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Informist, Monday, Nov. 10, 2025

By Aaryan Khanna

NEW DELHI – Prices of most government bonds ended higher as traders placed bets that the Reserve Bank of India's speculated bond purchases last week continued Monday, dealers said. This boosted prices of bonds maturing in five to 15 years, seen as the target of the central bank's purchases. Gilts fell earlier in the day due to a rise in US Treasury yields and concern the RBI's purchases may stop after the maturity of the 5.15%, 2025 gilt on Sunday.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 100.19, or 6.45% yield, as against INR 100.08, or 6.47% yield, in the previous session. The most-traded 6.33%, 2035 gilt ended at INR 98.89, or 6.49% yield, against INR 98.71 or 6.51% yield on Friday. This is the first time the latter's yield has closed below the psychologically crucial 6.50% yield since Oct. 16.

While bond prices rose last week as data suggested the beginning of a long-awaited series of bond purchases by the central bank to cap gilt yields, others were more concerned that the speculated purchases were tied to the RBI replenishing its bond portfolio after the maturity of the 5.15%, 2025 gilt Sunday. Estimates for the RBI's holding range from INR 150 billion–INR 285 billion, according to market participants. 

In the holiday-shortened week ended Friday, 'Others' net bought gilts worth INR 205.47 billion in the secondary market, the best four-day stretch since June 2023, according to Clearing Corp. of India data. The 'Others' category includes the RBI, provident funds, and insurers.

"There was some chatter about it last week but this replenishment news into has come into focus today (Monday)," a dealer at a private-sector bank said. "I think eventually the market has pushed past it, because we had some decent gains even though there was a lot of profit booking from traders side."

The RBI had last bought gilts in sizeable quantum in the secondary market in the last 15 days of January, before starting a string of four straight months with open market operation auctions to buy gilts between February and May. Some traders expect a repeat of this phenomenon as durable liquidity has shrunk sharply to INR 3.61 trillion as of Oct. 17, from 5.58 trillion on Jul. 25. It has likely fallen further as the RBI has conducted dollar sales to protect the rupee from hitting a record low against the dollar in October and November.

Earlier, the RBI used to switch its holdings of short-term maturities with the government but has discontinued this practice for most part since 2023. In May this year, the central bank switched INR 373 billion of two bonds maturing in 2026-27 (Apr-Mar) with the government, skipping bonds maturing in the current fiscal.

With no precedent on the RBI tying secondary market purchases to bond maturities, traders said they would continue to buy gilts until the 'Others' data suggested the central bank had wound down its buying. While the RBI's purchases have started quicker than some traders had expected, most had expected the central bank to announce OMO auctions in December to infuse durable liquidity into the banking system. These may total up to INR 2 trillion by March to support monetary policy transmission of 100 basis points of repo rate cuts earlier in 2025, IDFC FIRST Bank said in a note.

Meanwhile, the 6.48%, 2035 bond outpaced trade volumes of the erstwhile 10-year benchmark 6.33%, 2035 bond in early trade after its INR-320-billion auction Friday. The former bond is now being considered the 10-year benchmark. This led to the spread of the 6.33%, 2035 bond over the 6.48%, 2035 bond declining Monday, as traders covered their short bets in the older gilt while initiating short sales in the on-the-run 10-year bond. Its outstanding doubled to INR 640 billion Monday.

"Today (Monday) some of the early volumes were just there because of the auction – PDs (primary dealers) were still finalising trades to investors," a dealer at a primary dealership said. "The 6.33%, 2035 (bond) is gaining because of short covering that is likely now going into the 6.48% (2035 bond)."

As gilt prices rose, some state-owned banks preferred to take profits on uncertainty over further rate cuts in India and before India's CPI inflation data for October on Wednesday. CPI inflation is expected to have fallen to a record low of 0.3% in October, according to an Informist poll of 12 economists. Inflation will fall due to a high base effect, lower food prices, and a reduction in the goods and services tax.

However, most traders said the GDP growth for the September quarter will be the major data point on which they firm up their bets on whether the RBI's Monetary Policy Committee will cut the repo rate in December, rather than inflation data. The September quarter GDP data is scheduled for Nov. 28, the week before the policy meeting. On-year growth of 7.5% in the quarter would reduce chances of a rate cut, while a print below 7.0% growth may bolster bets, dealers said. 

Meanwhile, traders said rising US yields were a concern that was not being expressed in gilt prices amid positivity from the RBI's bond purchases. The yield on the 10-year US Treasury note was 4.13% at the end of Indian market hours Monday, up from 4.10% at the same time Friday. Foreign portfolio investors had sold over INR-9-billion worth of fully accessible route bonds Monday, Clearing Corp. data at 1900 IST showed. Gilt prices are likely to fall if data suggests the central bank's secondary market purchases were limited to only one week, dealers said. 

Turnover in the gilts market was INR 644.85 billion, up sharply from INR 439.15 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades settled using the RBI's wholesale e-rupee pilot for the second straight day. 

OUTLOOK

On Tuesday, government bond prices may open steady amid lack of significant domestic cues and track the movement in US Treasury yields, 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. Net secondary market purchases from the 'others' segment, which includes the RBI, have totalled INR 205.47 billion between Monday and Friday, the best four-day stretch for the category since late June 2023. 

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 the gilt auction on Oct. 31, dealers said. Traders continue to expect the RBI to soon conduct auctions to buy gilts, though estimates on the timing of such action vary.

Some traders also expect the announcement of an India-US trade deal in November, which may dent the outlook for bond prices in two ways, they said. An expected reduction in the 50% US tariff on India's exports would increase the growth outlook and weaken the case for a rate cut. At the same time, the rupee might rebound against the dollar, leading to the RBI buying the greenback to shore up its foreign exchange reserves. The infusion of rupee liquidity this will cause may weaken the case for OMO purchases in December, as some sections of the market expect, dealers said.

Movement in crude oil prices and the rupee may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.42-6.49% Tuesday. The yield on the 6.33%, 2035 bond is seen at 6.45-6.53%.

India Gilts: Up on speculation of RBI buys; 6.33%, 2035 up on short covering

MUMBAI--1558 IST--Government bond prices rose on speculation of secondary market purchases by the Reserve Bank of India, as the 'other' category of market participants were top net buyers for four consecutive days in the previous week, dealers said. Data from the Clearing Corp. of India showed the 'others' category – which includes the RBI, provident funds, and insurers – was the largest net buyer of gilts on Friday and bought bonds worth INR 63.57 billion.

"In the morning, I was personally thinking it is better to track the 6.48% bond (6.48%, 2035 gilt), but now it looks like RBI is buying the 6.33% paper (6.33%, 2035 gilt), so its volumes have overtaken the 6.48%," a dealer at a private sector bank said.  

Apart from the 'others' segment, banks were the only active participants in the market and were purchasing the 6.33% 2035 bond, dealers said. Some traders likely covered previously placed short bets on the 6.33%, 2035 bond to place short bets in the 6.48%, 2035 bond, betting that the yield spread between the two bonds is compressing, dealers said. Foreign portfolio investors were also buying gilts maturing in 10 years while booking profits in some tenures, dealers said. As of 1558 IST, FPIs net sold gilts worth INR 14.38 billion through the fully accessible route, according to data from Clearing Corp. of India. Mutual funds were largely absent from the government bond market Monday, dealers said.

The erstwhile 10-year benchmark 6.33%, 2035 bond was the most actively traded paper on the secondary market, as the total trade amount recorded in the order matching segment under the Reserve Bank of India's Negotiated Dealing System for the bond at 1536 IST was INR 218.60 billion, significantly higher than the INR 156.65 billion turnover in the 6.48%, 2035 bond.

A few traders were of the view that if the central bank was purchasing gilts on-screen, this was due to replacement demand post the redemption of the 5.15%, 2025 gilt, which matured on Sunday. However, surplus liquidity in the system was at a near-two-month high, and the absence of a variable rate reverse repo announcement from the RBI despite comfortable liquidity aided traders' view that the central bank was trying to pull yields lower, dealers said.

Traders await CPI inflation data for October, due on Wednesday, for cues on the possibility of a policy rate cut by the RBI's Monetary Policy Committee in December. Traders largely expect headline inflation in the range of 0.3%-0.7%. A few traders also expect deflation in October. 

At 1554 IST, the turnover in the gilt market was INR 510.50 billion, higher than INR 306.95 billion at 1530 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.43-6.49%, while that on the most-traded 6.33%, 2035 bond is seen moving in a range of 6.48-6.55% during the day. (Janwee Prajapati)

India Gilts: Reverse losses on bets RBI's speculated bond buys to continue

NEW DELHI--1410 IST--Government bond prices recovered on bets the Reserve Bank of India would continue buying bonds as traders had speculated last week. Some of the enthusiasm was punctured by the view that the central bank's purchases were tied to replenishing its holdings of the 5.15%, 2025 gilt that matured Sunday, dealers said.

In the holiday-shortened week ended Friday, 'Others' net bought gilts worth INR 205.47 billion in the secondary market, the best four-day stretch since June 2023, according to Clearing Corp. of India data. The 'Others' category includes the RBI, provident funds, and insurers – the latter two sections were not active on the buying side last week, leading to speculation that bulk of the purchases were from the central bank, dealers said.

The RBI had last bought gilts in sizeable quantum in the secondary market in the last 15 days of January, before starting a string of four straight months with open market operation auctions to buy gilts between February and May. Some traders expect a repeat of this phenomenon as durable liquidity has shrunk sharply to INR 3.61 trillion as of Oct. 17, from 5.58 trillion on Jul. 25. It has likely fallen further as the RBI has conducted dollar sales to protect the rupee from hitting a record low against the dollar in October and November.

However, some traders feared that the RBI's purchases were more limited in scope. Market estimates for the central bank's holding of the 5.15%, 2025 gilt range from INR 150 billion to INR 250 billion. This would account for a majority of the 'Others' purchases and not much more, suggesting the RBI only wanted to replenish the upcoming maturity last week, dealers said.

Earlier, the RBI used to switch its holdings of short-term maturities with the government, but has discontinued this practice for the most part since 2023. In May this year, the central bank switched INR 373 billion of two bonds maturing in 2026-27 (Apr-Mar) with the government, skipping bonds maturing in the current fiscal. There was also some replacement demand for bonds from some state-owned banks holding the maturing bond, though most of it would be deployed in lending activity, dealers said.

"The market is being bought into in the name of RBI's buying," a dealer at a private-sector bank said. "US yields are up, the rate cut hope is also not there, so if the buying stops, I think yields will start trending higher immediately." The yield on the 10-year US Treasury note was at 4.14%, near the upper end of its trading range since late September, and had led to gilt prices falling earlier in the day.

Traders await the release of CPI inflation for October Wednesday, which is seen at a record low of 0.3%, according to an Informist poll of 12 economists. The reading is mostly priced into gilts and is unlikely to change the market's views on a December rate cut, dealers said. Traders across institutions are currently in diametrically opposite camps about whether the RBI's Monetary Policy Committee will conduct a possible final rate cut this cycle in December and said the GDP growth for the September quarter will be the major data point on which they firm up their bets, rather than inflation data. The September quarter GDP data is scheduled on Nov. 28, the week before the policy meeting.

Some traders also expect the announcement of an India-US trade deal in November, which may dent the outlook for bond prices in two ways, they said. An expected reduction in the 50% US tariff on India's exports would increase the growth outlook and weaken the case for a rate cut. At the same time, the rupee might rebound against the dollar, leading to the RBI buying the greenback to shore up its foreign exchange reserves. The infusion of rupee liquidity this would cause may weaken the case for OMO purchases in December, as some sections of the market expect, dealers said.

At 1410 IST, the turnover in the gilt market was INR 333.60 billion, higher than INR 234.95 billion at 1430 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.43-6.49%, while that on the most-traded 6.33%, 2035 bond is seen moving in a range of 6.48-6.55% during the day. (Aaryan Khanna)

India Gilts: Tad dn on rise in US treasury yields; CPI inflation data eyed 

MUMBAI--1010 IST--Government bond prices fell slightly Monday due to an overnight rise in US yields, dealers said. Indian bond prices rose early Monday as traders speculated the Reserve Bank of India would continue to buy bonds in the secondary market. Data from the Clearing Corp. of India showed participants classified as 'others' – which includes the Reserve Bank of India, provident funds, and insurers – were the largest net buyer of gilts Friday and bought bonds worth INR 63.57 billion. Traders speculate the central bank is purchasing gilts and that this is the reason for the high purchases by players in this 'others' segment since Oct. 16. Traders also await CPI inflation data Wednesday.

"Not much volume in the market...it is expected to remain range-bound today as traders are now waiting for the CPI inflation data," said a dealer at a state-owned bank. If the inflation print is lower than expectations, then rate cut expectations will be back on the table, the dealer said.

Traders are likely to track CPI inflation data for October, due Wednesday. CPI inflation is expected to have fallen to a record low of 0.3% in October, according to an Informist poll of 12 economists. Inflation will fall due to a high base effect, lower food prices, and a reduction in the goods and services tax. Low inflation data is likely to boost sentiment among market participants as they will take hope from RBI Governor Sanjay Malhotra's October statement that low inflation has created space for policy easing.

Some traders bought gilts in the hope that the RBI would hold an open market operation to limit bond yields from rising. The yield on the 6.33%, 2035 bond had risen to an intraday high of 6.61% in October. However, other traders were of the view that the RBI is likely to wait till the last tranche of the cut in bank's cash reserve ratio takes effect, which is likely to bring down bond yields.

After the weekly gilt auction Friday, market participants are now considering the 6.48%, 2035 bond as the 10-year benchmark bond. The total trades recorded in the order matching segment under the Reserve Bank of India's Negotiated Dealing System for the 6.48%, 2035 bond at 0930 IST was INR 34.20 billion, higher than INR 13.80 billion volume recorded by the 6.33%, 2035 bond. Mutual funds likely sold the 6.33%, 2035 bond in the secondary market after the auction Friday.

At 0945 IST, the turnover in the gilt market was INR 58.55 billion, slightly higher than INR 40.55 billion at the same time 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 6.48-6.55% during the day, while that on the 6.48%, 2035 bond is seen at 6.43-6.49%. (Janwee Prajapati)

India Gilts: Seen up on RBI buy hopes, 'others' net buys INR 205 bln last wk

MUMBAI – Prices of government bonds are seen opening higher Monday after data from Clearing Corp. of India showed that the 'others' segment of market participants – a category that includes the Reserve Bank of India, provident funds, and insurers – was the largest net buyer of gilts Friday, purchasing bonds worth INR 63.57 billion. This takes the segment's total net purchases for last week to INR 205.47 billion, and strengthened traders' hopes that the RBI is buying gilts onscreen, dealers said. 

The yield on the 10-year benchmark 6.48%, 2035 gilt is seen moving in a range of 6.43-6.50% during the day. On Friday, the benchmark 2035 gilt ended at INR 100.08, or 6.47% yield. The erstwhile 10-year benchmark 6.33%, 2035 bond is expected to move in a range of 6.48-6.56%. On Friday, it ended at INR 98.71, or 6.51% yield. Elevated US Treasury yields may weigh on bonds. At 0830 IST, the yield on the 10-year benchmark US Treasury note was 4.13%, up from 4.10% at 1700 IST Friday.

Traders speculate that the central bank is purchasing gilts onscreen, which has been fueled by daily purchases from the 'others' segment since Oct. 16. Data released by the central bank Friday showed that the RBI did not buy or sell any gilts via open market operations in week ended Oct. 31. Data for last week will be released Friday. 

Later in the week, traders will also track CPI inflation data for October, due Wednesday. CPI inflation is projected to fall to a record low of 0.3% in October, due to the statistical effect of a high base, lower food prices, and reduction in goods and services tax rates, according to an Informist poll of 12 economists. At 0.3%, this would be the lowest CPI inflation print in the current CPI series, which has data since 2014. The lowest CPI inflation print in the current series is 1.46% in June 2017. Traders have priced in such a low figure, but if within expectations or lower, the print could lend a positive sentiment to traders, since RBI Governor Sanjay Malhotra said at the October Monetary Policy Committee meeting outcome that low inflation created space for policy easing. (Cassandra Carvalho)

End

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

Edited by Akul Nishant Akhoury

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