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Informist, Monday, Nov. 3, 2025

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended on a mixed note Monday. Bonds maturing up to 15 years recovered most losses as traders bought the gilts on speculation that the Reserve Bank of India would take further measures to curb yields after it rejected all the bids for the 6.28%, 2032 gilt at the auction last week. Long-term bonds remained out of favour and their prices ended lower likely as foreign banks and primary dealerships sold, dealers said.

 

The 10-year benchmark 6.33%, 2035 gilt ended at INR 98.57, or 6.53% yield, against 98.59, or 6.53% yield, Friday. The bond's price had fallen to as low as INR 98.43 intraday. The on-the-run 10-year 6.48%, 2035 gilt closed at INR 100.07, or 6.47% yield, from INR 100.06, or 6.47% yield, in the previous session.

 

"The bond market has become really unexplainable with such weird price movements in no volumes and with no triggers to think about so much of a movement," a fund manager at a mutual fund said, drawing attention to the nearly 50-paisa trading range on the 15-year benchmark 6.68%, 2040 gilt. "It has become a traders' market, with no fundamental reason for this much volatility."

 

Central bank officials are meeting primary dealerships, both standalone and those integrated with banks, this week. The topic is about business related to these market participants, but dealers speculated that the RBI may discuss the recent rise in gilt yields with the senior officials. The treasury representatives may propose measures like open market operations to add durable liquidity into the banking system by purchasing bonds, dealers said.

 

The rejection of bids by the RBI Friday came at a time when the 6.33%, 2035 bond had approached 6.60% intraday, a psychologically crucial level, with poor demand seen for the 2032 bond at the auction. With traders already having covered short bets after the auction, some private-sector and state-owned banks likely bought gilts Monday after the sharp fall in gilt prices in the first half of trade. Some traders also said they picked up gilts maturing in 8-10 years to bet on a December rate cut. However, there were no significant positive domestic cues beyond a smaller-than-indicated state bond auction announced Friday.

 

On Tuesday, states plan to raise INR 136 billion through bonds, against INR 194.50 billion in the indicative calendar for the quarter ending December. Gilt prices were little affected by the smaller state bond supply since October, about a third less than the indicative calendar for the December quarter, but continuously smaller auction amounts added to the positivity that supply would be kept in check amid poor demand, dealers said.

 

Still, long-term bonds continued to underperform gilts of other tenures and ended lower. Traders are avoiding picking up bonds maturing in 30 years or more as they do not expect any fresh positives to buoy prices from current levels, dealers said. Prospective open market purchases by the RBI will target bonds maturing up to 15 years, while demand from pension funds and life insurers has been modest, they said.

 

Even as the 6.98%, 2054 sovereign green bond at auction sailed through with its cut-off price well above market expectations, the 30-year benchmark 7.24%, 2055 gilt's cut-off price was below the median estimate in an Informist poll. Life insurers themselves continue to mop-up the bonds at a steady pace as prices fall, intended to hold the bonds to maturity and avoiding aggression amid the poor outlook on the gilts, dealers said.

 

Meanwhile, banks favoured bonds maturing around five years to bet on a December rate cut. The market is now pricing in only a 50% chance that the RBI's Monetary Policy Committee will cut the repo rate from the current 5.50% by another 25 basis points. These bets have weakened after the uncertainty around a US rate cut in December, but are likely to strengthen after India's CPI data for October is released on Nov. 12, dealers said. Traders see India's October CPI inflation at 1% or lower, well below the RBI's target band of 2-6% and at the lowest in the current series with base 2012.

 

"Everyone already has a position in short-term bonds that they are not letting go, maximum up to seven or eight years," a dealer at a state-owned bank said. "I think a December rate cut is almost certainly happening, so the short-end has room to rally more from here. Everyone seems to have the same view so at least yields won't rise."

 

Bond prices had opened higher but fell in the first half of trade due to some profit booking and caution on a lack of follow-on action from the RBI. Steady credit offtake at banks had also deterred traders from buying the 6.33%, 2035 gilt below 6.52% yield, dealers said. The bond's yield had fallen the most intraday in a month on Friday, retreating from the key 6.60% mark.

 

Turnover in the gilts market was INR 435.95 billion, down from INR 489.30 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades using the RBI's wholesale e-rupee pilot Monday as against two trades worth INR 100 million Friday.

 

OUTLOOK

On Tuesday, government bond prices may open steady due to lack of fresh domestic cues. Gilt prices may take direction from the result of the state bond auction in the second half of trade, dealers said. States will raise INR 136 billion through bonds at 1030-1130 IST Tuesday, against INR 194.50 billion in the indicative calendar for the quarter ending December.

 

Traders continue to be uncertain whether the RBI's rate-setting panel will cut the repo rate in December. At the same time, confidence of demand matching supply and the government's fiscal strength has increased after the reduction in bond supply at Friday's auction, dealers said. Traders continue to expect RBI to soon conduct open market operations to buy gilts, though estimates on the timing of such action vary.

 

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

 

Movement of US Treasury yields, crude oil prices, and the rupee may also influence gilts. The yield on the 10-year benchmark 6.33%, 2035 bond is seen at 6.48-6.59%. The 6.48%, 2035 bond is seen moving in a range of 6.42-6.49% Tuesday.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.5700	6.5343%	98.5875	6.5317%
6.48%, 2035	100.0700	6.4694%	100.0600	6.4708%
6.01%, 2030	99.3200	6.1757%	99.3100	6.1781%
6.68%, 2040	97.9600	6.9019%	98.0300	6.8941%
6.90%, 2065	94.5500	7.3235%	94.9000	7.2950%

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India Gilts: Mixed; 10-yr benchmark recovers on buys at lucrative 6.55% yld

 

	1537 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.58	98.65	98.43	98.64	98.59
YTM (%)	6.5329	6.5235	6.5553	6.5242	6.5317

 

	1537 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.06	100.13	99.98	100.07	100.06
YTM (%)	6.4715	6.4611	6.4825	6.4694	6.4708

 

MUMBAI--1537 IST--Prices of government bonds were mixed. The 10-year benchmark 6.33%, 2035 bond recovered from a fall to trade in a thin band on purchases at levels seen as lucrative when its yield hit a high of 6.56?rlier in the day, dealers said. Bonds maturing in more than 10 years remained down, however, as traders trimmed their stock of long-term gilts due to uncertainty on the rate view.   

 

"These levels look good. When it hit 55 (6.55% yield on the 10-year benchmark bond), 55 half (6.5550%), since then some buying has been coming in," a dealer at a state-owned bank said. "In the morning some profit-booking was there because after so many sessions we (bond prices) were finally in the money again."

 

Other than some value-buying, likely from state-owned banks, several traders were on the sidelines due to uncertainty on a trade deal between India and the US and subsequent uncertainty on whether the Reserve Bank of India's Monetary Policy Committee would cut rates in December. Some traders were also expecting the RBI to conduct open market purchases of gilts through auction, but the lack of any such announcement so far has disappointed them, dealers said. Moreover, liquidity in the banking system has returned to a comfortable surplus after largely being in deficit in the final days of October.

 

"I wouldn't say that there's positivity in the market, because see the price action in the 15-year bond," a dealer at a private-sector bank said. The 15-year 6.68%, 2040 bond last traded 9 paise down from Friday's close at INR 97.94.

 

Foreign portfolio investors purchased gilts, but in thin volumes, dealers said. As of 1537 IST, FPIs net purchased gilts worth INR 131.4 million through the fully accessible route, data from Clearing Corp. of India showed.        

 

At 1535 IST, the turnover in the gilt market was INR 334.55 billion, higher than INR 284.10 billion at the same time Friday, but still relatively thin, 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 6.51-6.56% during the day, while that on the 6.48%, 2035 bond is seen at 6.44-6.49%.  (Cassandra Carvalho)

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India Gilts: Remain down; long-term down more as traders exit positions

 

	1311 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.49	98.65	98.43	98.64	98.59
YTM (%)	6.5459	6.5235	6.5553	6.5242	6.5317

 

	1311 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.02	100.13	99.98	100.07	100.06
YTM (%)	6.4766	6.4611	6.4825	6.4694	6.4708

 

MUMBAI--1311 IST--Government bond prices remained down across tenures as traders sold bonds at a profit after prices rose on Friday, dealers said. The fall in prices of longer tenure bonds was more, as traders trimmed their bets in longer-duration bonds amid uncertainty around domestic rates, they said. 

 

Demand from longer tenure investors was seen weak at the auction Friday, even as the 6.98%, 2054 green bond was picked up by some insurers and pension funds at lower prices at Friday's auction, dealers said. Weak demand for the 7.24%, 2055 bond at Friday's gilt auction, even as yield spreads of longer tenure bonds over the 10-year benchmark 6.33%, 2035 bond widened, led traders to dump longer tenure bonds, dealers said. Longer tenure bonds were up in early trade after the Reserve Bank of India Friday announced that states would raise less than indicated through auction Tuesday. Post market hours on Friday, RBI said seven states would raise INR 136 billion, against indicative calendar for state borrowing for Oct-Dec showing states would borrow INR 194.50 billion on Tuesday. 

 

"Trade volumes remain low and people are profit-booking at these levels because there is no incremental change in view," a dealer at a private sector bank said. "Long-term is worst hit right now, but we have the 10-year auction, so there is also short bets for that."

 

Meanwhile, traders also placed short bets on the 10-year benchmark bond and some on the 6.48%, 2035 bond, dealers said. The 6.48%, 2035 bond will be up for auction Friday, where the outstanding of the bond will reach INR 640 billion. While, some traders expect the 6.48%, 2035 bond to take over as the 10-year benchmark after the auction, most remained on the sidelines as they expect trade volumes in the new 10-year bond to remain muted until more clarity on the domestic rate trajectory, dealers said. 

 

At 1310 IST, the turnover in the gilt market was INR 194.95 billion, higher than INR 96.85 billion at 1330 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 6.51-6.56% during the day, while that on the 6.48%, 2035 bond is seen at 6.44-6.49%.  (Srijita Bose)

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India Gilts: Down; reverse early gains on profit-booking, likely short sales

 

	1005 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.55	98.65	98.50	98.64	98.59
YTM (%)	6.5379	6.5235	6.5444	6.5242	6.5317

 

	1005 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.10	100.13	100.07	100.07	100.06
YTM (%)	6.4653	6.4611	6.4694	6.4694	6.4708

 

MUMBAI--1005 IST--Government bond prices were down Monday, reversing early gains as traders booked profits after the yield on the 10-year benchmark 6.33%, 2035 gilt saw its biggest single-day drop in almost a month on Friday. Some traders likely placed short bets on gilts before fresh supply of a 10-year gilt at the weekly gilt auction Friday, they said. 

 

After the sharp rise in prices Friday, traders booked profits, with some traders speculating that state-owned banks were selling gilts. State-owned banks were the largest net buyers of gilts Friday, net purchasing worth INR 14.24 billion. Some traders also placed fresh short bets on the 10-year benchmark gilt ahead of the weekly gilt auction. India's financial markets will be shut Wednesday for Guru Nanak Jayanti, giving traders one less day to make room for the fresh supply. The government will sell INR 320 billion of a 10-year bond Friday, the announcement of which is expected Monday. 

 

"The PSUs (state-owned banks) these days are playing at smaller differences rather than waiting for a change of 10-15 bps...they are trading in changes of a few basis points," a dealer at a primary dealership said. 

Bond prices opened higher after the Reserve Bank of India on Friday did not accept any bids for INR 110 billion of the 6.28%, 2032 bond at the weekly gilt auction. Traders interpreted the move as a signal from the central bank that it is not comfortable with higher yields. Lower-than-indicated state borrowing on Tuesday limited losses. States plan to raise INR 136 billion through bonds Tuesday, against INR 194.50 billion in the indicative calendar for the quarter ending December.

 

At 1000 IST, the turnover in the gilt market was INR 65.40 billion, higher than INR 12.15 billion at 0930 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 6.51-6.56% during the day, while that on the 6.48%, 2035 bond is seen at 6.44-6.49%.  (Janwee Prajapati)

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India Gilts: Seen higher on lower-than-indicated state bond supply

 

MUMBAI – Prices of government bonds are seen opening higher Monday, after the yield on the 10-year benchmark 6.33%, 2035 gilt saw its biggest single-day drop in almost a month on Friday. Lower-than-indicated state bond supply this week and a reduction in gilt supply at Friday's auction has improved confidence about demand matching supply, dealers said.

 

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 Friday, the 2035 gilt ended at INR 98.59, or 6.53% yield. The 10-year 6.48%, 2035 bond is expected to move in a range of 6.44-6.50%. On Friday, it ended at INR 100.06 or 6.47% yield. The yield on the benchmark 10-year US Treasury note was 4.08% at 0830 IST, against 4.11% at 1700 IST Friday. Japanese financial markets are shut on Monday for Japan Culture Day.

 

States plan to raise INR 136 billion through bonds Tuesday, against INR 194.50 billion in the indicative calendar for the quarter ending December. So far in Oct-Dec, states have raised INR 570.10 billion through bonds, less than the INR 861.60 billion indicated in the state borrowing calendar. Larger-than-indicated state bond supply was a pain point for traders in Jul-Sept, and yield spreads for 10-year state bonds over the 10-year benchmark gilt have fallen to around 64-73 basis points at the auction on Oct. 20 from over 100 bps seen last quarter. 

 

The Reserve Bank of India Friday rejected all bids for INR 110 billion of the 6.28%, 2032 bond, a move seen as a signal of discomfort with higher yields. However, the 10-year benchmark gilt and the newly-issued 6.48%, 2035 bond may see selling pressure this week ahead of fresh supply of a 10-year gilt at the weekly gilt auction Friday. The government will sell INR 320 billion of a 10-year bond Friday, the announcement of which is expected Monday.

 

Traders will closely track systemic liquidity, and continue to expect that the central bank will soon conduct open market operations to buy gilts, which could buoy gilt prices, though estimates of the timing of such action vary. Bond prices will also track the movement of the rupee against the dollar during the day, along with developments on talks between India and the US for a trade deal.  (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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