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Informist, Wednesday, Oct. 29, 2025

By Aaryan Khanna

NEW DELHI – Government bond prices ended steady as traders continued to keep bond prices in a narrow band despite comments on the India-US trade deal by US President Donald Trump and on monetary policy by the Reserve Bank of India Deputy Governor Poonam Gupta. Dealers said neither comments dispelled the uncertainty of a December rate cut by the RBI's Monetary Policy Committee, keeping traders on tenterhooks.

The 10-year benchmark 6.33%, 2035 gilt ended at INR 98.56 or 6.54% yield, flat against Tuesday's close. The benchmark yield has closed outside the 6.50-6.55% range only once in October. The more recently issued 10-year 6.48%, 2035 gilt closed at INR 100.09 or 6.47% yield, also the same as the previous close.

Trump Wednesday said he was ready for a trade deal with India and said he would do a great trade deal with New Delhi, fuelling optimism that an agreement between the two nations was imminent two months after the US imposed a 50% tariff on Indian exports. While the rupee's gains after this statement aided gilt prices briefly and led to foreign investors buying gilts, some traders booked profit as prices rose on the view that a deal would weaken the case for a December rate cut in India. Others said their view on a rate was unchanged as  bond prices were already reflecting a 60% chance of the deal happening in November, and Trump's comments were not material.

Meanwhile, RBI Deputy Gvernor Gupta--who is in charge on monetary policy and serves on the MPC--said there was still room to ease monetary policy as GDP growth was below potential and aspirations even at 6.8% in 2025-26 (Apr-Mar). However, Gupta reiterated her comments from the minutes of the MPC's last meeting that when and how much of the monetary policy space is used remains to be seen. Her remarks were not seen making a stronger case for rate cuts and some traders were disappointed with them, dealers said. RBI Governor Sanjay Malhotra said two weeks ago that an early resolution to tariffs could lead to an upside to growth.

"We have reached a point where supply and demand are well-matched at the current level – a rise in yields could bring in more investors, but there no appetite if levels (yields) start to fall," a fund manager at a life insurance firm said. "Traders are not convinced either way on whether the yield is falling and rate cuts are coming, so unless they come back into the market and start pushing prices somewhere we (gilt prices) are going to be range-bound." 

The five-year benchmark 6.01%, 2030 gilt was the biggest beneficiary of FPI buys, likely as traders positioned ahead of the US Federal Open Market Committee outcome at 2330 IST Wednesday, dealers said. Foreign investors bought over INR 20 billion of bond, according to Clearing Corp. of India data. This was a significant portion of the nearly INR 27 billion of inflows recorded under the fully accessible route Wednesday as of 1930 IST. 

The US rate-setting panel is universally expected to cut its policy rate by 25 bps on recent labour market weakness. Expectations of a deeper rate cut cycle in the US may aid bets for a December rate cut by the MPC and push up gilt prices, dealers said. Domestic conditions are also seen favourable for a rate cut in December, with CPI inflation likely to print below 1% for October, the lowest in the current series with base 2012. Traders are likely to ramp up their rate cut bets in the latter half of November, with more clarity on the trade deal and leading into the GDP reading for Jul-Sept on Nov. 28.

"If there's no rate cut in December then you wait till February when 0% inflation goes away and you are staring at summer months with above 4% inflation," a dealer at a primary dealership said. "In Jan-Mar, state bond supply will also rise. So there's no FOMO (fear of missing out) for a trader at current levels and that's why nobody is buying."

Long-term also continued to lack direction amid thin trade volumes. Pension funds continued to prefer spread assets such as state and corporate bonds over gilts as their mandate for investing in fixed income assets has reduced, dealers said. Traders are also shying away from picking up long-term bonds as there were no fresh positive triggers seen for the bonds, with auction supply likely to be absorbed on a week-by-week basis but no aggressive purchases from even life insurers expected, dealers said.

Turnover in the gilts market was INR 341.55 billion, up from INR 303.85 billion Tuesday, according to data on the RBI's NDS-OM platform. There were no trade using the RBI's wholesale e-rupee pilot on Wednesday for the fifth straight trading session.

OUTLOOK

On Thursday, government bond prices may take cues from overnight movements in US yields at the open, dealers said. The offshore cue may assume importance after the US Federal Open Market Committee outcome at 2330 IST Wednesday.

The US rate-setting panel is universally expected to cut its policy rate by 25 bps on recent labour market weakness. Expectation of a deeper rate cut cycle in the US may aid bets for a December rate cut by the MPC and push up gilt prices, dealers said.

Dealers are closely tracking developments related to a trade deal between India and the US for rate cues. Progress in trade talks may weigh on gilt prices, but any reports on a delay in the final announcement may aid bonds, dealers said. US President Donald Trump said Wednesday he was ready for a trade deal with India.

Movements in crude oil prices and the rupee 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% Thursday.

India Gilts: Mixed; 10-yr gilt gives up most gains post RBI Gupta's comments

MUMBAI--1531 IST--Prices of government bonds were mixed, while the benchmark 10-year 6.33%, 2035 gilt gave up most gains to trade in a thin band. Some traders said Reserve Bank of India Deputy Governor Poonam Gupta's comments during the day failed to lend any fresh cues that could reinforce bets of a rate cut. Tight liquidity in the banking system also deterred traders from any aggressive purchases, dealers said. 

"In the morning, it rose a little but now after DG's (deputy governor's) comments it fizzled out," a dealer at a private sector bank said. "Nothing positive (from the comments) is also a negative."

There is still room to ease monetary policy as growth is below potential and aspirations even at 6.8% in FY26, but when and how much remains to be seen, RBI Gupta said in a fireside chat at the Business Standard BFSI Summit Wednesday. This was similar to her comments in the minutes of the RBI Monetary Policy Committee's last meeting and did not increase rate cut hopes, dealers said. Some traders said their rate view was unaffected by Gupta's comments. 

On the domestic front, tightness in systemic liquidity hindered aggressive purchases, dealers said. Mutual funds were also cash-strapped, they said. The central bank's net injection into the banking system--a proxy for the systemic liquidity deficit--was INR 80.84 billion Tuesday, against INR 208.62 billion Monday.

"There's no buying coming in because people are tight on cash," a dealer at a state-owned bank said.

Traders expect the RBI to announce open market purchases of gilts through auction, though the timeline is uncertain. Some said operations could start next month, while others said OMO auctions would only be conducted end of December or January. Bond prices could rise even if the RBI purchases gilts on-screen in the secondary market, dealers said.   

Prices were buoyed by purchases by foreign portfolio investors, dealers said. As of 1531 IST, FPIs net purchased gilts worth INR 2.53 billion through the fully accessible route, according to data from Clearing Corp. of India. Dealers received queries from FPIs for gilts maturing in three, five and 10 years, they said. Some traders also expect bond prices to rise close to the end of trade on bets of a rate cut by the US Federal Open Market Committee late Wednesday.

However, a 25 bps rate cut by the FOMC on Wednesday is largely priced in, and traders await guidance from US Federal Reserve Chair Jerome Powell on the scope for further easing, including on whether the FOMC will cut rates by 25 bps again in December. Some traders also expect the US Federal Reserve to announce an end to its balance-sheet reduction Wednesday, which if announced, could see gilt prices rising at market open Thursday. However, the lack of economic data from the US due to the ongoing government shutdown could cloud the Fed's assessment, which made it 'risky' to bet on the FOMC outcome, a dealer said. 

At 1530 IST, the turnover in the gilts market was INR 275.90 billion, slightly higher than INR 219.00 billion at the same time Tuesday, 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 6.50-6.55% for the rest of the day, while that on the 6.48%, 2035 bond is seen at 6.44-6.48%. (Cassandra Carvalho)

India Gilts: Up on likely FPI buys, bets ahead of US FOMC outcome

India Gilts: Up on likely FPI buys, bets ahead of US FOMC outcome

MUMBAI--1225 IST--Government bond prices rose due to likely purchases by foreign portfolio investors after US President Donald Trump said the US was striking a great deal with India, dealers said. Some traders also placed bets ahead of the US Federal Open Market Committee's rate decision later on Wednesday, they said. 

"The move from 6.48% to 6.54% (on the 10-year benchmark 6.33%, 2035 bond yield) was primarily because of the trade deal, so it has been largely priced in by domestic guys," a dealer at a private sector bank said. "Trade volumes are still pretty thin and most of the flows from FPIs have been in 10 and five-year (benchmark gilts)."

Speaking at the Asia-Pacific Economic Cooperation leaders' Summit in South Korea on Wednesday, Trump said, "I'm doing a trade deal with India, and I have great respect and love for Prime Minister Modi. We have a great relationship."

A rise in the rupee had also led foreign traders to pick up gilts, dealers said. The rupee rose to 88.15 to a dollar from a close of 88.27 to a dollar on Tuesday. 

Fed fund futures are pricing in a 25 basis points cut each at the FOMC's October and December meetings, hopes of which were cemented by a slightly lower-than-expected US CPI print for September. Traders also expect the US Federal Reserve to announce an end to its balance-sheet reduction on Wednesday. FPIs built long positions ahead of the event on expectations that the interest rate differential between US Treasury yields and Indian bond yields would widen, dealers said. 

At 1213 IST, the turnover in the gilt market was INR 139.80 billion, similar to INR 137.75 billion at 1230 IST Tuesday, 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 6.50-6.55% during the day, while that on the 6.48%, 2035 bond is seen at 6.44-6.48%. (Srijita Bose)

India Gilts: Tad up on bets of rate cut by FOMC Wed; trade volume low

MUMBAI--1003 IST--Government bond prices were slightly up ahead of the US Federal Open Market Committee's decision on interest rates late Wednesday as traders purchased the 10-year benchmark 6.33%, 2035 paper on expectations that the FOMC will deliver a 25 basis-point rate cut later in the day, dealers said. Some traders hope that the FOMC's commentary late Wednesday will indicate scope for further easing, including a 25-bps cut in December. The yield on the 10-year benchmark US Treasury note was 3.98% at 1003 IST, the same as 1700 IST Tuesday. The 10-year US yield remaining below the key 4.00% provided comfort to bond traders, they said.

Trade volume remained muted, as seen earlier this week, as traders are cautious due to uncertainty hovering around the timeline and likelihood of a trade deal between the US and India. The likelihood of a US-India trade deal reduced expectations of a rate cut by the RBI's Monetary Policy Committee in the December meeting, dealers said. At 1000 IST, turnover in the gilt market was INR 33.95 billion, up from INR 17.15 billion at 0930 IST Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.

"I don't think RBI has any need to conduct OMOs now in this quarter (Oct-Dec) because of the CRR cut, we have some INR 500 billion coming through on Saturday right," a dealer at a primary dealership said. "But if it is intervening at $1 billion daily then that makes the case for OMOs."

Some traders expect the central bank to conduct open-market purchases of gilts through auction as the RBI's dollar sales to support the rupee, at a pace of around $1.0 billion-$1.5 billion per day, has been reducing durable rupee liquidity, dealers said. 

The yield on the 6.33%, 2035 benchmark bond is seen moving in a range of 6.50-6.55% during the day, while that on the 6.48%, 2035 bond is seen at 6.44-6.48%. (Janwee Prajapati)

India Gilts: Seen higher ahead of FOMC decision

MUMBAI – Prices of government bonds are seen opening higher Wednesday, dealers said. Traders will closely track the movement of US Treasury yields ahead of the US Federal Open Market Committee's rate decision late Wednesday. Lack of significant domestic triggers may keep trade lacklustre and volumes low, as seen so far this week. Several traders remain on leave post the Diwali week. Since Oct. 20, the average daily turnover in the gilt market has been a mere INR 299.42 billion, compared to an average of INR 667.67 billion seen in the week ended Oct. 17.  

The yield on the 10-year benchmark 6.33%, 2035 gilt is seen moving in a range of 6.50-6.55% during the day. On Tuesday, 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 6.44-6.50%. On Tuesday, it ended at INR 100.09 or 6.47% yield. The yield on the benchmark 10-year US Treasury note fell below 4% overnight and was at 3.99% at 0800 IST, against 3.98% at 1700 IST Tuesday.

Gilts have priced in a 25 bps cut by the FOMC Wednesday, and traders are also betting on a similar cut by the FOMC in December, dealers said. However, lack of economic data due to the ongoing government shutdown in the US may cloud the US Federal Reserve's assessment and traders await clarity from US Federal Reserve Chair Jerome Powell on the scope for further cuts. 

While some traders are betting on the 10-year US yield falling to as low as 3.85%, offshore cues may take a backseat until there is certainty on the timeline and likelihood of a trade deal between the US and India. A trade deal is likely to deter the Reserve Bank of India's Monetary Policy Committee from cutting the repo rate in December, dealers said. 

Some traders may trim portfolios after the RBI did not announce any open market purchase of gilts through auction post market hours Tuesday, though speculation of such operations being conducted is growing as the RBI's dollar sales to support the rupee, at a pace of around $1.0 billion-$1.5 billion per day, has been reducing durable rupee liquidity, dealers said. Some traders remain unconvinced about the need for OMOs in the December quarter, which prevented a broader rise in gilt prices Tuesday despite expectations of the RBI measure floating through the day, dealers said.

Traders may track the result of the INR-190-billion Treasury bill auction, especially due to recent pressure on systemic liquidity, which has led to the overnight weighted average call money rate being largely above the repo rate. Some unwinding of rate cut bets for December may also spike T-bill cut-off yields, dealers said.  (Cassandra Carvalho)

End

US$1 = INR 88.1950

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

Edited by Akul Nishant Akhoury

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