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Informist, Monday, Oct. 27, 2025

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended lower Monday as traders trimmed their portfolios towards the end of the day on constant uncertainty around the India-US trade deal, dealers said. Potential developments towards a deal are seen detrimental to gilt prices as a breakthrough weakens the case for the Reserve Bank of India's Monetary Policy Committee to cut rates in December.

 

The 10-year benchmark 6.33%, 2035 gilt closed at INR 98.48, or a yield of 6.55%, the highest closing yield on the benchmark since Sept. 30. The bond had closed at INR 98.57, or a 6.53% yield on Friday. The 6.48%, 2035 bond closed at INR 100.08, or a yield of 6.47%, against INR 100.12 or 6.46% yield the previous day. Trade volumes remained muted as some traders were still on leave in the aftermath of the Diwali week.

 

The 10-year benchmark yield had dipped below 6.50% in October largely on increasing bets of a December rate cut in India, following growth-supportive commentary from MPC members in the Sept. 29-Oct. 1 policy meeting and as revealed by the minutes of the meeting. Rate cut hopes have been floundering in the last few days on reports that India and the US are nearing terms on a trade deal. The US imposed a tariff of 50% on Indian imports near the end of August, which led to the RBI revising down quarterly GDP growth forecasts starting Oct-Dec. A reduction on those tariffs is likely to push up the RBI's GDP growth estimate for 2025-26 (Apr-Mar), which was already at 6.8% and was not seen by traders as low enough to warrant significant rate cuts, dealers said.

 

"The market seemed very afraid to take a position anymore," a dealer at a primary dealership said. "The truth is that traders don't think there is money to be made by going long, and investors have not been there in the market due to the festival season. So it is tough to get any positive momentum." 

 

A fall in the rupee against the dollar also weighed on gilt prices as traders assessed its ramifications on both inflation and banking system liquidity. The rupee ended the day at 88.2450 a dollar, as against 87.8450 on Friday. The sharp fall was unexpected and led the Indian unit to its lowest close in nearly a fortnight.

 

Traders said this may push up imported inflation while at the same time leading the central bank to sell dollars, sucking out relatively tight rupee liquidity in the banking system. Some banks have been selling gilts to meet their funding needs, especially as demand for credit has risen during the festival season, dealers said. 

 

On the inflation front, traders were also keeping an eye on crude oil movements in the wake of US sanctions on two of Russia's largest crude oil producers last week, which pushed domestic entities such as Reliance Industries Ltd. – the country's largest crude oil refiner – to diversify its source base. The shift from relatively cheap Russian crude may increase India's import bill and slightly push up domestic inflation, though traders still expect CPI inflation for October to average 1% or lower, a record low in the current series with base year 2012, dealers said.

 

Long-term bonds slumped early in the day as most traders were exiting the gilts on the view that long-term investors are likely to keep to the sidelines. The yield on the 40-year benchmark 6.90%, 2065 gilt ended at 7.25% Monday, the same level as before the Oct-Mar borrowing calendar, which brought down the share of long-term bond supply.

 

Bankers said demand from life insurers was uncertain after an initial surge in early October, but some traders considered the long-term bond yield lucrative enough to buy for their portfolios. The smaller-than-indicated state bond auction size also aided gilts. Nine states will raise INR 178 billion through bonds Tuesday, compared with INR 309 billion indicated for the week in the calendar for Oct-Dec state borrowing. While this led to a recovery intraday, traders shed those positions by the end of the day, dealers said.

 

Bonds maturing up to five years remained under pressure on uncertainty about the rate cut view in India. Traders await the Federal Open Market Committee's rate decision late Wednesday for further cues on rates. Indications of a deeper or extended rate-cutting cycle than the 50 bps already priced in 2025 will likely influence the possibility of a rate cut by the MPC as well, dealers said. Ahead of the meeting, some traders also likely sold bonds as 10-year US Treasury note inched up to 4.02% by 1700 IST from below 4.00% last week.  

 

"I think the lower SDL (state bond) auctions are continuing to pile up and that is not properly being priced into bonds," a dealer at a private-sector bank said. "Still, it is difficult to find a story to tell considering how low the volumes were. There are a lot of factors that need to a considered on a daily basis now."

 

Turnover in the gilts market was INR 237.20 billion, halving from INR 472.25 billion Friday, according to data on the RBI's NDS-OM platform. There were no trades using the RBI's wholesale e-rupee pilot on Monday, the same as Friday.

 

OUTLOOK

On Tuesday, government bond prices may take cues from overnight movements in US yields at the open, dealers said. The result of the INR-178-billion state bond auction at 1030-1130 IST may lend direction to gilt prices in the second half. 

 

Dealers are closely tracking developments related to a trade deal between India and the US for rate cues, as is the US Federal Open Market Committee's meeting outcome on Wednesday. Progress in trade talks may weigh on gilt prices, but any reports on a delay in the final announcement such as on Friday may aid bonds. Expectations of a deeper rate cut cycle in the US may aid bets for a December rate cut by the MPC and push up gilts, dealers said. 

 

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 6.43-6.50% Tuesday. 

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.4825	6.5464%	98.5650	6.5345%
6.48%, 2035	100.0800	6.4682%	100.1200	6.4627%
6.01%, 2030	99.3000	6.1801%	99.4200	6.1503%
6.68%, 2040	98.2050	6.8746%	98.3000	6.8640%
6.90%, 2065	95.4500	7.2507%	95.7500	7.2267%

 

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India Gilts: Recover; long-term bonds off lows before state bond sale Tue

	1618 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.56	98.60	98.48	98.57	98.57
YTM (%)	6.5353	6.5295	6.5468	6.5338	6.5345

 

	1618 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.12	100.15	100.06	100.11	100.12
YTM (%)	6.4634	6.4592	6.4706	6.4648	6.4627

 

MUMBAI--1618 IST--Government bond prices recovered from slight losses earlier as traders picked up gilts at yields considered lucrative and ahead of the smaller-than-indicated state bond auction Tuesday, dealers said. The market is closely watching potential developments in the India-US trade deal and traders held onto the most traded papers, driving down liquidity amid the uncertainty.

 

Nine states will raise INR 178 billion through bonds Tuesday, compared with INR 309 billion indicated for the week in the calendar for Oct-Dec state borrowing. The spread between 10-year state bonds and the 10-year benchmark gilt may contract from last week's 64-73 basis points, dealers said.

 

The yield on the 40-year benchmark 6.90%, 2065 gilt had climbed to 7.25% at the day's high, the same level as before the Oct-Mar borrowing calendar for the Centre, which brought down the share of long-term bond supply. Bankers said demand from long-term investors such as life insurers was uncertain after an initial surge in early October, but traders considered the long-term bond yield lucrative enough to buy for their portfolios, dealers said. 

 

"All the positives (triggers) are already priced in, the slight impact of lower borrowing is currently on the market... unless and until there is some positive (news) regarding the trade deal, the market will remain in the range only," a dealer at a state-owned bank said. "Even if the trade deal is delayed by a few weeks, it will have a positive impact on the market."

 

Gilt prices have fallen over the last few days on concerns that an early India-US trade deal could weaken the case for the Reserve Bank of India's Monetary Policy Committee to cut rates in December and beyond. Traders await the Federal Open Market Committee's rate decision late Wednesday for further cues on rates. Indications of a deeper or extended rate-cutting cycle than the 50 bps already priced in 2025 will likely influence the possibility of a rate cut by the MPC as well, dealers said. This may lead to a spurt in gilt prices and some traders may bet on such a possibility, they said.

 

At 1619 IST, turnover in the gilt market was INR 195.05 billion, down from INR 433.25 billion at 1630 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.33%, 2035 benchmark bond is seen moving in a range of 6.52%-6.56% during the day, while that on the 6.48%, 2035 bond is seen at 6.44-6.50%. (Janwee Prajapati)

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India Gilts: Most remain in thin band; long-term reverse gains

 

	1314 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.52	98.57	98.48	98.57	98.57
YTM (%)	6.5410	6.5338	6.5468	6.5338	6.5345

 

	1314 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.10	100.12	100.06	100.11	100.12
YTM (%)	6.4654	6.4630	6.4706	6.4648	6.4627

 

MUMBAI--1314 IST--Most government bonds traded slightly lower amid muted trade volumes due to uncertainty around a trade deal between the US and India, dealers said. Gilts maturing in 10-15 years recovered some losses as traders picked up liquid gilts due to the uncertainty around rates, they said. 

 

"If I have to go for gilts right now, I will go for the 10-year (benchmark 6.33%, 2035 gilts) or the 15-year (benchmark 6.68%, 2040 gilt) since levels look good in absolute terms," a dealer at a private sector bank said. "The 15-year (benchmark) has fallen around INR 1 or so in over the last two weeks, so levels seem good."

 

Though most traders returned to their desks after an extended holiday last week for Diwali, they refrained from placing aggressive bets until some clarity on a trade deal. Shorter tenure gilts were down as traders unwound some of their bets placed earlier on a rate cut by the Reserve Bank of India's Monetary Policy Committee at its December meeting, dealers said.

 

"A US-China deal could come soon and maybe after that we (India) will also have a deal announced,"  a dealer at a private sector bank said. "Market is divided on yields, so people don't want to take punts in gilts right now. It's better to go for OIS (overnight indexed swap rates)." 

 

Some traders felt that even if a trade deal between the two countries is announced before December, the RBI's rate-setting panel could opt for a rate cut in February or later if GDP growth falters and CPI inflation remains below 3% in 2025-26 (Apr-Mar).

 

Meanwhile, longer tenure bonds reversed early gains as traders switched to shorter tenure gilts to limit their exposure in longer tenure bonds amid uncertainty around interest rates, a dealer said. These gilts were up earlier on account of a smaller-than-indicated state bond auction scheduled Tuesday, they said. 

 

At 1302 IST, the turnover in the gilts market was INR 97.05 billion, sharply lower than INR 258.70 billion at 1330 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the remaining session, the 6.33%, 2035 bond is seen moving in a range of 6.52%-6.56% during the day. The yield on the 6.48%, 2035 bond is seen at 6.44-6.48%.  (Srijita Bose)

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India Gilts: Most dn on US yld rise; caution due to US-India deal uncertainty

 

	0943 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.51	98.57	98.49	98.57	98.57
YTM (%)	6.5425	6.5338	6.5454	6.5338	6.5345

 

	0943 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.10	100.11	100.10	100.11	100.12
YTM (%)	6.4654	6.4648	6.4654	6.4648	6.4627

 

MUMBAI--0943 IST--Prices of most government bonds, including the 10-year benchmark 6.33%, 2035 bond, were down tracking a slight rise in US Treasury yields and a depreciation in the rupee against the dollar, dealers said. Trade volume was low as traders were cautious of placing aggressive bets amid uncertainty around the trade deal between the US and India, and its subsequent effect on the decision of the Reserve Bank of India's Monetary Policy Committee in December, they said. At 0943 IST, turnover in the gilt market was INR 24.55 billion, down from INR 31.50 billion at 0930 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. 

 

On the trade front, External Affairs Minister S. Jaishankar Monday met US Secretary of State Marco Rubio in Kuala Lumpur. On Sunday, Rubio said a strategic relationship between the US and Pakistan will not be at the expense of ties with India.

 

"The trade volume is so low I think my screen is frozen...I think the traders are not ready to take position in the middle of all this uncertainty, as even when the numbers (India and US inflation data) are lower, there is no impact on the market," a dealer at the primary dealership said. India's CPI inflation fell to 1.54% in September. Economists project India's October CPI inflation at less than 1%, the lowest in the current series with 2012 as the base year. Data released Friday showed US CPI inflation for September was up 3.0% on year, against an estimate of 3.1% in a poll by The Wall Street Journal.

 

Some traders preferred the 6.68%, 2040 bond as they considered the yield spread of this gilt over the 10-year benchmark bond lucrative. The price of the long-term 6.90%, 2065 bond was up on likely investor demand. Some dealers expect prices to rise later in the day due to the lower-than-indicated size of Tuesday's state bond auction. Nine states will raise INR 178 billion through bonds Tuesday, compared to an indicative size of INR 309.00 billion. Several traders await the weekly gilt auction Friday, the announcement of which is due Monday. The government did not hold a gilt auction last week on account of Diwali. Some traders expect prices to move in a thin band during the day, and the 6.33%, 2035 bond is seen moving in a range of 6.52%-6.56% during the day. The yield on the 6.48%, 2035 bond is seen at 6.44-6.50%. (Janwee Prajapati)

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India Gilts: Seen largely steady Mon; focus on US-India trade deal timeline

 

MUMBAI – Prices of government bonds are seen opening largely steady Monday, dealers said. Prices may rise later in the day after indications that a deal between the US and India may not be as immediate as traders had initially thought, they said. Moreover, volumes are seen increasing from last week as several traders who were on leave for Diwali return to their desks, and this may limit any sharp price movement. Last week, low trade volumes had amplified the movement of bond prices. 

 

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 Friday, the 2035 gilt ended at INR 98.57, or 6.53% yield. The newly issued 10-year 6.48%, 2035 bond is expected to move in a range of 6.43-6.49%. On Friday, it ended at INR 100.12 or 6.46% yield. The yield on the 10-year US Treasury note was 4.03% at 0800 IST, from 4.01% at 1700 IST Friday.  

 

Prices may also be supported by lower-than-indicated borrowing by states this week. Nine states will raise INR 178 billion through bonds Tuesday, compared to an indicated figure of INR 309.00 billion.

 

On the global front, focus is on the US Federal Open Market Committee's interest rate decision Wednesday. Data released Friday showed the US consumer price index rose 3.0% on year, against an estimate of 3.1% in a poll by The Wall Street Journal. Core CPI rose 3.0% on year, against an estimate of 3.1%. The print boosted the case for a rate cut by the FOMC. Fed fund futures are largely pricing in a 25 basis-point cut Wednesday, and bets of a 25 bps cut in December rose to 95.8% from 93.7% a week ago after the CPI print. 

 

The inflation report was initially due on Oct. 15, but was delayed due to the ongoing US government shutdown. The White House has warned that October's inflation report might not be published for the first time ever because the shutdown had halted data collection. (Cassandra Carvalho)
 

End

 

US$1 = INR 88.24

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

 

Edited by Tanima Banerjee

 

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