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Informist, Tuesday, Nov. 4, 2025

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended higher, though the prices of bonds maturing in 10 years were off highs as traders sold gilts at a profit before the fresh supply of INR 320 billion of the 6.48%, 2035 gilt Friday. Expectations that the Reserve Bank of India would take steps to support the market had led to prices rising, especially as some traders speculated the central bank bought gilts in the secondary market Monday, dealers said. Details of the RBI's meeting with standalone primary dealerships Tuesday were sought after in the latter half of trade. 

 

The most-traded 6.33%, 2035 gilt ended at INR 98.62, or 6.53% yield, against 98.57, or 6.53% yield, Monday. The bond's price had risen to INR 98.74 intraday. The on-the-run 10-year 6.48%, 2035 gilt closed at INR 100.10, or 6.47% yield, from INR 100.07, or 6.47% yield, in the previous session. The bond's price also retreated from a high of INR 100.18.

 

Bond prices had risen sharply in early trade as traders were unable to continue their short sales in the 6.33%, 2035 bond and covered their bets. Repo trades on the 6.33%, 2035 bond were shut a day before its coupon payment, leading to a rise in both trading volumes and prices. After the early demand for short covering was met, there were no buyers for the 6.33%, 2035 bond under the key 6.52% yield and prices ultimately took a tumble, with several traders looking to book profit at the level, dealers said. 

 

"The market was up because nobody could find a way to continue their short sales," a dealer at a private-sector bank said. "Since there was no fundamental trigger, I think so people just took the opportunity to book profits. We were hearing foreign banks were on the selling side."

 

Especially after the short covering, traders said they wanted to avoid piling into the 10-year bonds ahead of the auction of the newer gilt Friday. The RBI rejected all bids worth INR 110 billion of the 6.28%, 2032 gilt at auction last week, likely because traders were demanding high yields to pick up the gilt. Such an action for the 6.48%, 2035 gilt at the upcoming auction is seen unlikely, both as the government is likely to have limited fiscal room to continuously cut supply and because the RBI would want the once-a-month 10-year supply to add to the 6.48%, 2035 bond's trade volumes, dealers said. The on-the-run 10-year gilt's trade volume is regularly barely one-tenth of the 6.33%, 2035 bond, which is still considered the benchmark by most traders.

 

Some traders also said they found the 6.68%, 2040 gilt's spread over the 6.48%, 2035 gilt lucrative to pile into the paper, leading the 2040 gilt to be the biggest gainer Tuesday. The 15-year benchmark has underperformed the 10-year gilt over the past two weeks, with banks and mutual funds likely trimming their holdings of the bond. The spread between the two bonds had risen to 43 basis points Monday against 37 bps on Oct. 17.  With the hope that the RBI would next conduct open market operations to buy gilts of up to 15 years, the 6.68%, 2040 gilt was seen a cheap buy as a potential beneficiary, dealers said. Some traders also speculated the central bank had bought it in the secondary market.

 

The 'others' category of gilt market participants – which comprises insurance companies, provident funds and the RBI – net bought gilts worth INR 40.36 billion Monday, data from the Clearing Corp. of India showed. Traders speculated that this figure could be purchases by the RBI on screen. Several traders have been expecting the central bank to begin open market purchases of gilts both on-screen and through auctions as the RBI's dollar sales in the foreign exchange market drain systemic liquidity. At the Monetary Policy Committee's post-policy press conference in October, RBI Governor Sanjay Malhotra said "a number of measures have been contemplated" to bring the 10-year benchmark bond yield lower. The RBI had last bought a minuscule INR 100 million of gilts in the week ended Sept. 26.

 

"The market gets to know these things. It was not insurers that bought bonds in such a quantum yesterday (Monday)," a dealer at a primary dealership said. "Unless there was a big auction transfer (transfer from bidders to end-investors of auction stock) – but even the price action yesterday (Monday) in some of the illiquid papers seemed to suggest it was the (RBI)."

 

A rise in overnight indexed swap rates also weighed on gilt prices in the latter half of trade, as traders continue to be uncertain about a domestic rate cut in December. The five-year OIS rate ended at 5.70% from 5.68% Monday. The market is sharply divided on those hopes, with some dealers confident low inflation would allow a rate cut to 5.25% while others said that a potential recovery in the growth trajectory could prompt the Monetary Policy Committee to keep its powder dry. Further developments on the India-US trade talks were closely watched as a reduction in the 50% US tariff on India's exports could lead to a rise in GDP growth, dealers said.

 

Short-term gilts continued to be in favour regardless of the rate view, as these bonds offered an attractive "carry", or spread, over the overnight cost of funding, dealers said. Banks have added short-term gilts to their portfolios as liquidity has improved this week following a cash reserve ratio cut and the government's month-end spending. After dipping into a deficit last week, the RBI's net liquidity absorbed from the banking system – a proxy for a liquidity surplus – was at INR 1.75 trillion Monday. 

 

Turnover in the gilts market was INR 513.65 billion, up from INR 435.95 billion Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There was one trade worth INR 100 million using the RBI's wholesale e-rupee pilot Tuesday as against no trades the previous day.

 

OUTLOOK

Money markets will remain shut Wednesday for Guru Nanak Jayanti. On Thursday, government bond prices may open steady due to lack of fresh domestic cues. The movement in US Treasury yields during the holiday may lend cues at open, dealers said.

 

Expectations of the RBI buying gilts in the secondary market to infuse durable liquidity push up prices of bonds maturing up to 15 years. Net secondary market purchases from the 'others' segment, which includes the RBI, has topped INR 40 billion each on Monday and Tuesday, which is likely to increase speculation that the central bank has already begun its purchases in the 10- and 15-year gilts, dealers said.

 

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 in 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 said last week he was ready for a trade deal with India.

 

Movement of 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% Thursday.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.33%, 2035	98.6150	6.5279%	98.5700	6.5343%
6.48%, 2035	100.0975	6.4655%	100.0700	6.4694%
6.01%, 2030	99.3800	6.1610%	99.3200	6.1757%
6.68%, 2040	98.2450	6.8704%	97.9600	6.9019%
6.90%, 2065	94.6700	7.3137%	94.5500	7.3235%

 

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India Gilts: Off highs on rise in OIS, profit-taking; focus on RBI-PD meet

 

MUMBAI--1553 IST--Government bond prices were off highs and gave up most of earlier gains as traders placed short bets ahead of the fresh supply of INR 320 billion of the 6.48%, 2035 gilt Friday, dealers said. A rise in swap rates also weighed on bond prices. Traders booked profits after the yield on the 10-year 6.33%, 2035 bond hit a low of 6.51% during the day. All attention will be on the meeting between standalone primary dealerships and the central bank later in the day, as traders hope for some indication of support from the Reserve Bank of India at the outcome.

 

Traders likely placed short bets ahead of the market holiday on Wednesday and the upcoming weekly gilt auction, dealers said. India's financial markets will be closed on Wednesday for Guru Nanak Jayanti. Bond prices also gave up gains, tracking the rise in the five-year swap rate to the day's high of 5.71%. Prices were buoyed by expectations of support from the RBI through open-market purchases, on-screen operations, and auctions. Traders bought gilts maturing in up to 15 years, anticipating central bank support, and speculated that the RBI made on-screen purchases in the secondary market on Monday. The price of the 15-year benchmark 6.68%, 2040 gilt outperformed the 10-year benchmark bond as the yield spread between the two gilts was lucrative, they said.

 

"Whenever the yields in the market rise, there is some sort of buying to prevent them from rising further," a dealer at a private sector bank said. "If you connect the dots, it seems like someone, like the RBI, is preventing the yields from rising too high." Traders said the 6.50% yield on the 6.33%, 2035 bond is a key level to book profits, and was unlikely to fall below the level without a strong trigger.  

 

Bond prices were little changed after the result of the state bond auctions Tuesday. Maharashtra did not accept any bids for its 2050 and 2055 bond reissues, which bond traders saw as positive for the state's fiscal management. However, it also indicated that demand from long-term investors was tepid. Seven states raised INR 116 billion against a notified amount of INR 136 billion. The cut-off yield on Tamil Nadu's 10-year paper was 7.14%, slightly lower than 7.15% estimated in an Informist poll. The yield spread of Tamil Nadu's 10-year bond over the 6.33%, 2035 benchmark gilt was 61 basis points, lower than 62-69 bps seen on states' 10-year bonds at last week's auction. 

 

At 1530 IST, the turnover in the gilt market was INR 442.60 billion, higher than INR 334.55 billion at 1535 IST Monday, 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 6.48-6.55% for the rest of the day, while that on the 6.48%, 2035 bond is seen 6.42-6.49%.  (Janwee Prajapati)

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India Gilts: Remain up, FPIs likely buy bonds as rupee rises

 

	1148 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.69	98.74	98.59	98.59	98.57
YTM (%)	6.5175	6.5106	6.5315	6.5315	6.5343

 

	1148 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.17	100.18	100.11	100.11	100.07
YTM (%)	6.4555	6.4548	6.4638	6.4638	6.4694

 

MUMBAI--1148 IST--Government bond prices remained higher Tuesday as traders speculated that the Reserve Bank of India could provide support to the gilts market by purchasing gilts through open market operations, dealers said. Some foreign portfolio investors also bought gilts as the rupee rose against the dollar, they said. 

 

"There are expectations that RBI could (purchase) bonds, hence we're seeing buying," a dealer at a private sector bank said. "There is some amount of asset-liability management buying as well, but I think seven and 15-year (bonds) look good right now if you want to position for some open market operations announcement (by RBI)."

 

Traders picked up gilts maturing in up to 15 years on hopes of support from the central bank, dealers said. They also speculated that the RBI bought gilts in the secondary market through on-screen OMO buys. The 15-year benchmark 6.68%, 2040 gilt was sharply up as traders found the yield on the bond attractive.

 

Tuesday's state bond auction witnessed firm demand for bonds maturing in up to 11 years from banks' asset liability managers. Demand for Rajasthan's four-year bond and Tamil Nadu's 10-year bond was seen firm from banks, dealers said. However, demand for longer tenure state bonds was muted from long-term investors such as insurers and pension funds, as they refrained from adding exposure to bonds due to uncertainty around RBI's Monetary Policy Committee action on interest rates going ahead, dealers said. Further, many investors said they expect borrowing through state bonds to be higher in the Jan-Mar quarter and may wait for higher yield spreads over gilts to pick up state bonds. Traders also continued to trim their exposure in longer tenure gilts waiting for RBI MPC's next move around benchmark interest rates, dealers said.

 

At 1148 IST, the turnover in the gilt market was INR 230.00 billion, higher than INR 129.90 billion at 1130 IST Monday, 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 6.48-6.55% during the day, while that on the 6.48%, 2035 bond is seen at 6.42-6.49%.  (Srijita Bose)

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India Gilts: Up on speculation of gilt buys by RBI Mon, PD-RBI meet eyed

 

	0943 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.72	98.74	98.59	98.59	98.57
YTM (%)	6.5135	6.5106	6.5315	6.5315	6.5343

 

	0943 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.16	100.18	100.11	100.11	100.07
YTM (%)	6.4576	6.4548	6.4638	6.4638	6.4694

MUMBAI--0943 IST--Government bond prices rose Tuesday, especially the 6.33%, 2035 bond, due to speculation that the Reserve Bank of India purchased gilts on-screen Monday, which fuelled hopes of support from the central bank to bring down bond yields, dealers said. Traders anticipate support from the RBI after its meetings with primary dealerships Tuesday and Thursday. A surge in the rupee against the dollar also aided the rise in prices, dealers said.  

 

The 'others' category of gilt market participants, which comprises insurance companies, provident funds and the Reserve Bank of India, net bought gilts worth INR 40.36 billion Monday, data from the Clearing Corp. of India showed. Traders speculated that this figure could be purchases by the RBI on-screen. Several traders have been expecting the central bank to begin open market purchases of gilts both on-screen and through auctions as the RBI's dollar sales in the foreign exchange market drain systemic liquidity. At the Monetary Policy Committee's post-policy press conference in October, RBI Governor Sanjay Malhotra said "a number of measures have been contemplated" to bring the 10-year benchmark bond yield lower. 

 

"Yesterday's 'others' buys," a dealer at a state-owned bank said. "People are saying it was RBI who bought yesterday (Monday)." Traders were also optimistic of the outcome of the central bank's meeting with primary dealerships Tuesday and Thursday. Central bank officials are meeting primary dealerships, both standalone and those integrated with banks. The meeting will focus on business related to these market participants, but dealers speculated that the RBI might discuss the recent rise in gilt yields with 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.

 

Traders also said that the inability to trade the 6.33%, 2035 bond in the special repo segment of the Clearcorp Repo Order Matching System led to a rush to cover short bets in the gilt in the secondary market, which aided the rise in prices. No repo trade was conducted in the bond Tuesday ahead of the bond's interest payment date. 

 

"Today (Tuesday) is shut day in CROMS (Clearcorp Repo Order Matching System) for 6.33%, 2035 bond because of the interest payment," a dealer at another state-owned bank said. "Two, three banks have come to ask us for cover because they are not able to cover in CROMS."

 

The state bond auction is likely to sail through, dealers said. Seven states will raise INR 136 billion through bonds, which is lower than the indicated size of INR 194.50 in the state borrowing calendar for the Oct-Dec period. 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. Lower supply of state government bonds is likely to lead to yield spread contraction of around 5 basis points between state bonds and gilts of similar maturity from last week's auction, dealers said. 

 

At 0930 IST, the turnover in the gilt market was INR 116.55 billion, more than double the INR 42.40 billion at the same time Monday, 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 6.48-6.55% during the day, while that on the 6.48%, 2035 bond is seen at 6.42-6.49%. (Janwee Prajapati)

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India Gilts: Seen tad down as US ylds rise; outcome of RBI-PDs meet awaited

 

MUMBAI – Prices of government bonds are seen opening largely steady Tuesday due to lack of fresh triggers. A slight overnight rise in US Treasury yields may weigh, dealers said. The yield on the benchmark 10-year US Treasury note was 4.11% at 0800 IST, against 4.09% at 1700 IST Monday. Traders await the outcome of a meeting between officials from the Reserve Bank of India and primary dealerships, both standalone and those integrated with banks, Tuesday and Thursday.

 

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 Monday, the 2035 gilt ended at INR 98.57, or 6.53% yield. The 10-year 6.48%, 2035 bond is expected to move in a range of 6.45-6.50%. On Monday, it ended at INR 100.07 or 6.47% yield. 

 

Later in the day, bond prices may track the result of the state bond auction of INR 136 billion, the size of which is lower than indicated in the state borrowing calendar for the December quarter. At the auction, yield spreads of state bonds may compress by around 5 basis points over gilts of similar maturity from last week's auction, dealers said. 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.

 

The meeting between RBI officials and primary dealerships will focus on business related to these market participants, but dealers speculated that the RBI may discuss the recent rise in gilt yields with senior officials. Treasury representatives may propose measures like open market operations to add durable liquidity into the banking system by purchasing bonds, dealers said.

 

The 10-year benchmark gilt and the newly-issued 6.48%, 2035 bond may see selling pressure ahead of INR-320-billion fresh supply of the 6.48%, 2035 gilt at the weekly gilt auction Friday. Traders may place fresh short bets ahead of the auction after covering some bets Monday, dealers said. A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data for Monday showed trades worth INR 113.18 billion in the 6.33%, 2035 gilt, down from INR 151.20 billion Friday.

 

Nearing the end of trade, dealers may trim risks ahead of the scheduled holiday. India's financial markets are shut Wednesday for Guru Nanak Jayanti. (Cassandra Carvalho)

 

End

 

US$1 = INR 88.65

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

 

Edited by Deepshikha Bhardwaj

 

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