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Informist, Thursday, Nov. 6, 2025

By Aaryan Khanna

NEW DELHI – Government bond prices ended higher on speculation that the Reserve Bank of India had bought gilts in the secondary market this week in order to add durable liquidity to the banking system and cap bond yields. The 6.48%, 2035, up for auction on Friday, was a laggard ahead of fresh supply, with the 15-year benchmark 6.68%, 2040 gilt outperforming 10-year bonds for the second day in a row.

The most-traded 6.33%, 2035 gilt ended at INR 98.71, or 6.52% yield, as against 98.62 or 6.53% yield Tuesday. The bond ended off highs, after hitting INR 98.82 intraday. Money markets were shut on Wednesday for Guru Nanak Jayanti. The on-the-run 10-year 6.48%, 2035 gilt closed at INR 100.12, or 6.46% yield, as against INR 100.10, or 6.47% yield, in the previous session. The government will sell INR 320 billion of the bond at auction 1030-1130 IST Friday.

The RBI had rejected all bids for the 6.28% 2032 gilt at last week's auction, likely signalling its displeasure with a rise in yields. Dealers speculated that the RBI would follow through on the action by conducting open-market operations to buy bonds in the secondary market. That speculation turned into buying momentum Thursday after data from Clearing Corp. of India showed that 'others' – a category that includes the central bank, provident funds and insurers – bought INR 90 billion worth of gilts in the secondary market Monday and Tuesday.

Traders discounted the thought that insurers and provident funds were part of such significant purchases, as they had no large buy orders from these participants in the past trading sessions, dealers said. Some traders speculated that the RBI was directly buying the 2040 gilt this week, which led to its sharp rise. Others said traders were driving up the 15-year bond, avoiding the 10-year segment in the secondary market ahead of its fresh supply, while the central bank was buying other securities. The yield on the 6.68%, 2040 gilt has fallen 5 basis points since Monday's close, while that on the 6.48%, 2035 bond is down less than 1 basis point.

"The volumes in that paper (6.68%, 2040 bond) have also increased this week, which is natural because the 6.48%, 2035 bond is dead before the auction," a dealer at a private-sector bank said. "Also, I think the market wants proof of the RBI's buying action before people start going too long on the 10-year bonds. In fact, it had given a lot of people some good exits."

The yield on the 6.33%, 2035 bond slipped below the psychologically crucial 6.50% mark in early trade for the first time since Oct. 23. However, profit booking around that level kept gains in the bond limited. Some primary dealers also short-sold the most-traded bond ahead of the INR 320-billion auction Friday, dealers said. A rise in the 10-year US Treasury yield to 4.15% at the end of Indian market hours Thursday from 4.10% at 1700 IST Tuesday also weighed on gilt prices, they said. 

The auction is expected to sail through after the build-up of short bets and because the 6.48%, 2035 is likely to generate widespread demand in only its second auction, dealers said. The bond has not been heavily traded in the secondary market despite its INR 320-billion outstanding, though some traders said its liquidity would increase after the fresh supply.

That would allow the bond to be considered the outright 10-year benchmark by traders and investors, dealers said. The bond was traded 12 times in the 'When-Issued (Re-Issues)' segment of the Negotiated Dealing System-Order Matching platform on Thursday in a range of INR 100.04-100.12.

A key determinant for demand at these price levels will be whether the 'Others' segment continues to show a net purchase number for Thursday, dealers said. If hopes of RBI purchases weaken by the bidding time Friday, traders may demand higher returns to pick up the large supply of the 6.48%, 2035 bond at auction, they said. The data on the RBI's activity in the bond market this week will be released only on Nov. 13.

"The market is optimistic, but these things can change very quickly," a dealer at a primary dealership said. "Anyway, the focus is the auction right now – the market did pretty well today (Thursday), considering they will have to buy INR 320 billion tomorrow (Friday)."

There were also mixed reports on the outcomes of the RBI's meetings with standalone primary dealers on Tuesday and with banks with integrated primary dealerships on Thursday. Officials who attended the meeting Tuesday told Informist that the discussion was largely operational in nature about primary dealers' underwriting commitments and so on, without any market-relevant discussions except for the RBI asking the reason for the recent rise in yields and market participants citing poor investor demand.

However, other media outlets reported that primary dealers demanded that the central bank conduct open market operations to lower yields, as well as switch to uniform-price auctions to generate more investor demand in the market, since all successful bidders receive the bond at the cut-off. Weekly gilt auctions have been conducted using the multiple-price method since April last year, in which bidders are allotted securities at their respective bid prices, which favours traders over end investors.

Turnover in the gilts market was INR 516.80 billion, marginally up from INR 513.65 billion Tuesday, according to data on the RBI's NDS-OM platform. There was one trade worth INR 100 million using the RBI's wholesale e-rupee pilot Thursday, the same as on Tuesday.

OUTLOOK

On Friday, government bond prices may take cues from the category-wise share of buy-sell data for the gilt market Thursday, dealers said. Further net purchases by the 'Others' category could continue to stoke hopes of the RBI buying bonds in the secondary market at a consistent pace for the first time since January.

Bonds maturing in up to 15 years are seen as the target of these purchases and will be preferred by traders, dealers said. This is also likely to help the INR 320-billion supply of the 6.48%, 2035 bond at auction sail through. Net secondary market purchases from the 'others' segment, which includes the RBI, have totalled INR 90 billion on Monday and Tuesday.

Traders remain uncertain whether the RBI's Monetary Policy Committee will cut the repo rate in December. At the same time, confidence in demand matching supply and the government's fiscal strength has increased after the RBI accepted only bids worth only INR 210 billion against the notified INR 320 billion at last week's gilt auction, dealers said. Traders continue to expect the RBI to soon conduct auctions 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 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 6.47-6.57%. The 6.48%, 2035 bond is seen in a range of 6.42-6.52% Friday.

India Gilts: Remain up on hopes of RBI support; short bets limit gains

MUMBAI--1515 IST--Prices of most government bonds remained up as traders bought gilts in the hope of support from the Reserve Bank of India as the "others" category of gilt market participants, which comprises insurance companies, provident funds, and the RBI, has net bought nearly INR 199 billion worth of gilts since Oct. 16, data from Clearing Corp. of India showed. Gains were limited, however, as banks took profits when the 6.33%, 2035 benchmark bond yield hit the 6.50% level, the lower end of the recent trading range. Some traders placed short bets ahead of the weekly gilt auction Friday, which also weighed on gilt prices.

"The overall market is positive after the 'Other' segment showed buys... everybody's expecting support from the RBI now, so they are buying," a dealer at a private-sector bank said. "If it shows buys even today, then tomorrow's auction is likely to be good."

Traders are hopeful that the meeting between the RBI and banks' primary dealers Thursday will give indications of the central bank conducting open market purchases through auction. Some traders took profits as the yield on the 6.33%, 2035 benchmark bond hovered near the key 6.50% level, which is considered lucrative. Several traders were unable to exit their bond purchases last month as the yield on the 10-year benchmark bond shot up from 6.52% on Oct. 1 to the day's high of 6.60% on Oct. 31. Thursday, traders also focussed on the bond auction Friday. 

"If the auction tomorrow (Friday) is good, and it sails through, then the market is likely to remain positive till policy day," a dealer at a state-owned bank said. The government will sell INR 320 billion of the 6.48%, 2035 bond Friday. Some traders placed short bets ahead of the auction in the hope of buying the bond at the auction at a lower price. In the WhenIssued (ReIssues) segment of the RBI's Negotiated Dealing System-Order Matching platform, the 6.48%, 2035 bond was traded for a total amount of INR 5.35 billion at a yield of around 6.47%. 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 at 1515 IST showed trades worth INR 132.88 billion in the 6.33%, 2035 gilt, up from INR 113.18 billion Monday. The bond was not traded in CROMS Tuesday ahead of its interest payment. 

The 15-year 6.68%, 2040 bond outperformed the 6.33%, 2035 benchmark bond on purchases by traders as the yield spread between the 15-year paper and the 10-year benchmark was attractive, dealers said. 

At 1530 IST, the turnover in the gilts market was INR 443.35 billion, similar to INR 442.60 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 6.48-6.55% for the rest of the day, while that on the 6.48%, 2035 bond is seen at 6.43-6.49%.  (Janwee Prajapati)

India Gilts: Remain up; 15-year benchmark bond up on hopes of RBI's OMO buys

MUMBAI--1219 IST--Most government bond prices remained up Thursday as traders speculated that the Reserve Bank of India bought gilts in the secondary market through open market operations, dealers said. However, traders also sold bonds as yield on the 10-year benchmark 6.33%, 2035 gilt fell below 6.50% and as some traders placed short bets ahead of the INR 320 billion gilt auction Friday, they said. 

"Traders are not sure whether it is RBI buying, though the buys in the market are solely because of expectations of RBI support. But whether yields will fall or not will depend on how much of RBI support is there," a dealer at a state-owned bank said. "We will have to see data (RBI's Bulletin Weekly Statistical Supplement) tomorrow (Friday) to see if anything shows up. Also there is auction tomorrow so these levels won't sustain today."

Traders are hopeful that the RBI bought gilts through on-screen buys, dealers said. The 'others' category of gilt market participants, which comprises insurance companies, provident funds and the RBI, has net bought nearly INR 199 billion worth of gilts since Oct. 16, data from Clearing Corp. of India showed. Though RBI's Weekly Statistical Supplement data has not shown buys by the central bank so far in October, traders hoped that some buys by RBI could be reflected when the data for week ended Oct. 31 is released Friday. Some traders expect the RBI to announce a primary gilt buy auction sometime later in the month to limit rise in gilt yields, dealers said. The 15-year benchmark 6.68%, 2040 bond gained favour among traders on hopes of OMO buys by the central bank, dealers said, and as yield spread on the 15-year gilt over the 10-year benchmark gilt was found attractive. 

Meanwhile, traders also found yields attractive to book profits, dealers said. "I am getting a good exit here and I still don't have a clear view on how the auction will be tomorrow. So I don't want to add aggressive positions here and go light right now," a dealer at a private sector bank said. The government will sell the upcoming 10-year 6.48%, 2035 bond at auction Friday. Traders placed short bets on the 10-year benchmark to pick up the 6.48%, 2035 bond at auction Friday, with some fearing traders will demand higher yields on the bond as uncertainty around domestic rate trajectory persists.

A rise in overnight indexed swap rates led bonds to pare some gains, dealers said. The yield on the 10-year US Treasury note also rose to 4.15%, 5 basis points higher than close, at 1700 IST Tuesday, which likely led some foreign portfolio investors and banks to sell gilts, they said. 

At 1219 IST, the turnover in the gilt market was INR 240.15 billion, slightly lower than INR 261.20 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 6.48-6.55% during the day, while that on the 6.48%, 2035 bond is seen at 6.43-6.49%.  (Srijita Bose)

India Gilts: Off highs as US ylds up; bets of RBI onscreen gilt buys rise

MUMBAI--0933 IST--Government bond prices were off highs Thursday due to a rise in US Treasury yields and after the Reserve Bank of India's meeting with standalone primary dealerships Tuesday failed to lend any positive cues, dealers said. Traders also booked profits after the yield on the 10-year benchmark 6.33%, 2035 gilt hit 6.4984%, the lowest since Oct. 23. Bond prices rose sharply at market open as traders continued to speculate that the central bank purchased gilts in the secondary market Monday and Tuesday, dealers said. On Monday and Tuesday combined, the 'others' category of gilt market participants, which comprises insurance companies, provident funds and the RBI, net bought gilts worth nearly INR 90.00 billion, data from the Clearing Corp. of India showed. 

The RBI's meeting with primary dealerships Tuesday was largely around operational processes, dealers said. However, traders are still hopeful of a meeting between the RBI and banks' primary dealers on Thursday, providing indications of the central bank conducting open market purchases through auction. The central bank did not accept any bids for the 6.28%, 2032 bond at last week's gilt auction, which the market perceived as a positive signal from the RBI, as it showed that the RBI is not comfortable with higher yields. This supported traders' view of the RBI likely purchasing gilts in the secondary market.

Bond prices may give up some gains towards the end of trade as traders may place short bets before the fresh supply of INR 320 billion of the 6.48%, 2035 gilt at the weekly gilt auction Friday, dealers said. A rise in US yields also weighed on bond prices. The yield on the benchmark 10-year US Treasury yield was 4.15% as of 0830 IST, against 4.10% at 1700 IST Tuesday.

"The levels (yields) are expected to remain around these levels only....earlier, it (prices) was up because somebody must have taken the bet (accepted a bid for a higher price)," a trader at a primary dealership said. "Later on, it (6.33%, 2035 bond price) might fall slightly as traders will place shorts for the auction." Some traders said the 10-year benchmark bond yield was unlikely to sustain a fall below 6.50%, which is a key technical level, Thursday, while others said a fall to 6.48% was possible on bets of the RBI purchasing gilts on-screen.

At 0930 IST, the turnover in the gilt market was INR 79.20 billion, lower than INR 116.55 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 6.48-6.55% during the day, while that on the 6.48%, 2035 bond is seen at 6.43-6.49%.  (Janwee Prajapati)

India Gilts: Seen dn after RBI-PD meet Tue, 'others' buy data to limit losses

MUMBAI – Prices of government bonds are seen opening lower Thursday after the outcome of the meeting between standalone primary dealerships and the Reserve Bank of India on Tuesday did not offer any positive outcome that could pull bond yields lower, dealers said. An overnight rise in US Treasury yields may also weigh on bond prices. However, speculation that the central bank is purchasing gilts in the secondary market may limit losses, dealers said. On Monday and Tuesday combined, the 'others' category of gilt market participants, which comprises insurance companies, provident funds and the Reserve Bank of India, net bought gilts worth nearly INR 90.00 billion, data from the Clearing Corp. of India showed. 

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 Tuesday, the 2035 gilt ended at INR 98.62, or 6.53% yield. The 10-year 6.48%, 2035 bond is expected to move in a range of 6.44-6.50%. On Tuesday, it ended at INR 100.10 or 6.47% yield. India's financial markets were shut Wednesday for Guru Nanak Jayanti. The yield on the benchmark 10-year US Treasury yield was 4.15% as of 0830 IST, against 4.10% at 1700 IST Tuesday.

The RBI's meeting with standalone primary dealerships was largely around operational processes and the central bank did not offer any indications of any support measure to bring down bond yields. Traders had hoped that the central bank would start conducting open market purchases of gilts through auctions in the near term, and that there would be some indication of this at the meeting. Traders now await the outcome of the central bank's meeting with banks' primary dealership desks on Thursday.  (Cassandra Carvalho)  End

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

Edited by Saji George Titus

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