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Informist, Wednesday, Nov. 12, 2025

By Aaryan Khanna

NEW DELHI – Government bond prices ended higher on continued speculation that the Reserve Bank of India is buying gilts in the secondary market. Bonds gave up some gains in the last hour of trade as some traders booked profits after CPI inflation in October was in line with expectations, while primary dealers placed short bets ahead of the weekly gilt auction on Friday, dealers said.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 100.14, or 6.46% yield, against INR 100.03, or 6.47% yield, Tuesday. The most-traded 6.33%, 2035 gilt ended at INR 98.84, or 6.50% yield, against INR 98.76, or 6.51% yield, at the close of the previous session. The latter bond failed to close below the psychologically crucial 6.48% mark after dipping below it for the second straight day, disappointing some traders.

Traders expect the RBI to continue buying gilts in the secondary market after data from Nov. 3 to Tuesday showed net purchases of over INR 300 billion by the 'Others' category, according to Clearing Corp. of India data. The category includes the central bank. Traders said that the vast majority of purchases, upwards of INR 260 billion, are likely to be by the RBI, as insurers and provident funds have not been very active in the secondary market. With the segment's demand flowing into this week, traders see it as a precursor to the RBI conducting an open market operation auction as early as December.

Meanwhile, India's CPI inflation fell to a record low of 0.25% in October from 1.44% September, data released at 1600 IST showed. A record fall in food prices in October helped drag down the headline print, even as core CPI inflation inched up to 4.4% on year in October from 4.3% in September. The reading, largely in line with market expectations, will provide room for the Reserve Bank of India's Monetary Policy Committee to ease the repo rate further, dealers said.

"A 25 bps (basis point) rate cut appears increasingly likely. If not, a shift in policy stance to 'accommodative' or even both cannot be ruled out," said V.R.C. Reddy, head of treasury at Karur Vysya Bank. "Meanwhile, consistent buying activity under the ‘Others' category, likely representing RBI's secondary market operations on NDS-OM (Negotiated Dealing System – Order Matching platform), is supporting the bond market."  He sees the 10-year benchmark yield at 6.38-6.40% before the policy decision on Dec. 5. 

However, some traders said the CPI data did not make a difference to their bets on rate cuts as they awaited GDP growth data at the end of the month. Some traders had also bet on a deflationary reading this month, which would strengthen the case for a rate cut in December, and sold bonds as the print was higher than they had positioned for, dealers said.

Moreover, traders began short-selling bonds to make room for the fresh supply at the weekly gilt auction Friday, which they had avoided so far this week before the inflation data. The government will sell INR 160 billion of the 6.68%, 2040 gilt and INR 120 billion of the 6.90%, 2065 gilt on Friday. The most-traded 6.33%, 2035 gilt fell more than the 10-year benchmark from the highs as the short selling was concentrated in that paper, dealers said. 

"Between now and Friday, there are no more major events, so the short selling has begun after CPI," a dealer at a primary dealership said. "Even if they are not short-selling, it is a good level to cut your position, which is long before the auction and then go long again at the auction or in the secondary (market) on Friday."

With the RBI speculated to be buying bonds, demand at the auction is expected to be firm. Both the 2040 and 2065 gilts, which will be auctioned this week, ended higher. Some traders speculated the 6.68%, 2040 bond was also a target of the central bank's purchases, but others said the RBI would avoid it as it would amount to monetising the fiscal deficit by buying on-the-run gilts. The consensus is that the RBI has been buying the off-the-run and most traded 6.33%, 2035 bond in the secondary market since last week, avoiding a distortion in the trading patterns of other bonds, dealers said.

Turnover in the gilts market was INR 730.60 billion, up from INR 562.60 billion Tuesday, 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 fourth straight day. 

OUTLOOK

On Thursday, government bond prices may open steady amid a lack of fresh domestic cues. CPI inflation for October was in line with expectations and is unlikely to lead to any further market movement, dealers said. While several traders expect a rate cut at the upcoming monetary policy review in December, some said the MPC may hold off on rate cuts if GDP growth remains robust, as the inflation trajectory is expected to rise in the next few months.

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, totalled over INR 300 billion between Nov. 3 and Tuesday.

Traders continue to expect the RBI to soon conduct auctions to buy gilts in December to infuse durable liquidity or the latest in the March quarter. The fear of additional bond supply for both the Centre and states has receded amid the muted borrowing from both entities since the beginning of October, dealers said.

Some traders also expect the announcement of an India-US trade deal as soon as this week, which may dent 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, prompting the RBI to buy 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, dealers said.

Movement in US Treasury yields, crude oil prices, and the rupee may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.44-6.51% Wednesday. The yield on the 6.33%, 2035 bond is seen at 6.46-6.54%.

India Gilts: Off highs; India Oct CPI disappoints those betting on deflation

MUMBAI--1609 IST--Prices of government bonds were off highs after India's headline inflation for October was 0.25%. Some traders were disappointed as they were betting on deflation, dealers said. Most traders' expectations were in a range of 0.3-0.7%, and the print was in line with an Informist poll of 12 economists, which had estimated the figure at 0.3%. Data from the statistics ministry released at 1600 IST showed India's CPI inflation fell to a record low in October, from 1.44% in September. However, traders had priced in a 0.3% figure and the print did not provide clarity, or increase bets, of the possibility of a 25 basis-point rate cut in December. Reserve Bank of India Governor Sanjay Malhotra had said at the October Monetary Policy Committee meeting outcome that low inflation created space for policy easing.

Deflation is when inflation turns negative, which means prices have fallen year-on-year. If the data had showed deflation in India for October, it would have been for the first time in several decades and would have sharply increased space for policy easing by the Monetary Policy Committee in December, dealers said. Core inflation in October rose to 4.4%, from 4.3% in September, but traders were expecting the higher figure due to a sharp rise in gold prices, dealers said.

"It (headline inflation data) is not very bad but some people were expecting a deflationary trend so there's some negative reaction in the market right now," a dealer at a private-sector bank said. "I think it (prices) should be supported, there will not be large number (large fall in prices), but there won't be a very big rally (price rise) also right now... No, I don't think probability (of a December rate cut) has increased after this number, but definitely this is not a very bad number as such. But GDP numbers will be crucial, which is due end of this month."

GDP growth data for Jul-Sept is due Nov. 28. India's GDP likely grew 7.2% in the September quarter, according to India Ratings and Research Pvt. Ltd. At the October Monetary Policy Committee meeting outcome, the RBI raised its Jul-Sept GDP growth forecast to 7.0%, from 6.7% earlier. 

Government bond prices remained higher on speculation of continued buying by the RBI in the secondary market. At 1620 IST, the turnover in the gilts market was INR 615.05 billion, higher than INR 510.55 billion at 1630 IST Tuesday, 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 moving in a range of 6.43-6.48% for the rest of the day, while that on the 6.33%, 2035 bond is seen at 6.45-6.52%.  (Cassandra Carvalho)

India Gilts: Remain up on buys by 'others'; CPI inflation data to lend cues

MUMBAI--1516 IST--Prices of most government bonds remained sharply higher due to speculation of continued buying by the Reserve Bank of India and bets of the October CPI inflation print being lower than estimated, dealers said. Traders expect bond prices to remain up as long as the 'others' segment of market participants indicates purchases by the central bank in the secondary bond market. CPI inflation data, to be released at 1600 IST, will dictate further movement of bond prices, dealers said.

Traders speculated that the RBI bought between INR 250 billion and INR 280 billion out of the total purchases of INR 301.3 billion by the 'others' segment from Nov. 3 till Tuesday. The RBI will release data on its secondary market activity for the week ended Nov. 7 on Friday, which dealers expect to confirm the speculation and the quantum bought, dealers said. According to most dealers, the central bank is only picking the 6.33%, 2035 paper and the 6.48%, 2035 bond in its on-screen buys. The total traded amount recorded in the 6.33%, 2035 paper was INR 242.75 billion and INR 156.25 billion in the 6.48%, 2035 bond on the RBI's Negotiated Dealing System-Order Matching platform.

Some traders said the central bank purchased the 15-year 6.68%, 2040 bond on-screen Tuesday, since bids for the bond on the Negotiated Dealing System-Order Matching platform were in larger-than-usual quantums of around INR 2.00 billion per bid. Others said it was unlikely that the RBI would buy a paper that is being auctioned later in the week, as it would indicate artificially bumping up demand for the bond at the auction. On Friday, the government will sell INR 160 billion of the 6.68%, 2040 bond and INR 120 billion of the 6.90%, 2065 bond. Both are longer-term securities, and the fresh supply on Friday deterred traders from purchasing gilts maturing in more than 10 years inspite of lucrative yield spreads over the benchmark 10-year gilt, they said.

"RBI is only buying 10-year paper right now; the 15-year paper is only receiving regular demand," said a dealer at a state-owned bank. "The RBI only buys bonds for which the auction is over, as the next auction is for the 15-year paper. It is unlikely that they (RBI) will buy that paper otherwise it will look like RBI is monetising...also the trade volume is normal."

Some state-owned banks are selling the 6.33%, 2035 bond and buying the 6.48%, 2035 bond, dealers said. The price of the 6.48%, 2035 bond rose more than its 10-year peer, the erstwhile benchmark 6.33%, 2035 bond. Some traders also covered the short bets – placed earlier in order to hedge against uncertainties – due to expectations of further fall in yields. Traders have largely covered all their "naked shorts", ever since the indications of central bank buys in the market, and the short sales in the 10-year gilts that remain are spread trades by traders who have purchased longer-term bonds, dealers said.  

Traders expect India's headline inflation print for October to come in at 0.3-0.7%. If the data is lower than expectations, traders will ramp up bets of a rate cut in December. However, if the inflation data remains within the expected range, which is largely priced in, it is unlikely to have any impact on bond prices. At 1518 IST, the turnover in the gilt market was INR 519.10 billion, higher than INR 421.45 billion at the same time Tuesday, 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 moving in a range of 6.43-6.48% for the rest of the day, while that on the 6.33%, 2035 bond is seen at 6.45-6.52%.  (Janwee Prajapati)

India Gilts: Remain up; profit sales keeping 6.33%, 2035 yield above 6.48%

India Gilts: Remain up; profit sales keeping 6.33%, 2035 yield above 6.48%

MUMBAI--1301 IST--Prices of government bonds stayed sharply up, on bets the Reserve Bank of India is likely buying gilts on-screen and expectations of a low CPI inflation print for October, dealers said. The central bank is said to be buying gilts in the secondary market since Nov. 3, dealers said. On the technical front, the yield on the 6.33%, 2035 bond is not coming below the key 6.48% level, as traders have been booking profits after the yield hit a high of 6.60% on Oct. 31. Some traders expect the yield to fall to 6.45% by end of trade Wednesday, but that would depend on CPI inflation surprising on the downside, they said.

"It (yield on the 6.33%, 2035 bond) is not breaking this level, for some time now we're seeing this, every time we hit 6.48%, near INR 98.99 or INR 99.00, we are not able to fall below (in yield terms) as traders are booking profits," a dealer at a state-owned bank said. "If CPI is better (lower) than market (expectations of) 0.4%, then we can break this level." The 6.33%, 2035 bond yield last closed below 6.48% on Sept. 23, when it settled at 6.4729%. The bond closed at 6.4799% on Oct. 15.

Traders are unsure how long the central bank will buy gilts on-screen. Some expect the RBI to continue its purchases till the Monetary Policy Committee meeting in December. Traders largely expect the central bank to conduct open market purchases of gilts through auction to the tune of INR 1.00 trillion to INR 1.50 trillion starting either December or in Jan-Mar. Some traders expect the central bank's on-screen purchases to total INR 200 billion, while others see it at INR 400 billion to INR 500 billion. Since Nov. 3, the 'others' segment of market participants – which includes insurance companies, provident funds and the central bank – has net bought gilts worth INR 301.30 billion. Of this figure, some buys could be attributed to insurance companies and pension funds, and thus the only confirmation of the central bank's purchases would be from weekly statistical data from the RBI for last week due Friday. Some traders said that insurers have been selling gilts, and hence the RBI's buys could be more than the net figure.

Overall, bond prices are likely to move upwards in the run up to the December policy meeting, unless a trade deal between US and India is cemented before that, dealers said. The yield on the 6.48%, 2035 bond is seen falling to 6.40% in the near-term, due to likely support from the central bank, dealers said. However, traders refrained from aggressive positions, especially in longer-tenure gilts, in spite of lucrative yield spreads due to lack of expectations of more than one rate cut in the policy rate either in December or February. Traders see 60-70% possibility of a 25 basis point rate cut in December, but are waiting for CPI and GDP growth data for cues.

Traders see India's headline inflation for October at 0.3-0.7%. If the data, which is due at 1600 IST, is within expectations or lower, traders would ramp up bets of a rate cut in December, even as some traders have priced in a near-0% print. RBI Governor Sanjay Malhotra had said in October that low inflation has created space for policy easing. Some traders expect India to slip into deflation in October, dealers said. Deflation is when inflation turns negative, which means prices have fallen on a year-on-year basis. Core inflation is expected to remain on the higher side due to rise in gold prices, dealers said.

At 1230 IST, the turnover in the gilt market was INR 372.15 billion, higher than INR 224.40 billion same time Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Rest of the day the yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in a range of 6.43-6.48% and that on the 6.33%, 2035 bond at 6.45-6.52%.  (Cassandra Carvalho)

India Gilts: Sharply up on hopes of RBI buys; CPI inflation data eyed

MUMBAI--0942 IST--Government bond prices shot up on speculation of gilt purchases by the Reserve Bank of India after the 'other' segment of market participants was net buyers of gilts for six consecutive trading sessions, dealers said. Most traders believed the RBI is buying the erstwhile 10-year benchmark bond and the 6.48%, 2035 bond. Some traders also speculated that the RBI was also buying the 15-year bond. Traders also await CPI inflation data, due to be released later in the day.  

Data from Clearing Corp. of India showed participants classified as 'others' – which includes the central bank, provident funds, and insurers – were the largest net buyers of gilts Friday and bought bonds worth INR 62.59 billion. Including Tuesday, total purchases from the 'others' were INR 301.3 billion from Nov. 3. Dealers peg the total quantum of purchases by the central bank this month upwards of INR 200 billion out of the INR 239 billion of total net purchases from the 'Others' segment since Nov. 3. The RBI will release data on its secondary market activity for the week ended Nov. 7 on Friday, which dealers expect to confirm the speculation and the quantum bought, dealers said. 

"Traders are going long before the CPI inflation data," a dealer at a primary dealership said. "There is a good possibility of the CPI (inflation) data to come lower, so traders will go long across tenure expecting a cut (policy rate cut in December)."

Traders expect India's headline inflation print for October will come in at 0.3-0.7%. If the data is within expectations or lower, traders would ramp up bets of a rate cut in December. RBI Governor Sanjay Malhotra had said in October that low inflation has created space for policy easing. Expectations of India slipping into deflation in October are gaining traction, dealers said. Deflation is when inflation turns negative, which means prices have fallen on a year-on-year basis. 

Traders are wary of an India-US trade deal, which seems to be imminent, according to a report in the Business Standard newspaper, as a trade deal is seen as being detrimental to the bond market. A deal, which will boost Indian exports and growth, will weaken the case for the Reserve Bank of India's Monetary Policy Committee to cut rates in December.

At 0940 IST, the turnover in the gilt market was INR 123.10 billion, higher than INR 37.58 billion at 0930 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 6.48-6.55% 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 bets of RBI buys as 'others' net buy INR 62.59 bln Tue

MUMBAI – Prices of government bonds are seen opening higher Wednesday on continued bets of on-screen purchases by the Reserve Bank of India after the 'others' segment of market participants – which includes insurance companies, provident funds and the central bank – net bought gilts worth INR 62.59 billion Tuesday. An overnight fall in US Treasury yields is likely to aid, dealers said. Caution ahead of India's CPI inflation data for October at 1600 IST is likely to limit gains, as is anticipation of India and the US nearing a trade deal after fresh news reports on progress in trade talks. 

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 Tuesday, the benchmark 2035 gilt ended at INR 100.03, or 6.47% yield. The erstwhile 10-year benchmark 6.33%, 2035 bond is expected to move in a range of 6.47-6.55%. On Tuesday, it ended at INR 98.76, or 6.51% yield. At 0830 IST, the yield on the 10-year benchmark US Treasury note was 4.08%, down from 4.12% at 1700 IST Tuesday, after data released Tuesday showed US firms shed more than 11,000 jobs a week through late October. The US bond market was closed Tuesday on account of Veterans Day.

The 'others' segment has net bought gilts worth INR 301.30 billion so far since Nov. 3, and traders speculate that the central bank is buying bonds on-screen. The total buys could be larger since some insurance companies have sold gilts during the same period, dealers said. The RBI is largely seen purchasing the 6.33%, 2035 gilt, with some traders speculating purchases of the 10-year benchmark 6.48%, 2035 gilt and the 15-year 6.68%, 2040 gilt as well. If weekly data from the RBI on Friday confirms purchases by the central bank in the secondary market last week, traders expect the on-screen purchases to set the stage for announcement of open market purchases of gilts through auction. 

On the data front, traders largely expect India's headline inflation print for October in the range of 0.3-0.7%. If the data is within expectations or lower, traders would ramp up bets of a rate cut in December, since RBI Governor Sanjay Malhotra said at the outcome of the October Monetary Policy Committee meeting that low inflation created space for policy easing. Expectations of India slipping into deflation in October are gaining traction, dealers said. Deflation is when inflation falls into negative, suggesting prices have fallen.      

Traders will also track developments in India-US trade talks, and any developments during the day about the car blast in New Delhi Monday may also affect bond prices, dealers said. The investigation into the car blast was handed over to the National Investigation Agency on Tuesday.  (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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