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Informist, Monday, Oct. 20, 2025

By Aaryan Khanna

NEW DELHI – Government bond prices ended higher Monday in dull trade between the weekend and two market holidays for Diwali. The results of the state bond auction and government's switch auction was the only excitement during the day, though volumes remained muted, dealers said. The slightly better than expected cut-off prices at both auctions pushed up gilt prices in the secondary market.

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.78, or a yield of 6.50%, as against INR 98.71, or 6.51% yield, Friday. The 6.48%, 2035 bond closed at INR 100.29, or a yield of 6.44%, against INR 100.24, or 6.45%, in the previous session. Turnover in the gilt market was INR 139.10 billion, a fraction of the INR 801.65 billion Friday. This is the lowest daily traded volume since December 2022, data showed.

"Actually a lot of people are on leave this week," a dealer at a state-owned bank said. "Today's (Monday's) price action is not really going to give you too much of a picture, but yes there was good bidding at both auctions."

Public sector banks likely bought state bonds, with the Reserve Bank of India accepting bids for the entire notified amount of INR 170 billion. The cut-off yield on Tamil Nadu's seven and 10-year papers were set 5 basis points and 1 bp lower, respectively, than the median of an Informist poll. Provident funds likely bought the long-term paper, as a strategic shift to pick up more spread assets rather than gilts, dealers said. The lack of demand from provident funds for the 50-year gilt at last week's auction had led to a reversal in gilt prices across tenures Friday.

Meanwhile, the RBI accepted offers aggregating INR 116.5 billion at the gilt switch. The central bank set cut-off prices on three of the four destination securities higher than an Informist poll, which were already seen above the Financial Benchmarks India Ltd. prices for Friday. Traders bid aggressively to get more stock of gilts maturing in 2033 and 2034, while booking profits on short-term gilts, dealers said.

The government did not switch the 6.64%, 2027 gilt with the 6.19%, 2034 bond despite receiving 14 offers. The cut-off price on the 7.34%, 2064 gilt was lower than expected and barely above the Financial Benchmarks India price from Friday. Some banks said they did not want to add duration risk to their portfolios, especially as the spreads of the long-term bond yields over the 10-year benchmark have shrunk since late September, dealers said.

The spread of the 40-year benchmark 6.90%, 2065 gilt over the 6.33%, 2035 bond has shrunk by 5 bps since the release of the Oct-Mar borrowing calendar on Sept. 26 to 67 bps Monday. Some traders picked up the 50-year benchmark 7.09%, 2074 gilt after its price slumped Friday, but the volume was minuscule and the rise may correct Thursday, dealers said.

An intraday fall in US Treasury yields also helped prop up gilt prices after they fell earlier in the day. The yield on the 10-year US Treasury note rose to 4.02% over the weekend from 3.99% at 1700 IST Friday, weighing on gilt prices. However, the yield was trending lower by 1700 IST and fell below 4.0% after Indian market hours. Foreign portfolio investors were likely net buyers as US yields are expected to fall further, dealers said. FPIs bought fully accessible gilts worth nearly INR 12 billion on Monday, according to Clearing Corp. of India data.

Selling by traders near the psychologically crucial 6.50% yield on the 6.33%, 2035 bond limited the gains, dealers said. Bid-offer spreads remained wide for most of the day as traders could not find liquidity in most bonds, even the 10-year benchmark 6.33%, 2035 gilt, with several people on leave. There were no trades using the RBI's wholesale e-rupee pilot for the fourth straight day Monday.

OUTLOOK

Money markets are shut on Tuesday and Wednesday for Diwali. Trade volume may be low Thursday as some traders may be on leave around the festival season, and there are no significant triggers this week, dealers said. As is the tradition, the government has not offered to sell any gilts this week.

Traders will largely track the movement of US Treasury yields and offshore triggers ahead of the US Federal Open Market Committee's meeting next week due to lack of domestic triggers, dealers said. The FOMC is largely expected to cut rates by 25 bps this month. The US Bureau of Labor Statistics said it will release US CPI data for September on Friday, despite a partial government shutdown. FPIs are also likely to continue picking up gilts as US monetary policy is seen easing and US yields have fallen, dealers said. 

Geopolitical developments, especially developments on 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.

Movement of crude oil price may also influence 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 is seen at 6.47-6.57%.

India Gilts: Tad up as state bond sale, switch results tad better than view

MUMBAI--1546 IST--Prices of government bonds were a tad up, at the day's high in thin trade after the result of the switch auction was better than expected, and the state bond auction result was largely along expected lines, dealers said.

The result of the INR-190-billion switch auction was better than expectations. The RBI set cut-off prices sharply higher than those indicated by Financial Benchmarks India Pvt. Ltd. Friday, for four of the five destination securities. Some traders had expected the cut-off price on the long-term 7.34%, 2064 gilt to be closer to, or below indicated prices than sharply above, since traders did not want to hold the duration risk. The RBI set an INR 102.26 cut-off on the 7.34%, 2064 gilt, against its indicative price of INR 102.24. The government did not switch the 6.64%, 2027 gilt at auction Monday. Traders had expected cut-off prices on most of the destination securities to to be at least 10-15 paise higher than indicated prices. Some traders wanted stock of the destination securities being offered for their held-to-maturity books, especially since the yields of some of the papers are higher and yet to align with the rest of the yield curve. 

"The 8-9 year papers, you're getting good yield at these levels because its still a (an erstwhile) 10-year gilt to people," a dealer at a private sector bank said. 

The RBI set cut-off yields on states' 10-year bonds in a range of 7.14-7.23%, a slightly wider range than 7.15-7.19% estimated in an Informist poll. State-owned banks bid for bonds maturing in up to 15 years, whereas pension funds bid for long-term papers, dealers said. 

"There's good bidding for up to the 7 to 10-year segments from PSBs (state-owned banks') side," a dealer at a state-owned bank said. "It's a good time to take state bonds today (Monday) but the problem is there's no one to take it."

Trade activity and volume was dull since several traders are on leave for Diwali. At 1556 IST, the turnover in the gilt market was INR 123.15 billion, sharply lower than INR 642.80 billion at the same time Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.

The rise in the rupee against the dollar was positive for gilt prices, bringing in foreign inflows, dealers said. The 7.10%, 2029 bond was the third most traded paper on the RBI's Negotiated Dealing System-Order Matching platform, and traders said that foreign portfolio investors were purchasing the gilts, while others said domestic traders were positioning in the gilt. As of 1556 IST, foreign portfolio investors net sold gilts worth INR 43.60 million through the fully accessible route, according to data from Clearing Corp. of India.  

For the rest of the day, bond prices are seen moving in a narrow range due to lack of significant domestic and because several traders are on leave due to Diwali. The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.47-6.55% and the yield on the 6.48%, 2035 bond is seen at 6.42-6.46%. (Cassandra Carvalho)

India Gilts: Tad dn on rise in US yld; low turnover as some traders on leave

India Gilts: Tad dn on rise in US yld; low turnover as some traders on leave

MUMBAI--0934 IST--Prices of government bonds fell slightly Monday, tracking a rise in US Treasury yields in thin trade, dealers said. The downtrend in prices Friday post weak demand for the 7.09%, 2074 bond at the weekly gilt auction continued Monday. The spread between bid and ask prices in the secondary market was wide and price movements were amplified due to the thin volume, dealers said. Several traders were absent from desks for Diwali since the gilt market is open for only three trading sessions this week. Markets administered by the Reserve Bank of India are shut Tuesday and Wednesday for Diwali. 

At 0935 IST, turnover in the gilt market was INR 8.50 billion, sharply down from INR 133.90 billion at 0930 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The 10-year US Treasury yield rose above the psychologically crucial 4.00% mark and was at 4.02% at 0935 IST, from 3.99% at 1700 IST Friday.

"(At) First prices will be down because of (Friday's) auction, we saw sell-off because of that on Friday and US yields have also gone up," a dealer at a state-owned bank said. "But later this may reverse because this week no gilt auction also (no fresh supply)."

Five states will raise INR 170 billion through auction Monday. Spreads of these bond yields at the auction over gilt yields are expected to be similar to last week's auction, dealers said. The RBI will also conduct an INR-190-billion switch auction wherein the government will switch five short-term gilts with five longer-term gilts. Participation at the switch auction is seen robust, since several traders have stock of the source securities, while some traders want stock of the destination securities, they said. 

During the day, bond prices are seen moving in a narrow range due to lack of significant domestic and because several traders are on leave due to Diwali. The yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.47-6.55% and the yield on the 6.48%, 2035 bond is seen at 6.42-6.46%.  (Janwee Prajapati)

India Gilts: Seen steady amid lacklustre volume; several traders on leave

MUMBAI – Prices of government bonds are likely to open steady Monday amid lacklustre volumes as several traders are on leave this week for Diwali, dealers said. Later in the day, traders will track the result of the INR-170-billion state bond auction and the INR-190-billion switch auction.

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen moving in a range of 6.47-6.55% during the day. On Friday, the 2035 gilt ended at INR 98.71, or 6.51% yield. The newly issued 10-year 6.48%, 2035 bond is expected to move in a range of 6.42-6.47%. On Friday, it ended at INR 100.24 or 6.45% yield. Trade volume may be low as some traders are on leave for Diwali. The Reserve Bank of India-administered markets are shut Tuesday and Wednesday for Diwali. 

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, 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.

The RBI will not conduct the weekly gilt auction this week. With lack of fresh gilt supply to prepare for, traders will largely track offshore triggers ahead of the US Federal Open Market Committee's meeting this month. The 10-year US Treasury yield rose above the 4.00% mark and was at 4.02% at 0800 IST, from 3.99% at 1700 IST Friday. Traders will also watch the movement of the rupee against the dollar Monday. (Cassandra Carvalho)

End

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

Edited by Ashish Shirke

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