More Stories

Informist, Friday, Nov. 14, 2025

By Aaryan Khanna

NEW DELHI – Government bond prices ended lower on a combination of negative factors, including a dull outlook on the Reserve Bank of India's on-screen bond purchases, which may have fallen off and come to an end, dealers said. Data released at 1633 IST showed that the RBI had bought gilts in the secondary market last week in a significant quantum for the first time since January, at a pace more or less similar to market expectations. The cut-off prices for the 6.68%, 2040 and 6.90%, 2065 gilts at the weekly auction were also slightly lower than expected, and both bonds ended sharply down. 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.95, or 6.49% yield, against INR 100.04, or 6.47% yield, Thursday. The most-traded 6.33%, 2035 gilt ended at INR 98.63, or 6.53% yield, against INR 98.70, or 6.52% yield, at the close of the previous session. The central bank, which was likely buying gilts in the secondary market until earlier this week, has not been active in the Negotiated Dealing System – Order Matching platform since Thursday, which weighed on gilt prices, dealers said.

The RBI bought INR 124.70 billion worth of gilts through on-screen open market operations in the week ended Nov. 7, the central bank data showed. This is the first secondary market purchase by the central bank since it bought a minuscule INR 100 million of gilts in the week ended Sept. 26.

In the week ended Nov. 7, the 'Others' category, which includes the RBI, insurers and provident funds, had net bought gilts worth INR 205.47 billion in the secondary market, according to data from the Clearing Corp. of India. Traders had been speculating ever since the daily data showed a spike in net purchases by the 'Others' category that the central bank was buying gilts on screen.

Some traders had expected the central bank's purchases to be as high as INR 180 billion last week. However, since the RBI data is based on the settlement date, it would not include secondary market purchases on Nov. 7. Last week, 'Others' net bought INR 141.93 billion worth of gilts in the secondary market up to Nov. 6.

"The data that the RBI releases is based on the value date, so it would only count for activity until Nov. 6," a dealer at a private-sector bank said. "They bought INR 125 billion out of around INR 150 billion until Thursday (Nov. 6), which is broadly what the market was looking at."

A mix of domestic and global factors dragged gilt prices. The RBI announced a variable rate reverse repo auction of INR 1 trillion for Friday, intended to absorb excess liquidity from the system. The liquidity surplus was INR 2.40 trillion Thursday, higher than INR 2.10 trillion Wednesday. The central bank accepted all offers worth INR 573.80 billion at the auction.

Traders had earlier expected the RBI to conduct such an auction but had grown comfortable with lower overnight rates since the central bank had refrained from announcing a VRRR earlier this week amid a similar liquidity surplus. The weighted average call rates had trended towards 5.30% and the weighted average triparty rate was below the Standing Deposit Facility rate of 5.25% over the past week. With the RBI signalling its intent to prop up overnight rates to near the policy repo rate of 5.50%, traders who had stocked up on gilts trimmed their holdings, dealers said.  

Some traders said the overnight rise in US Treasury yields also weighed on Indian bond prices after comments by US Federal Reserve officials dampened expectations of a US rate cut in December. Several US Federal Reserve officials on Thursday indicated a lower likelihood of further rate cuts, citing concerns about inflation and signs of relative stability in the labour market following two US interest rate cuts this year. Lesser chances of a rate cut in the US are likely to have a cascading effect, and traders pared bets of a rate cut by the RBI Monetary Policy Committee in December. The yield on the 10-year benchmark US Treasury yield was 4.12% at the end of Indian market hours, up from 4.10% at 1700 IST Thursday.  

This dampened demand for gilts at the gilt auction, though the fresh supply sailed through better than some had anticipated. The government sold INR 160 billion of the 6.68%, 2040 gilt and INR 120 billion of the 6.90%, 2065 bond. The long-term 6.90%, 2065 paper saw muted demand, dealers said. Long-term investors, such as life insurers and pension funds, did not place aggressive bids for the 6.90%, 2065 bond, as the RBI accepted only 119 of 226 received. 

The 15-year benchmark gilt was slightly better bid as its price had slipped in the run-up to the auction and traders had speculated some of the RBI's bond purchases had also extended to this segment. Some banks also picked up the gilt after demanding a higher yield at the auction to replace gilts maturing in 10-15 years, which were likely sold to the RBI in the past two weeks, dealers said.

"The only people who are buying at the auction are the ones who believe the RBI will continue buying (bonds)," a dealer at a primary dealership said. "Everyone else is on the sidelines – there is uncertainty daily about what the RBI is doing with liquidity, whether their OMOs are going to be consistent or short-lived – lots of questions remain."

However, both the 2040 and 2065 gilts recovered some losses to end above their auction cut-off prices. Traders said yields had become attractive after the auction results and picked up the longer-term bonds. Some traders also covered their short positions in the liquid 2035 gilts, preventing sharp losses on the day. A lack of RBI bond purchases next week and the weekly supply are likely to keep bond prices under pressure, but the RBI's proactivity over the past two weeks to cap yields suggests it would be difficult to drive prices lower, dealers said. 

Turnover in the gilts market was lacklustre for an auction day at INR 451.10 billion, up from INR 332.60 billion Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The thin trade volumes contributed to the volatility after the auction result, dealers said. There were five trades in state bonds worth INR 8.79 billion using the RBI's wholesale e-rupee pilot Friday, against two trades worth INR 100 million Thurdsay.

OUTLOOK

Gilts are not traded on Saturdays. On Monday, bond prices may open steady amid a lack of fresh domestic cues, dealers said. A low quantum of net buys from 'Others' in the secondary market Friday, the category that includes the RBI, may weigh on gilts. 

Net secondary market purchases by the 'Others' segment have been less than INR 15 billion since Wednesday, after averaging around INR 50 billion between Nov. 3 and Tuesday. 'Others' net bought only INR 11.39 billion worth of gilts on Friday, according to Clearing Corp. of India data released after market hours. Traders were divided on whether the RBI's secondary market purchases are at an end or would continue, and awaited further clarity at the next monetary policy review in December. 

Some traders also expect the announcement of an India-US trade deal soon, which may dent bond prices, as it signals a higher growth outlook and reduces the need for open market operations auctions, dealers said. However, traders will assess the impact of the government and the RBI's bevy of relief measures to exporters announced on Thursday and Friday, respectively. While these announcements suggested a trade deal may not be imminent, a positive for gilts, the RBI's measures may reduce the case for a rate cut, dealers said.

"The more these measures come, the more it seems he's done on the policy front," a dealer at another private-sector bank said. 

While several traders expect a rate cut at the 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. India's GDP data for Jul-Sept is scheduled on Nov. 28, a week before the next policy review.

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.

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 6.45-6.53% Monday. The yield on the 6.33%, 2035 bond is seen at 6.49-6.56%.

India Gilts: Remain down post muted demand at auction, fall in 'others' buys

MUMBAI--1524 IST--Prices of government bonds remained down due to muted demand at the gilt auction, dealers said. The Reserve Bank of India likely continued to refrain from aggresive purchases in the secondary market, which weighed on bond prices, dealers said. A rise in US Treasury yields also weighed on gilts. 

The cut-off yield for the 15-year 6.68%, 2040 paper at the auction was almost in line with expectations, but the long-term 6.90%, 2065 paper saw muted demand, dealers said. Long-term investors, such as life insurers and pension funds, did not place aggressive bids for the 6.90%, 2065 bond as the RBI accepted 119 bids out of 226 bids received. 

"Almost all market participants were there for 15-year (paper) today (Friday)," a dealer at a state-owned bank said. "The yields are decent for the 15-year bond in the secondary market."  

State-owned banks and private sector banks likely picked up the 15-year paper in the secondary market as the paper traded at a lucrative yield. Some traders covered their short bets placed on the bond earlier, at the auction. Traders who bought the paper at auction likely offloaded their auction stock onto the secondary market, dragging down the price of the bond.

The reduction in purchases from the 'others' segment worried traders as they no longer expect the RBI to support the market and limit a fall in bond prices, dealers said. The 'others' segment of gilt market participants — which includes the central bank, insurance companies and provident funds – net purchased gilts worth INR 9.21 billion Thursday, according to data from Clearing Corp. of India. This follows another meagre figure of INR 13.80 billion Wednesday, after a healthy daily average net purchase of around INR 50 billion by this segment from Nov. 3 till Tuesday.

Some traders said the overnight rise in US Treasury yields also weighed on Indian bond prices after comments by US Federal Reserve officials dampened expectations of a rate cut in the US in December. Several US Federal Reserve officials on Thursday indicated lower probability of further rate cuts, citing worries about inflation and signs of relative stability in the labour market after two interest rate cuts in the US this year. Lesser chances of a rate cut in the US are likely to have a cascading effect, and traders pared bets of a rate cut by the RBI Monetary Policy Committee in December. At 1524 IST, the yield on the 10-year benchmark US Treasury yield was 4.12%, up from 4.10% at 1700 IST Thursday.  

At 1524 IST, the turnover in the gilt market was INR 354.90 billion, higher than INR 273.40 billion at 1530 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.33%, 2035 bond is seen moving in a range of 6.48-6.55% during the day, while that on the 6.48%, 2035 benchmark bond is seen at 6.43-6.49%. (Janwee Prajapati)

India Gilts: Remain dn; 2065 bond cut-off price seen better than prior view

MUMBAI--1258 IST--Prices of government bonds remained down as traders awaited the result of the INR-280-billion gilt auction before taking any other trade positions, dealers said. The government aimed to sell INR 160 billion of the 6.68%, 2040 gilt and INR 120 billion of the 6.90%, 2065 gilt. Earlier in the day, appetite from long-term investors such as insurance companies and pension funds for the 2065 paper was seen poor, as these investors have been largely absent from the secondary gilt market even as yield spreads of long-term gilts over the 10-year benchmark gilt have been appealing, dealers said. The Reserve Bank of India set an underwriting fee of 1.18 paise for the 6.90%, 2065 gilt, higher than an Informist poll estimate of 0.65 paisa. 

However, post auction, expectations of demand from long-term investors picked up and the price of the 6.90%, 2065 bond came off lows. The bond last traded at INR 94.23, or 7.35% yield. The paper was traded at INR 94.10 or 7.36% yield at 1112 IST, during the time of bidding. Dealers said around INR 10 billion of the gilt was purchased for forward-rate agreements at the auction. The presence of a large state-owned insurance company at the auction would likely aid in a better-than-expected cut-off price on the gilt, dealers said. An Informist poll estimated the cut-off on the gilt at INR 93.95 or 7.37% yield. However, traders showed tepid interest in the paper and, hence, were still uncertain about whether the bond's auction would sail through. Bank traders bid for the 15-year 6.68%, 2040 gilt for both, their investment and trading books as the expected cut-off yield on the bond was lucrative to buy, dealers said. The cut-off is seen at INR 97.95 or 6.90% yield, as per an Informist poll.   

 
"There's no demand for this bond (6.90%, 2065 bond). At least PSUs (state-owned banks) have no demand for it, some demand from insurance is there," a dealer at a state-owned bank said. "LIC and similar companies are there, some six thousand (INR 60 billion) they will take but no one is there to subscribe for the remaining half. Six thousand demand we're hearing for STRIPS (Separate Trading of Registered Interest and Principal of Securities) and related products."

The movement of bond prices in the secondary market Friday did not indicate that the central bank was purchasing gilts on-screen, dealers said. That dampened sentiment, and traders await Friday's weekly statistical data from the RBI, which may come during market hours, for confirmation that purchases made by 'others' last week was the central bank itself. The 'others' segment net purchased gilts worth INR 205.47 billion last week, and traders expect a largely similar figure under the RBI's open market operation purchases for last week. 

At 1230 IST, the turnover in the gilt market was INR 132.15 billion, lower than INR 149.30 billion at the same time Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Traders expect volumes to only pick up after the result of the auction.

Other than the auction result, traders are likely to track the result of the Bihar assembly election, for cues on political stability, dealers said. The yield on the 6.33%, 2035 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 benchmark bond is seen at 6.43-6.49%. (Cassandra Carvalho)

India Gilts: Down on VRRR auction announcement, fall in buying by 'others'

MUMBAI--0955 IST--Government bond prices fell early Friday after the Reserve Bank of India late Thursday announced it would drain up to INR 1 trillion on Friday through a variable rate reverse repo auction, dealers said. Demand for gilts at the auction later in the day was also affected by the announcement of the VRRR auction as this came as a shock to market participants. Some traders also pointed to the overnight rise in US Treasury yields, which is likely to have weighed on government bond prices. Traders were also cautious as bond purchases by the 'others' segment of market participants, which includes the central bank, declined from mid-week.

The RBI announced a variable rate reverse repo auction of INR 1 trillion Friday, which is intended to absorb excess liquidity from the system. The liquidity surplus was INR 2.40 trillion Thursday, higher than INR 2.10 trillion Wednesday. Some traders expect a spillover effect of the variable rate reverse repo auction announcement on gilts as it was perceived by market participants that the RBI might not be comfortable with interbank rates falling below the Standing Deposit Facility rate of 5.25%.   

"The market will likely remain down till the (gilt) auction cut-offs are out," a dealer at a private sector bank said. "Auction (weekly gilts auction) cut off will lend some cues about further movement...we also have election results today, let's see what happens."

A few traders expect demand for bonds at the weekly gilt auction to be subdued as they had expected that the auction could be cancelled after the announcement of the VRRR auction. Other traders, however, expect the auction to sail through and the cut-off yield to be on the higher side. Demand for the 40-year bond is low as long-term investors such as pension funds and life insurers are largely absent from the market, but the auction is still expected to sail through due to the small quantum on offer. 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 long-term securities and the fresh supply Friday deterred traders from purchasing gilts maturing in more than 10 years in the secondary market in spite of lucrative yield spreads over the benchmark 10-year gilt.

Some traders said the overnight rise in US Treasury yields also weighed on Indian bond prices as expectations of a policy rate cut in the US dimmed. The toned down expectations of a rate cut in the US are likely to have a cascading effect, which will likely make traders pare bets on a rate cut by the RBI Monetary Policy Committee in December.  

Back home, a sharp decline in purchases by the 'others' segment of market participants muted speculation about RBI's on-screen gilt purchases. The actual purchases by the central bank could be higher or lower depending on what insurance companies did, as these insurers are also clubbed in the 'others' segment. If insurance companies were net buyers, this would mean the RBI bought less than speculated and if the insurance companies were net sellers, it would mean the RBI bought even more than the speculated quantum.

Purchases by the 'others' segment fell below INR 15 billion Wednesday and Thursday and this has reignited fears that the central bank was only purchasing gilts to replenish its portfolio after the redemption of the 5.15%, 2025 gilt on Nov. 9. The 'others' segment of gilt market participants — which includes the central bank, insurance companies and provident funds – net purchased gilts worth INR 9.21 billion Thursday, according to data from Clearing Corp. of India. This follows another low figure of INR 13.80 billion of such purchases Wednesday, after a healthy daily average net purchase of around INR 50 billion by this segment from Nov. 3 till Tuesday. Traders await Friday's weekly statistical data from the RBI for confirmation of the quantum of bonds the RBI has bought.

At 0955 IST, the turnover in the gilt market was INR 68.30 billion, higher than INR 54.70 billion at 0930 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.33%, 2035 bond is seen moving in a range of 6.48-6.55% during the day, while that on the 6.48%, 2035 benchmark bond is seen at 6.43-6.49%. (Janwee Prajapati)

India Gilts: Seen lower as RBI may have slowed down on-screen buys

MUMBAI – Prices of government bonds are seen opening lower Friday as the Reserve Bank of India is likely to have reduced its on-screen purchases in the secondary gilt market, dealers said. Traders may also place short bets before the auction of INR 160 billion of the 6.68%, 2040 bond and INR 120 billion of the 6.90%, 2065 bond. The RBI will conduct a three-day variable rate reverse repo auction for INR 1.00 trillion Friday, an announcement which was largely unexpected since traders had begun pricing in lower overnight money market rates due to the lack of such an auction so far this week, 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 Thursday, the benchmark 2035 gilt ended at INR 100.04, 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%. It ended at INR 98.70, or 6.52% yield the previous session.

The 'others' segment of gilt market participants — which includes the central bank, insurance companies and provident funds – net purchased gilts worth INR 9.21 billion Thursday, according to data from Clearing Corp. of India. This follows another meagre figure of INR 13.80 billion Wednesday, after a healthy daily average net purchase of around INR 50 billion by this segment from Nov. 3 till Tuesday. Traders speculate that most of these purchases since Nov. 3 have been by the central bank. Traders also await Friday's weekly statistical data from the RBI, which may come during market hours, for confirmation that purchases made by 'others' last week was the central bank itself. The 'others' segment net purchased gilts worth INR 205.47 billion last week, and traders expect a largely similar figure under the RBI's open market operation purchases for last week. 

While actual purchases by the central bank could be greater or lower due to trade conducted by insurers, the below-INR 15 billion figures Wednesday and Thursday have reignited some fears that the central bank was only purchasing gilts to replenish its portfolio after redemption of the 5.15%, 2025 gilt on Nov. 9. Others said that the central bank's purchases was a move to pull down yields, and that on-screen purchases might set the stage for an open market purchase of gilts through auction. Traders expect the RBI to purchase around INR 1.00 trillion worth of gilts by end of this financial year through open market purchases – both through auction and in the secondary market. Traders speculate that the central bank was largely purchasing the 6.33%, 2035 bond and the 6.48%, 2035 bond, and a smaller quantum of purchases in the 15-year gilt, which will be auctioned Friday. 

Demand for the 15-year 6.68%, 2040 bond at the auction is seen firm, but appetite from long-term investors for the 6.90%, 2065 bond is likely to be weak, inspite of lucrative yield spreads of this bond over the 10-year benchmark gilt, dealers said. Demand for the gilt for bond-forward rate agreements is seen poor, dealers said. 

An expected rise in overnight money market rates may weigh further on bond prices, dealers said. Some traders said they will track the result of the Bihar election for cues on policy certainty. A few traders also expect a trade deal between India and the US to be finalised over the weekend, and will trim portfolios before market close, though most expect a deal by end of this month. Friday's closing yield on the 10-year benchmark bond will be crucial for direction on the movement of bond prices next week, dealers said. (Cassandra Carvalho)

End

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

Edited by Saji George Titus

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.