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Informist, Thursday, Nov. 20, 2025

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended mixed Thursday. The 10-year benchmark 6.48%, 2035 gilt and the 6.33%, 2035 gilt recovered from their fall on purchases by state-owned banks, while long-term bonds ended higher. Optimism about firm demand at Friday's weekly gilt auction aided the recovery in bond prices, after the 10-year benchmark gilt was down for most of the session, dealers said.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.94, or 6.49% yield, against INR 99.93, or 6.49% yield, Wednesday. The most-traded 6.33%, 2035 gilt ended at INR 98.59, or 6.53% yield, same as the previous session. The yield on the benchmark 10-year US Treasury note was 4.14% at 1700 IST, slightly down from the high of 4.15% hit overnight but up from 4.13% same time Wednesday.

Close to the end of market hours, traders covered short bets placed earlier, dealers said. State-owned banks bought gilts during the day as the yield on the benchmark 10-year gilt rose to the psychologically crucial 6.50% level, at which the 10-year gilt yield is 100 basis points over the repo rate of 5.50%. Expectations that demand at Friday's INR-300-billion gilt auction would be firm, especially from long-term investors, aided appetite for long-term gilts, dealers said. The government will Friday sell INR 180 billion of the 6.01%, 2030 bond and INR 120 billion of the 7.09%, 2074 bond. Both these bonds ended 3 paise higher at INR 99.25 and INR 95.88, respectively.

"Long-term bonds had gotten sold off quite a lot, so some amount of healthy correction is happening," a trader at a primary dealership said. "I do think that as we move closer to December, the fear of excess SGS (state bond) supply would be there, so the quantum of rally would be limited for longer-end."

The 6.90%, 2065 bond--usually seen as the most liquid long-term bond--ended at INR 94.39, up 9 paise from Wednesday's close. The bond yield has compressed to 7.34% from a high of 7.41% earlier this week but is still up from 7.23% at close on Sept. 29, a day after the Centre reduced the share of the 40-year bond in Oct-Mar by nearly 3 percentage points from Apr-Sept. Some traders, especially those of some foreign and private sector banks, found the 7.41% yield lucrative, while others expect its yield to be around 7.45% on the view that the MPC will not cut rates in December, and that the seasonal trend of heavy state bond supply in Jan-Mar will weigh on long-term bond prices. Likely demand from insurance companies for forward-rate agreements kept long-term bond prices up the past two sessions, along with purchases from traders, dealers said.

The 15-year 6.68%, 2040 bond was the third most traded bond on the RBI's Negotiated Dealing System-Order Matching platform. Several traders, especially from state-owned banks, purchased the bond, and the bond's yield fell to realign with the fall in yields of longer-term bonds. Foreign portfolio investors were churning their portfolios, and purchasing short-term and ultra-long term gilts, dealers said. As of 1800 IST, FPIs net bought gilts worth INR 2.64 billion through the fully accessible route Thursday, after daily net sales earlier this week, according to data from Clearing Corp. of India. Demand for the 6.01%, 2030 bond at Friday's auction is seen firm due to recent buys from FPIs in this tenure and as traders prefer short-term gilts due to uncertainty about a rate cut or support from the RBI through open market operations, dealers said.

"FPIs are there, last three-four days I've seen them. They've been on the selling side, but they usually sell first and then buy, maybe they are churning their portfolios," a trader at a primary dealership said. "It's just some shuffling of portfolio, not more than that. It's very difficult to tell, but I don't think total FPI holdings (in gilts) will fall below INR 3.2 trillion because if this news of index inclusion is there then before the announcement in January also we could see some flows."

Business Standard Tuesday reported that FPIs had given a positive feedback to Bloomberg Index Services on India's bond market operationality, seen as one of the key barriers to index inclusion. India is currently being evaluated for a potential weight of around 1% in the flagship Global Aggregate Index spread over roughly 10 months, if admitted, and which could lead to an inflow of around $25 billion, according to the report. The formal announcement is likely in January, the paper said.

Traders assessed talk of the RBI's meetings with economists held Tuesday and Wednesday, and several had mixed views of the meeting. Economists were divided in a 50-50% call for a rate cut or no rate cut by the MPC next month, dealers said. Some economists asked the RBI to conduct open market purchase of gilts through auction, and also discussed core CPI inflation. There was no conclusive outcome from the meetings that pointed to a rate cut or OMO auctions, dealers said.

Bond prices were down most of the day, as a low figure of purchases by the 'others' segment of market participants Tuesday and Wednesday dampened hopes of the central bank purchasing gilts onscreen to pull down bond yields. The 'others' segment includes insurance companies, provident funds, and the RBI. Some traders pared bets of a rate cut by the Monetary Policy Committee in December, after the release of the minutes of the US Federal Open Market Committee's October meeting reduced bets of a rate cut by the US Federal Reserve next month, they said. Traders also trimmed portfolios ahead of US economic data due post market hours, dealers said.

Turnover in the gilt market was INR 427.35 billion, up from INR 350.95 billion Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were two trades worth INR 300 million in the 6.33%, 2035 gilt using the RBI's wholesale e-rupee pilot Thursday, against no trades through this method Wednesday.

OUTLOOK

On Friday, bond prices may track overnight movement of US Treasury yields after the release of economic data in the US. US jobless claims for the week ended Nov. 15 fell by 8,000 to 220,000, against a Wall Street Journal poll estimate of 227,000. The US added 119,000 non-farm payrolls in September, against a poll estimate of 50,000. The unemployment rate in the same month rose to 4.4%, against a consensus of 4.3%. The US Bureau of Labor Statistics Wednesday said it would not publish non-farm payrolls report for October as the US government partially shut down and was unable to gather data. It also delayed the release of November's monthly jobs report to Dec. 16 from the usual release data of the first Friday of the month. This makes Thursday's non-farm payrolls report for September the last large-scale data point for the labour market before the US FOMC's next meeting on Dec. 9-10.

Traders will track the net purchases and sales in the secondary market Thursday from the 'Others' segment, the category that includes the RBI, even as expectations of the central bank purchasing gilts onscreen to bring down bond yields have diminished, dealers said. India's GDP data for Jul-Sept, scheduled on Nov. 28--a week before the next policy review--is the next cue for indications of the rate trajectory. Traders largely expect a print of around 7.2%. State Bank of India sees India's GDP growth in Jul-Sept at 7.5%, against the RBI's projection of 7.0%. Some traders have priced in a higher print, since the RBI has said that while Jul-Sept growth will be strong, the growth trajectory later on could be weaker due to external risks, dealers said.

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.

Movement of crude oil prices and the rupee against the dollar may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.45-6.53% Friday. The yield on the 6.33%, 2035 bond is seen at 6.49-6.56%.

India Gilts: Mixed; recover most losses on purchases by PSU banks

MUMBAI--1655 IST--Prices of government bonds recovered most losses due to purchases by state-owned banks, as the yield on the 10-year benchmark 6.48%, 2035 gilt hit the psychologically crucial 6.50% level, at which the 10-year yield is 100 basis points above the repo rate of 5.50%. 

The market mostly ignored the comments of Reserve Bank of India Governor Sanjay Malhotra at an event in New Delhi. Long-term bond prices briefly reversed gains, but were up again ahead of the fresh supply of the 7.09%, 2074 bond Friday. 

Malhotra's comments at the VKRV Rao Memorial Lecture did not lend any significant cues, dealers said. Malhotra said he couldn't pre-empt what the Monetary Policy Committee has to say early next month. The governor also said he was confident that India and the US would reach a good trade deal going forward, which could reduce the recent pressure on the rupee.  

"It seems like he (Malhotra) is on the hawkish side only," a dealer at a state-owned bank said. "Apart from that, it feels like the possibility of a rate cut (next month) has ended, that's why the market is anticipating that market (bond prices) will go down." 

After the central bank's meeting with economists and the release of the minutes of the US Federal Reserve Open Market Committee's October meeting, hopes of a rate cut both by the FOMC and by the MPC meeting next month faded away, dealers said. Traders also placed short bets ahead of the weekly gilt auction Friday, dealers said. 

At 1630 IST, the turnover in the gilts market was INR 361.00 billion, up from INR 308.10 billion at the same time Wednesday, 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 6.47-6.50%. That on the 6.33%, 2035 bond is seen moving in a range of 6.51-6.57% for the rest of the trade.  (Cassandra Carvalho)

India Gilts: Most dn on intraday short sales; traders pare rate cut bets

MUMBAI--1433 IST--Prices of most government bonds were down as traders placed intraday short bets on gilts ahead of the fresh supply of INR 300 billion Friday, dealers said. Some traders pared bets on a rate cut by the Reserve Bank of India's Monetary Policy Committee in December, after the release of the minutes of the US Federal Open Market Committee's October meeting reduced bets of a rate cut by the US Federal Reserve next month, they said. Traders also assessed talk of meetings between the RBI and economists Tuesday and Wednesday, with mixed views on the outcomes. Traders now await remarks by RBI Governor Sanjay Malhotra, who is speaking at the Delhi School of Economics Thursday.

Long-term bond prices were up on likely demand from insurance companies as well as some private-sector and foreign bank traders due to lucrative yields. Long-term bond prices have been largely higher the past two trading sessions on likely demand for bond forward rate agreements, dealers said. The 6.90%, 2065 bond traded at INR 94.40, up 10 paise from Wednesday's close. The bond yield has compressed to 7.34% from a high of 7.41% earlier this week but is still up from 7.23% at close on Sept. 29, a day after the Centre reduced the share of the 40-year bond in Oct-Mar by nearly 3 percentage points from Apr-Sept.

The government will sell INR 180 billion of the 6.01%, 2030 bond and INR 120 billion of the 7.09%, 2074 bond Friday. Demand for both bonds is seen to be firm, thanks to renewed interest from long-term investors and likely purchases in short-term bonds by foreign portfolio investors this week. Traders made room for the bonds before the auction. Some placed intraday short bets on hopes of covering the bets nearing the end of trade at cheaper prices.

Traders also unwound bets of a rate cut by the Monetary Policy Committee next month as they reduced their expectation of a Fed rate cut. Only about 34% of traders now price in a policy rate cut in December, compared with 50% Wednesday. The FOMC's October meeting minutes showed Fed officials were divided on lowering borrowing costs. Further, speculation that the Monetary Policy Committee would not opt for a cut next month increased after talk of meetings held by the RBI with bank economists indicated that support from the central bank to bring down bond yields either through open market gilt purchases or through a rate cut was unlikely. However, traders had mixed views on the outcome, with some saying economists were divided on whether the RBI's rate-setting panel should cut interest rates next month.

"All traders are doing intraday trades, just see how low the volumes are," a dealer at a private-sector bank said. "It's just people playing intraday... those who had to do (trade) post-FOMC minutes have done it... there are mixed views (at the RBI-economist meetings), some are expecting, some are not expecting a cut. There's no conclusive outlook... you can see it in the price action as well. Even after FOMC minutes, it's stable, the 6.50% (yield) level on the new 10-year (6.48%, 2035) paper is holding. Until that breaks, market will be here only."

At 1430 IST, the turnover in the gilts market was INR 270.15 billion, up from INR 195.10 billion at 1435 IST Wednesday, 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 6.47-6.50%. That on the 6.33%, 2035 bond is seen moving in a range of 6.51-6.57% for the rest of the day.  (Cassandra Carvalho)

India Gilts: Tad down on rise in US yields, pared bets on RBI support

MUMBAI--1026 IST--Government bond prices were a tad down following a rise in US Treasury yields, dealers said. The US treasury yields rose following the FOMC minutes released on Wednesday after market hours. Traders also pared bets on the Reserve Bank of India's support through an open-market operation auction in December.

US Treasury yields rose Wednesday after the US government delayed the announcement of the jobs' data, which soured the expectations for a December policy rate cut. The November non-farm payroll data was postponed till after the December Federal Open Market Committee meeting, while the October jobs report will not be released at all, a US government agency said. Traders await the September jobs data to be released after Indian market hours Thursday. Traders reduced their expectations of a Fed rate cut, with only about 33% of traders now pricing in a policy rate cut in December compared to 50% Wednesday. The Fed's October meeting minutes showed a divided view of the US Fed officials about lowering borrowing costs. The 10-year US yield was 4.14%, up from 4.12% Wednesday.

Back home, traders gave up on the expectations of further RBI support through open-market operations in the December quarter, dealers said. Traders had increased expectations of open market operation auctions in the December policy meeting after the RBI bought gilts on screen in the Nov. 7 week. However, with dwindling net purchases of gilts by the 'Others' segment – which includes the RBI – since Nov. 11, dealers no longer see a steady stream of purchases from the central bank until the March quarter.

"I am not expecting OMOs in December...it might come only in next quarter," said a dealer at the primary dealership. "And even if the RBI comes with an OMO it will be through on-screen buys only."

Later in the day, government bond prices may fall further as traders will place short bets to make space in their portfolio for the fresh supply of gilts at the weekly auction on Friday. Demand from long-term investors such as life insurers for the 50-year benchmark 7.09%, 2074 gilt at auction will be closely watched. Traders have picked up bonds maturing between 15 and 40 years this week but may not do so for the 2074 paper at the auction, dealers said.

At 1026 IST, the turnover in the gilt market was INR 77.20 billion, higher than INR 81.65 billion at 1030 IST wednesday, 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 6.48-6.53%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.51-6.57% during the day amid lack of domestic or global cues.  (Janwee Prajapati)

India Gilts: Seen down on rise in US yields, fear of delay in OMO auctions

NEW DELHI – Government bond prices may open lower on an overnight rise in US Treasury yields after minutes of the US Federal Open Market Committee's October meeting were released, dealers said. Moreover, traders fear the Reserve Bank of India may delay open market operation auctions to the March quarter rather than conduct them in December, as some traders had expected. 

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.45-6.52% after ending at INR 99.93, or 6.49% yield, Wednesday. The yield on the 6.33%, 2035 bond is seen at 6.51-6.56%, against INR 98.59, or 6.53% yield, Wednesday.

The 10-year US Treasury yield inched up to 4.14% at 0835 IST from 4.13% at the end of Indian market hours Wednesday. Expectations of a 25-basis-point rate cut at the meeting shrank to 32.8% from 50.1% a day prior, according to the CME FedWatch tool. Minutes of the US FOMC meeting showed a divide in policymakers' views on whether borrowing costs needed to be lower in the face of above-target inflation and a weakening labour market. Meanwhile, a US government agency said that it would skip the October non-farm payrolls and delay the release of November jobs data until after the FOMC's next meeting on Dec. 9-10. The data was expected to make a stronger case for rate cuts, and this makes the September non-farm payrolls data on Thursday even more crucial. 

Meanwhile, comments emerging from meetings between the Reserve Bank of India and economists on Tuesday and Wednesday may continue to weigh on the market, dealers said. There was uncertainty after the meetings on whether the RBI would cut rates further and whether it felt the need to support the bond market and bring down gilt yields, dealers said.  (Aaryan Khanna)  

End

US$1 = INR 88.7050

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

Edited by Ashish Shirke

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