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Informist, Friday, Oct. 24, 2025

By Srijita Bose

MUMBAI – Government bond prices ended mixed Friday. Prices of most bonds recovered from the day's lows on expectations that a trade deal with the US could take longer than earlier expected, after Commerce and Industry Minister Piyush Goyal said that India will not sign any trade deal in a hurry. However, longer-term bonds ended sharply lower as traders reduced their duration risk, dealers said. 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.57, or a yield of 6.53%, against INR 98.56, or a 6.54% yield. The 6.48%, 2035 bond closed at INR 100.12, or a yield of 6.46%, flat against Thursday. Traders who sold gilts on fears that a trade deal could be announced over the weekend bought back some of these gilts after the comments from Goyal, dealers said. 

"Goyal said that India will not hamper long-term ties for short-term gains, so you know a final trade deal could only come in December," a dealer at a state-owned bank said. "Also, in absolute terms, these are really good levels to buy." 

State-owned banks ramped up their buys near the end of trade as they found yields attractive on the view that a trade deal may not come soon, dealers said. Some traders were of the view that even if a trade deal is announced before the December meeting of the Reserve Bank of India's Monetary Policy Committee, gilt yields are not likely to rise sharply, they said. They were of the view that a 25-basis-point rate cut by the RBI's rate-setting panel was still on the cards, even if a trade deal is announced before December. Dealers also said they expect some support from the central bank if gilt yields rise after a trade deal is announced,  dealers said. 

Prices were down earlier on likely sales by primary dealers as the possibility of an early trade deal with the US reduced bets of a deeper rate-cut cycle beyond a 25 bps cut in December by the Monetary Policy Committee, dealers said. Some foreign primary dealers are also likely to have sold gilts due to a liquidity crunch, a dealer said. Foreign banks also likely sold Friday to trim any aggressive rate cut bets taken earlier, they said.

Meanwhile, some foreign portfolio investors are likely to have picked up extremely short-tenure gilts to limit the duration risk and as the rupee appreciated against the dollar, dealers said. The 7.06%, 2028 bond was the fifth-most traded bond on RBI's Negotiated Dealing System-Order Matching with trades worth INR 12.40 billion. The rupee had risen to a high of 87.63 against the dollar during the day, but closed at 87.85, against 87.84 per dollar at close Thursday.

However, FPIs sold longer tenure gilts due to the risk over the weekend and as the 10-year US Treasury yield rose above the 4.00% mark, dealers said. The 10-year US yield rose to 4.02% during the day from 3.99% at 1700 IST Thursday. Data from Clearing Corp. of India at 1816 IST showed FPIs sold INR 10 billion worth of gilts Friday through the fully accessible route.  

Insurance companies were also likely selling gilts to make room for state bonds after reports said that states were urging the finance ministry to ease their borrowing limits, dealers said. Traders also trimmed their longer tenure bond holdings, they said. This kept prices on gilts maturing in 30-50 years sharply down Friday. 

Traders also sold the 15-year benchmark 6.68%, 2040 gilt, with trades worth INR 14.85 billion in the reported deals segment of the NDS-OM platform. However, some banks picked up the 15-year gilt because the yields were attractive to buy, dealers said. "The 15-year gilt has fallen by nearly 1 rupee since last week, so now these levels seem good to buy," a dealer at a private sector bank said. Meanwhile, some banks also added the new 10-year 6.48%, 2035 bond to their held-to-maturity books while placing short bets on the 6.33%, 2035 gilt, they said. 

Traders were also waiting for the delayed print of the US September CPI data released after market hours. However, most said the print is unlikely to deter the US Federal Open Market Committee from cutting rates at the end of this month, with Fed fund futures largely pricing in a 25-basis-point cut at the meeting.

Turnover in the gilts market was INR 472.25 billion, higher than INR 344.70 billion Thursday, according to data on the RBI's NDS-OM platform. There were no trades using the RBI's wholesale e-rupee pilot on Friday, similar to Thursday.

OUTLOOK

Gilts are not traded on Saturdays. On Monday, government bond prices may take cues from movements in US yields, dealers said. Any development on a trade deal between India and the US could lead traders to pare back domestic rate-cut bets, they said.

Data released after market hours showed that US CPI inflation in September rose 3.0% on year, slightly lower than 3.1% estimated in a Wall Street Journal poll, and up from 2.9% in August. Core inflation also rose 3.0% against expectations of 3.1%. Traders will track other offshore triggers ahead of the US FOMC's meeting next week, dealers said. The FOMC is largely expected to cut rates by 25 bps this month.

Movements in crude oil prices may also influence gilts. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.48-6.58%. Meanwhile, the 6.48%, 2035 bond is seen moving in a range of 6.42-6.48% Monday. 

India Gilts: Recover most losses on likely delay in trade deal

MUMBAI--1604 IST--Government bonds recovered most losses after comments from Commerce Minister Piyush Goyal on the trade talks with the US suggested that the India-US trade deal could take longer than expected, dealers said. Prices were down earlier on likely sales from primary dealers as the possibility of a trade deal between India and the US dimmed bets of a deeper rate-cut cycle beyond a 25 basis-point cut in December by the Reserve Bank of India's Monetary Policy Committee, they said. Insurance companies were also likely selling gilts to make room for state bonds after a report of states urging the finance ministry to ease their borrowing limits. Some traders are of the view that the price action is more pronounced due to low trade volume.

Earlier, state-owned banks bought gilts as the yield on the 10-year benchmark bond hit 6.54%, a psychologically crucial level. "The market lacks enthusiasm and therefore no buying is seen... no one is willing to buy as FOMO (fear of missing out) is not there, there is nothing to look forward to," a dealer at a state-owned bank said.

Expectations of a rate cut at the December meeting faded slightly as a trade deal between India and the US is likely to reduce the effective tariff on Indian exports. However, some traders were of the view that a rate cut of 25 bps is already priced in and the commentary of further easing is more important for the market than the rate cut itself. Few traders said they were hopeful of support measures from the RBI to pull bond yields down.

At 1620 IST, the turnover in the gilts market was INR 424.85 billion, up from INR 304.30 billion at the same time Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the rest of the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.50%-6.56% and the yield on the 6.48%, 2035 bond is seen at 6.44-6.48%.  (Janwee Prajapati)

India Gilts: Reverse gains; primary dealers, foreign banks likely sell

MUMBAI--1252 IST--Government bonds reversed gains as expectations of a US-India trade deal loomed, dashing hope of a domestic rate cut, dealers said. Foreign banks and primary dealers are likely to have sold gilts, with the 10-year benchmark gilt nearing the 6.56% yield level, they said. However, purchases by state-owned banks limited the fall in gilts. 

"Some big PD (primary dealer) is trying to drag down the prices," a dealer at a private sector bank said. "If the yield remains here, then towards the close we might see another 1 basis point rise in yields because traders will prefer to take a fresh position Monday." 

Taders likely picked up the 15-year benchmark 6.68%, 2040 gilt while trimming their positions in the 10-year benchmark gilt as they found yield levels on the former attractive, dealers said. The 15-year gilt had INR 29.50 billion worth of trades both on screen as well as over the counter, as per the Reserve Bank of India's Negotiated Dealing System-Order Matching platform. Some banks also added the new 10-year 6.48%, 2035 bond to their held-to-maturity books while placing short bets on the 6.33%, 2035 gilt, they said. 

Meanwhile, some foreign portolio investors are likely to have picked up extremely shorter tenure gilts to limit the duration risk and as the rupee appreciated against the dollar, dealers said. The 7.06%, 2028 bond was the fourth-most traded bond on RBI's NDS-OM with INT 12 billion worth of trades. The rupee rose to 87.63 against the dollar during the day from 87.84 per dollar at close Thursday. 

Trade volumes are expected to remain on the lower side Friday, as seen this week. Trading activity is expected to rise only Monday as traders return to their desks after Diwali, dealers said. Till 1230 IST, the turnover in the gilts market was INR 209.15 billion, slightly higher than INR 153.45 billion at the same time Thursday, according to data on the RBI's NDS-OM platform. During the rest of the day, the yield on the 10-year benchmark 6.33%, 2035 gilt is seen at 6.50-6.58% and the yield on the 6.48%, 2035 bond is seen at 6.44-6.48%.  (Srijita Bose)

India Gilts: Tad up on buys from PSU banks as levels seen lucrative

MUMBAI--0953 IST--Government bond prices were up on likely purchases from state-owned banks, dealers said. State-owned banks stepped up purchases at the 6.53% yield on the benchmark 10-year 6.33%, 2035 gilt, which is a psychologically crucial level since it is the upper end of the recent trading range. The yield on the 10-year benchmark bond Thursday hit its highest level since the outcome of the Reserve Bank of India's Monetary Policy Committee meeting on Oct. 1. State-owned banks were buying papers maturing within 10-15 years for their trading books, dealers said.

"There was a more than expected sell-off yesterday (Thursday), which dragged down the prices significantly. Therefore, today the market is back up as it's a good level to buy," a dealer at a state-owned bank said.

Traders were cautious of a likely trade deal between India and the US, which has dampened bets of a rate cut by the MPC in the next policy meeting. Some traders are also seen placing short bets ahead of the weekend. 

Traders await the US CPI inflation print for September on Friday, a rare release of economic data during the government shutdown in the US. However, the print is unlikely to deter the US Federal Open Market Committee from cutting rates at the end of this month, dealers said, with Fed fund futures largely pricing in a 25-basis-point cut at the meeting.

Trade volumes are expected to remain on the lower side Friday, as seen this week. Trading activity is expected to rise only Monday as traders return to their desks after Diwali, dealers said. At 0954 IST, the turnover in the gilts market was INR 64.75 billion, slightly up from INR 33.55 billion at 0930 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 6.50%-6.55% and yield on the 6.48%, 2035 bond is seen at 6.44-6.48%.  (Janwee Prajapati)

India Gilts: Seen down after fall in prices Thu on US-India deal expectations

MUMBAI – Prices of government bonds are seen opening lower Friday, with the selling pressure from Thursday seen continuing, as traders price in the possibility of higher domestic GDP growth if a trade deal between the US and India is sealed and US tariffs on Indian exports are reduced, dealers said. US Treasury yields also rose overnight. The yield on the 10-year benchmark US Treasury note failed to sustain a fall below the key 4.00% mark and was 4.00% at 0800 IST, slightly above 3.99% at 1700 IST Thursday.

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen moving in a range of 6.50-6.56% during the day. On Thursday, the 2035 gilt ended at INR 98.56, or 6.54% yield. The newly issued 10-year 6.48%, 2035 bond is expected to move in a range of 6.45-6.50%. On Thursday, it ended at INR 100.12 or 6.46% yield. Traders will closely track technical levels, and if the 10-year benchmark gilt yield rises above the key 6.54% level, the yield could rise another 5-6 basis points. Traders will also track the movement of swap rates. The weekly closing yield on the 10-year benchmark gilt will be a key trigger for the direction of bond prices next week, dealers said. 

Traders may continue to unwind bets of a rate cut in December, as a US-India trade deal looks inevitable, dealers said. Most traders had thought that further cuts in the repo rate would come by only if domestic GDP growth was impacted by the higher tariffs imposed by the US. According to the minutes of the rate-setting panel's October meeting, RBI Governor Sanjay Malhotra had said domestic economic growth is expected to soften because of the tariffs, though the Centre's cut in goods and services tax would partially cushion the impact. A news report of a potential reduction in US tariffs on India to 15-16% spooked traders, since 15% was an unexpectedly low figure. 

Traders may place bets on the US CPI inflation print for September, due post market hours Friday, a rare release of economic data during a partial government shutdown. A poll by The Wall Street Journal forecast the print at 3.1% on year, up from 2.9% in August. Core inflation is expected to remain at 3.1%. The print is unlikely to deter the US Federal Open Market Committee from cutting rates at the end of this month, with Fed fund futures largely pricing in a 25-basis-point cut at the meeting.

Movement of foreign flows will also be tracked, after foreign portfolio investors turned net sellers of gilts for the first time in 10 sessions Thursday. FPIs net sold gilts worth INR 5.59 billion through the fully accessible route Thursday. However, FPIs' total net gilt purchases through the fully accessible route are still at a record high, at above INR 3.10 trillion. 

The movement of the rupee against the dollar, and crude oil prices may also lend cues. Crude oil prices jumped around 5% Thursday after the US imposed sanctions on Russian oil majors Rosneft and Lukoil, but bond traders are largely comfortable with Brent crude rising till around $70 a barrel, and concerns may grow only if prices rise above that.  (Cassandra Carvalho) 

End

US$1 = INR 87.85

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

Edited by Saji George Titus

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