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Informist, Monday, Nov. 17, 2025

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended down Monday as traders pared bets of a rate cut by the Reserve Bank of India's Monetary Policy Committee as India's trade deficit widened to a record high in October, dealers said. Lack of clarity about the trajectory of bond yields deterred traders from buying bonds aggressively, even as yields hit the upper end of the recent trading range, especially since the central bank's bond purchases in the secondary market are seen dwindling, dealers said. 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.86, or 6.50% yield, against INR 99.95, or 6.49% yield, Friday. The most-traded 6.33%, 2035 gilt ended at INR 98.51, or 6.54% yield, against INR 98.63, or 6.53% yield, at the end of the previous session. The selling pressure was more pronounced in the 6.33%, 2035 bond, as traders who had purchased it on speculation that it was the RBI's preferred choice of buys sold the paper, and some shifted to the newer 6.48%, 2035 gilt, since it is the benchmark bond.  

"There are no triggers as such, there's one trigger that came is the trade data, which came pretty high. The trade deficit increased a lot," a trader at a primary dealership said. "... People are not willing to invest a lot in bonds anymore because the amount of uncertainty in our markets right now, people are just trying to get out and wait till some certainty comes out."

India's merchandise trade deficit in October widened to an all-time high on record high imports during the month, according to data from the commerce ministry Monday. Merchandise exports fell the sharpest in 15 months in October on a year-on-year basis. In October, merchandise exports fell 11.8% on year to $34.38 billion, while imports rose 16.6% to $76.06 billion.

Bond traders had mixed views on the data, with some saying low exports would hit economic growth, increasing the chances of a rate cut by the MPC, while others said the rise in the trade deficit would put more pressure on the currency and government revenue. Some traders had expected a sharp fall in exports after the US imposed a 50% tariff on Indian goods. 

The fall in bond prices worsened as some traders triggered stop losses after a sharp rise in bond prices early last week. Some traders did not wish to sell bonds at current levels in order to avoid booking losses, dealers said. 

"People have bought the 10-year (6.48%, 2035 bond) at (INR) 100, (INR) 100.25, and now prices are (INR) 99, so how can they sell without marking a loss? But yes, due to stop losses, yields can go higher, we can see closing below (INR) 99.90 (on the 10-year benchmark bond)," a dealer at a private sector bank said during market hours. 

The RBI's on-screen purchases in the gilt market have likely ended, and traders found no reason to buy gilts amid the central bank's lack of support, dealers said. Traders had purchased gilts earlier this month on bets that the central bank would pull down bond yields through onscreen purchases, and were buying the same gilts they speculated the central bank was buying, namely the 6.33%, 2035 gilt, the 6.68%, 2040 gilt, and the 6.48%, 2035 gilt. However, statistics released by the central bank Friday for the week ended Nov. 7 showed that the central bank bought gilts worth INR 124.70 billion, against traders' expectations of around INR 200.00 billion. This reignited fears that the central bank's buys were not for yield management but to replenish its portfolio after the redemption of the 5.15%, 2025 bond on Nov. 9. The 6.33%, 2035 gilt and the 6.68%, 2040 gilts were down the most compared to bonds of similar maturity. 

"When prices were up, also the 6.33% (6.33%, 2035) gilt was up the most, and now when prices are down, it will fall the most," a dealer at a state-owned bank said. "Whatever RBI was buying, traders wanted only that, and now that RBI is not there, no one is interested to buy."

Traders who were stuck with Friday's auction stock of the 6.68%, 2040 bond also sold the gilt Monday, dealers said. Primary dealerships likely sold gilts, while losses were limited as state-owned banks likely purchased gilts at levels seen as lucrative, dealers said. An intraday fall in US Treasury yields also limited losses. The yield on the benchmark 10-year US Treasury note was 4.13% at 1700 IST, from 4.15% at 0900 IST and 4.12% at 1700 IST Friday. The five-year 6.01%, 2030 bond yield ended over 2 basis points higher, ahead of its fresh supply at the weekly gilt auction Friday, dealers said.

Turnover in the gilt market was INR 307.55 billion, down from INR 451.10 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were two trades worth INR 100 million in the 6.33%, 2035 gilt using the RBI's wholesale e-rupee pilot Friday, against five trades in state bonds worth INR 8.79 billion Friday.

OUTLOOK

On Tuesday, bond prices may open steady amid a lack of fresh domestic cues, dealers said. Traders will track the net purchases and sales in the secondary market Monday from the 'Others' segment, the category that includes the RBI. 

Traders may also track the INR-136-billion state bond auction result Tuesday, which is smaller than the INR 214 billion indicated in the calendar for state borrowing for Oct-Dec.

Some traders also expect an 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. 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 delayed US September jobs report is due Thursday. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.45-6.53% Tuesday. The yield on the 6.33%, 2035 bond is seen at 6.49-6.56%.

India Gilts: Fall more as country's trade deficit at record high in Oct

India Gilts: Fall more as country's trade deficit at record high in Oct

MUMBAI--1546 IST--Prices of government bonds fell slightly further as traders assessed India's trade data for October. India's merchandise trade deficit in October widened to an all-time high on record high imports during the month, according to data detailed by the commerce ministry Monday. Export of goods fell the sharpest in 15 months in October on a year-on-year basis.

In October, merchandise exports fell 11.8% on year to $34.38 billion and imports rose 16.6% to $76.06 billion. Bond traders had mixed views on the data, with some saying low exports would hit economic growth, which would increase chances of a rate cut, while others said that the rise in trade deficit put more pressure on currency and government revenue.

"People already knew that exports would fall (because of US tariffs on Indian exports) so it was expected, so that's why you're not seeing that much of a reaction (to the trade data)," a dealer at a state-owned bank said. The fall in bond prices was limited due to some purchases at lucrative levels, and because some traders increased bets of a rate cut after the data, dealers said.

At 1540 IST, turnover in the gilt market was INR 216.70 billion, lower than INR 353.70 billion at 1530 Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.48%, 2035 benchmark bond is seen at 6.47-6.51% and that on the 6.33%, 2035 bond is seen in a range of 6.50-6.56% rest of the day. (Cassandra Carvalho)

India Gilts: Remain down; traders await switch auction result for cues

MUMBAI--1307 IST--Government bond prices remained down ahead of the result of the gilt switch auction, with the scheduled fresh supply of 2033 and 2034 bonds as destination securities leading to a greater fall in these papers over the new 10-year benchmark gilt, dealers said. A rise in US Treasury yields and the Reserve Bank of India likely stopping its secondary market gilt purchases after less than two weeks also weighed on prices.

"The shorter end of the curve will likely go smoothly, but the middle part of the curve might see some pressure," a trader at a state-owned bank said. "The market is holding at these levels currently, everyone is waiting for the switch auction result, which might lend some cues." Losses were limited likely as state-owned banks bought the 10-year benchmark 6.48%, 2035 gilt around the psychologically crucial 6.50% yield, while the most-traded 6.33%, 2035 gilt was picked up near the key 6.55% yield level, dealers said. 

The government offered to switch INR 250 billion of gilts maturing up to 2029 at an auction held between 1030 IST and 1130 IST with four bonds maturing in 2033 and 2034. Bonds maturing in seven to 10 years already have a large share in the Centre's Oct-Mar borrowing calendar and the further pressure led to fall in these bonds in the secondary market, dealers said. The switch auction is likely to be a success as both state-owned and private-sector banks would be keen to book profit on their held-to-maturity securities that are designated as source securities, leading to a larger supply of the bonds maturing in eight and nine years.

Some traders preferred the 6.68%, 2040 gilt over the 10-year gilts as its spread expanded after the auction of the 2040 bond last week. At 1300 IST, the 15-year benchmark yield was 6.92%, over 42 basis points higher than the 10-year benchmark bond. The 6.68%, 2040 bond was the third-most-traded gilt, though trade volumes remained low across the market, which traders attributed to a lack of fresh domestic cues.

Traders await details of a trade deal between India and the US, as well as the September quarter GDP print at the end of November, for further cues on domestic interest rates. A trade deal will lead to traders trimming their bets of a repo rate cut by the Monetary Policy Committee in the December meeting. Some traders have already given up those bets as they expect GDP growth to beat RBI estimates in Jul-Sept. The RBI projects India's GDP growth in the September quarter at 7.0%. Traders expect a reading between 7.0% and 7.5% and India Ratings' estimate is 7.2%, both of which are unlikely to lead to rate cuts, dealers said.

At 1305 IST, turnover in the gilt market was INR 144.75 billion, higher than INR 353.70 billion at 1330 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.48%, 2035 benchmark bond is seen at 6.43-6.49%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.48-6.55% during the day. (Janwee Prajapati)

India Gilts: Fall on rise in US yields; volume thin on lack of domestic cues

MUMBAI--1023 IST--Government bond prices fell on account of a rise in US Treasury yields over the weekend, dealers said. Trade volumes were thin due to lack of aggressive bets as traders said there were no fresh cues on the domestic front.   

US Treasury yields rose as traders pared bets of a policy rate cut by the Federal Open Market Committee in December. Fed fund futures traders are now pricing in only a 46% chance of a 25-basis-point cut at the US Federal Open Market Committee's December meeting, down from a two-third likelihood of a cut a week ago, according to CME's FedWatch Tool. The yield on the 10-year US Treasury note rose to 4.15% from 4.12% at the end of Indian market hours Friday. Some traders see lack of further US rate cuts also reducing the likelihood of domestic interest rate moderation by the RBI's Monetary Policy Committee in December and beyond, dealers said. 

"The market will remain sluggish today, as there are no further cues," a dealer at a state-owned bank said. "The market might move only 2 bps to 3 bps in the day, volumes are also very low." At 1022 IST, the turnover in the gilt market was INR 49.40 billion, significantly lower than INR 83.65 billion at 1030 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.

Back home, traders had already pared bets that the RBI would continue buying gilts in a significant quantum after a modest start, dealers said. The central bank infused liquidity worth INR 124.70 billion in the week through bond buys in the week ended ended Nov. 7, suggesting its total purchases of gilts may be around INR 170 billion for that week. The data is based on settlement date. This was on the lower end of market estimates, some of which were upwards of INR 200 billion. 

'Others' – a category that includes provident funds, insurers and the central bank - bought INR 205.47 billion worth of gilts in the secondary market in the week to Nov. 7, according to Clearing Corp. of India data. However, the pace of these purchases slowed to INR 130.23 last week. Traders now await the next monetary policy meeting for further clues on the RBI's strategy on open market operations, dealers said. Some traders expect OMO auctions in December, while most see large purchases by the central bank only in the March quarter.

The yield on the 6.48%, 2035 benchmark bond is seen at 6.45-6.52%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.48-6.55% during the day. (Janwee Prajapati)

India Gilts: Seen down on rise in US yields, view of dwindling RBI buys

NEW DELHI – Government bond prices may open lower Monday due to a rise in US Treasury yields over the weekend. Expectations of the Reserve Bank of India's secondary market purchases dwindling from a modest start may also weigh on gilts, dealers said.

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.45-6.53% after ending at INR 99.95, or 6.49% yield, Friday. The yield on the 6.33%, 2035 bond is seen at 6.49-6.56%, against INR 98.63, or 6.53% yield, Friday

Multiple US Federal Reserve officials indicated inhibition over further rate cuts late last week, citing worries about inflation and signs of relative stability in the labour market after two US interest rate cuts this year. Fed fund futures traders are now pricing in only a 46% chance of a 25-basis-point cut at the US Federal Open Market Committee's December meeting, down from a two-third likelihood of a cut a week ago, according to CME's FedWatch Tool. The yield on the 10-year US Treasury note rose to 4.15% at 0815 IST from 4.12% at the end of Indian market hours Friday. 

On the domestic front, RBI data released after market hours Friday showed the central bank bought INR 124.70 billion worth of gilts in the secondary market in the week to Nov. 7, its first significant purchases on-screen since January. That same week, 'others' – a category that includes the RBI, insurers and provident funds – had net bought INR 205.47 billion worth of gilts in the secondary market, according to Clearing Corp. of India data. Bond market participants had pegged the central bank's secondary market purchases significantly higher at around INR 180 billion in the week to Nov. 7, the majority of the purchases from the 'others' category.

"I think the previous rumours are correct...that secondary buys are only replacement buying for 5.15%, 2025 paper," a dealer at a primary dealership said. The RBI held between INR 150 billion and INR 300 billion of the 2025 bond that matured on Nov. 9, according to market estimates. 

However, the data is based on settlement date and would not account for secondary market purchases on Nov. 7, which will be reflected in official data this week, dealers said. From Nov. 3 till Nov. 6, the 'others' segment net purchased gilts worth INR 141.93 billion, according to data from Clearing Corp. of India.

Even with a higher quantum of purchases two weeks ago, 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 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. 
 

Traders continue to expect the RBI to soon conduct auctions to buy gilts in December or latest in the March quarter to infuse durable liquidity. The fear of additional bond supply for both the Centre and states has receded amid muted borrowing from both entities since the beginning of October, dealers said. The outlook on the RBI's Monetary Policy Committee cutting rates remained uncertain and traders await the release of September quarter GDP data on Nov. 28, they said.  (Aaryan Khanna)

End

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

Edited by Saji George Titus

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