6.01%, 2030 gilt, and INR 120 billion of the 7.09%, 2074 bond at 1030-1130 IST. Demand for both bonds at the auction is seen firm. Traders may place short bets on the five-year gilt to pick it up at cheaper prices at the auction. Meanwhile, investor demand for the 50-year paper is expected to be robust at the auction, with some demand for forward-rate agreements. 

The 10-year US yield fell below the 4.00% mark and was at 3.96% at 0823 IST, falling from 4.04% at 1700 IST Thursday after comments by Federal Reserve Governor Christopher Waller boosted expectations of a rate cut in the US this month. Waller said on Thursday that "based on all the data we have ... I believe that (the Federal Open Market Committee) should reduce the policy rate another 25 basis points" at the conclusion of this month's monetary policy meeting on Oct. 29.

Foreign portfolio investors are likely to buy gilts as the interest rate differential between the safe-haven asset and the Indian bond yield widened. Domestic traders could ramp up bets of a rate cut in India as well. However some traders may wait for US yields to sustain below 4.00% before taking bets on the same. Meanwhile, the Ministry of External Affairs of India Thursday rejected US President Donald Trump's claim of having a conversation with Prime Minister Narendra Modi, in which Modi allegedly assured him that India will not buy oil from Russia. Some dealers said this could push back a trade deal between the two countries. Traders will watch the movement of the rupee against dollar Friday.  (Srijita Bose)

End

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

Edited by Deepshikha Bhardwaj

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.