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Informist, Friday, Nov. 21, 2025

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended sharply lower as traders hit stop-losses when the two most-traded bonds rose past psychologically crucial levels, dealers said. A sharp fall in the rupee to record lows and data showing the Reserve Bank of India sold bonds in the week ended Nov. 14 had pressured bond prices lower to test those key levels. Earlier, the INR-300-billion weekly gilt auction sailed through. 

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.72, or 6.52% yield, against INR 99.94, or 6.49% yield, Thursday. The bond's yield ended at its highest since its issuance on Oct. 3. The most-traded 6.33%, 2035 gilt ended at INR 98.35, or 6.57% yield, closing above 6.55% for the first time since Oct. 30. It closed at INR 98.59, or 6.53% yield, in the previous session.

 

The Indian currency declined 78 paise, the most in a day since May 8, to a record closing low of 89.4800 a dollar. The 0.9% slide Friday came as stop-losses were triggered on short dollar bets when the RBI did not sell dollars near the previous record low of 88.8025 a dollar as the market had expected. Bond traders were worried the sharp fall would lead the central bank to avoid easing monetary policy further in order to defend the Indian unit, especially amid uncertainty on whether the US Federal Open Market Committee will cut rates at its next meeting in December.

 

Even as some state-owned banks likely bought gilts near the psychologically crucial 6.50% yield on the 6.48%, 2035 bond and 6.55% yield on the 6.33%, 2035 gilt, data released by the RBI near the end of market hours showed it had sold gilts worth INR 148.10 billion. Traders had widely expected the central bank to buy gilts worth INR 125 billion to INR 150 billion in the week. Immediately, traders held off on fresh purchases and prices drifted lower.

 

"The rupee was out of control, and on top of this the data came and really sunk the market," a dealer at a primary dealership said. "It is a big blow that we have ended (above) 6.55% (yield on the 6.33%, 2035 bond) today (Friday), we will now move to test 6.60% if the data is correct." It was only after market hours that the central bank corrected the data to show it bought gilts of that quantum, rather than selling them. 

 

Traders had hoped that the data entry was erroneous during market hours as well and did not dump bonds as would be the usual reaction to such a release, dealers said. With this, the total purchases by the central bank over the first two weeks of November came out to INR 272.80 billion. This was in line with market expectations and reinforced traders' speculation that the RBI was replenishing its bond holdings after the maturity of the 5.15%, 2025 bond on Nov. 9. The central bank held between INR 150 billion – INR 300 billion of the maturing bond, according to traders' and economists' estimates. Moreover, the data showed the last liquidity infusion was on Nov. 13, backing up traders' views that the RBI has opted to not buy gilts on the secondary market since that day.

 

The slide capped off a volatile day for bonds. Gilts had risen in early trade due to an overnight fall in US Treasury yields, which continued to buoy market sentiment even at the close. The 10-year US yield was at 4.09% at 1700 IST Friday from 4.14% at the end of Indian market hours Thursday, pushing up gilt prices early in the day before the two liquid bonds maturing in 2035 gave up gains on profit booking. 

 

Intraday, long-term bonds were up for the fourth straight session on purchases by pension funds and insurance companies, dealers said. These were likely the largest bidders for the INR-180-billion supply of the 7.09%, 2074 gilt as well. The Reserve Bank of India set the cut-off price on the bond at INR 96.07, against the INR 95.77 median in an Informist poll. The central bank accepted only 17 out of 213 bids for the bond at the auction, suggesting that investors lapped up supply of the bond by bidding in large quantums. 

 

Around INR 20 billion to INR 30 billion of the 2074 bond was purchased for bond forward rate agreements, dealers said. The cut-off yield of 7.39% on the bond offers a spread of around 90 basis points over the 10-year benchmark 6.48%, 2035 gilt. However, traders avoided long-term bonds after facing losses in the tenures over the past few months. They also saw the paper as too high risk to bid on due to its low liquidity in daily trade. Instead, they picked up the more liquid, 15-year 6.68%, 2040 bond, which was up 17 paise from the previous close at INR 98.23. Bonds maturing in more than 15 years and higher gained more after the auction result but eventually ended up with losses. 

 

"Its fortunate that some insurer came to the rescue today (Friday) and traders didn't have to worry about auction," a dealer at a foreign bank said. "No trader is in any mood to materially increase their exposure to long-term bonds after the sort of losses they have been dealt in the last few months."

 

Demand for INR 180 billion of the 6.01%, 2030 paper was robust from banks and some mutual funds and its cut-off price was in line with expectations, dealers said. Bets of a soft policy outcome at the Reserve Bank of India's Monetary Policy Committee's December meeting persist, in which case the yield curve is seen steepening, wherein short-term yields fall greater than their long-term counterparts, dealers said. Recent interest from foreign portfolio investors in short-term bonds has boosted demand for this paper, they said.

 

Turnover in the gilt market was INR 570.20 billion, up from INR 427.35 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades using the RBI's wholesale e-rupee pilot Friday, against two traded worth INR 300 million Thursday.

 

OUTLOOK

Gilts are not traded Saturday. On Monday, bond prices may rise slightly as traders who had shed bonds based on the RBI selling gilts may pick up gilts since the data showed the central bank bought bonds in the Nov. 14 week, dealers said. Some banks may also pick up gilts as the yield on the most-traded bond ended at a three-week high Friday. 

 

Traders will track the net purchases and sales in the secondary market Friday from the 'Others' segment, the category that includes the RBI. Expectations of the central bank purchasing gilts on screen to bring down bond yields have diminished, dealers said. The central bank's management of the rupee, after it hit a record low Friday, would also be closely watched Monday.

 

Traders await the September quarter GDP data on Nov. 28 to place bets on the MPC's outcome the week after. Some sections of the market were of the view that the record low near-zero CPI inflation print in October made enough case for a rate cut. Others see the decision contingent on the impact of higher US tariffs on India's GDP growth, dealers said. Traders are expecting a growth reading of around 7.0-7.5% against the RBI's forecast of 7.0% for the September quarter.

 

Some traders have factored 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. However, a growth rate near 8.0% may weigh on rate cut expectations and drive down bond prices at the end of the week, whereas a reading around 7.0% will lead to rate-cut bets. Trade volume may fall in the run-up to the data.

 

Some traders also expect an announcement of an India-US trade deal soon, which may dent bond prices. A deal being struck would lead to a higher growth outlook and reduce the need for open-market operations auctions, dealers said. On the other hand, it may support the rupee and allay traders' concern that the RBI would hold off on monetary policy easing to protect the currency.

 

Movement of crude oil prices may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.47-6.56% Monday. The yield on the 6.33%, 2035 bond is seen at 6.51-6.60%.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.7225	6.5172%	99.9400	6.4870%
6.33%, 2035	98.3500	6.5665%	98.5850	6.5324%
6.01%, 2030	99.0950	6.2343%	99.2450	6.1962%
6.68%, 2040	97.8425	6.9157%	98.0575	6.8917%
6.90%, 2065	94.1000	7.3602%	94.3925	7.3362%

 

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India Gilts: Fall after rupee slumps 0.9% against dollar to record low

 

	1515 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.84	99.98	99.79	99.98	99.94
YTM (%)	6.5008	6.4814	6.5078	6.4821	6.4870

 

	1515 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.50	98.67	98.44	98.63	98.59
YTM (%)	6.5447	6.5201	6.5541	6.5259	6.5324

 

	1515 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
7.09%, 2074
PRICE (INR)	95.92	96.30	95.75	95.75	95.88
YTM (%)	7.4008	7.3708	7.4142	7.4142	7.4036

 

NEW DELHI--1515 IST--Government bond prices fell after a slump in the rupee against the dollar, with the Indian unit hitting several fresh record lows, dealers said. The Indian unit fell as much as 0.9% against the greenback to a record low of 89.4900 a dollar after traders hit stop-losses on their short dollar bets near the previous record low of 88.8025 a dollar. 

 

"It is the fall in the rupee playing out," a dealer at a state-owned bank said. "There is nothing else in the market."

 

A fall in the rupee raised concerns that the Reserve Bank of India will defend the domestic unit by not easing monetary policy at its upcoming Monetary Policy Committee meeting in early December, dealers said. Traders said the negative impact was limited immediately as US Treasury yields had fallen and the INR 300-billion auction sailed through.

 

Long-term bonds erased all gains after having risen sharply earlier in the day. Even the 7.09%, 2074 gilt, which drew a much better than expected cut-off price at the auction, dipped into losses before trading near Thursday's close.

 

At 1515 IST, the turnover in the gilt market was INR 418.55 billion, higher than INR 321.50 billion at 1530 IST Thursday, with most of it after the auction result, 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 6.47-6.54%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.51-6.57% for the rest of the day. (Aaryan Khanna)

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India Gilts: Most steady; better 2074 bond cut-off drives up long-term gilts

 

	1410 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.95	99.98	99.91	99.98	99.94
YTM (%)	6.4855	6.4814	6.4911	6.4821	6.4870

 

	1410 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.63	98.67	98.60	98.63	98.59
YTM (%)	6.5259	6.5201	6.5302	6.5259	6.5324

MUMBAI--1410 IST--Prices of most government bonds were little changed even with the cut-off price of the 7.09%, 2074 gilt sharply higher than expected, dealers said. Long-term bonds rose further after the auction result as life insurers likely picked up most of the supply in the 50-year benchmark gilt.

 

Long-term bonds were up for the fourth straight session on purchases by pension funds and insurance companies, dealers said. These were likely the largest bidders for the INR 180-billion supply of the 7.09%, 2074 gilt as well. The Reserve Bank of India set the cut-off price on the bond at INR 96.07, against the INR 95.77 median in an Informist poll. The central bank accepted only 17 out of 213 bids for the bond at the auction, suggesting that investors lapped up supply of the bond by bidding in large quantums. Foreign portfolio investors also favoured long-term gilts. Data from Clearing Corp. of India as of 1410 IST indicated purchases by FPIs in the 7.30%, 2053 bond through the fully accessible route.

 

Around INR 20 billion to INR 30 billion of the 2074 bond was purchased for bond forward rate agreements, dealers said. The cut-off yield of 7.39% on the bond offers a spread of around 90 basis points over the 10-year benchmark 6.48%, 2035 gilt. However, traders avoided the long-term bonds after facing losses in the tenures over the past few months. They also saw the paper as too high risk to bid on due to its low liquidity in daily trade. Instead, they picked up the more liquid, 15-year 6.68%, 2040 bond, which was up 17 paise from the previous close at INR 98.23.

 

"Its a very good auction for the 50-year bond but it doesn't impact traders too much, so I don't think there is a shift in the trading range even after such good demand," a dealer at a private-sector bank said. "Some dealers would have positions in the 6.68% (2040 gilt) and 6.90% (2065 gilt) which are seeing some momentum."

 

The 6.90%, 2065 bond--usually seen as the most liquid long-term bond--last traded at INR 94.65, up 26 paise from Thursday's close. The bond yield compressed to 7.32% from a high of 7.41?rlier this week but was 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 are cautious that the recent rise in long-term bond prices may be short-lived, dealers said. Nearing the March quarter, traders expect long-term bond yields to rise further due an expected seasonal rise in state bond issuances. As of Tuesday's state bond auction, the weighted average tenor of state bonds issued Tuesday was 12 years, according to Aditi Nayar, chief economist at ICRA. 

   

Demand for INR 180 billion of the 6.01%, 2030 paper was robust from across all sections of the gilt market, dealers said. However, the bond last traded at INR 99.22, down 3 paise from Thursday's close. The RBI set a cut-off price of INR 99.16 on the bond, against a poll estimate of INR 99.15. Bets of a soft policy outcome at the Reserve Bank of India's Monetary Policy Committee's December meeting persist, in which case the yield curve is seen steepening, wherein short-term yields fall greater than their long-term counterparts, dealers said. Recent interest from foreign portfolio investors in short-term bonds has boosted demand for this paper, dealers said. 

 

At 1410 IST, the turnover in the gilt market was INR 251.50 billion, higher than INR 198.90 billion at 1330 IST Thursday, and marked a rise of over 50?ter the auction result was published, 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 6.46-6.52%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.55% for the rest of the day. (Cassandra Carvalho and Aaryan Khanna)

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India Gilts: Mixed; 10-year erases early gains on short bets before auction

 

	0959 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.93	99.98	99.92	99.98	99.94
YTM (%)	6.4883	6.4821	6.4904	6.4821	6.4870

 

	0959 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.62	98.64	98.60	98.63	98.59
YTM (%)	6.5280	6.5244	6.5302	6.5259	6.5324

 

MUMBAI--0959 IST--Government bond prices were mixed. The 10-year benchmark 6.48%, 2035 bond erased early gains as traders trimmed portfolios to make room for INR 300 billion of supply at the weekly gilt auction, dealers said. Prices of most other bonds rose slightly due to an overnight fall in US Treasury yields after US government data showed that the unemployment rate rose to its highest in almost four years in September. The yield on the 10-year US Treasury note fell to 4.10% at 0959 IST from 4.14% at the end of Indian market hours Thursday.

 

At the gilt auction, the government will sell INR 180 billion of the 6.01%, 2030 bond and INR 120 billion of the 7.09%, 2074 bond. Demand for the 7.09%, 2074 bond is seen mixed, while demand for the 6.01%, 2030 bond is expected to be firm. Traders betting on a soft outcome at the Reserve Bank of India's Monetary Policy Committee meeting next month are likely to lap up supply of the five-year bond, dealers said. 

 

"Demand for the shorter paper is there, but I have doubts in the longer tenure paper," said a dealer at a private sector bank. "Auction will sail through, but there is no demand from banks and PDs (primary dealerships) for the longer tenure paper... Mutual funds are also not interested in the longer paper, but they could pick up the shorter tenure paper... they are adding T-bills (Treasury bills) to their portfolio."

 

Investors may avoid picking up the longer tenure paper amid uncertainty of a policy rate cut in December despite an appealing yield spread between the 10-year benchmark and the long-term bond, as the yield-to-price movement is higher for the longer-term papers. Traders await the auction result for direction on the further movement of bond prices, they said.

 

At 0959 IST, the turnover in the gilt market was INR 32.55 billion, higher than INR 22.80 billion at 0930 IST Thursday, 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 6.46-6.52%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.55% for the rest of the day. (Janwee Prajapati)

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India Gilts: Seen slightly up on fall in US yields; auction to sail through

 

MUMBAI – Prices of government bonds are seen opening slightly higher Friday tracking an overnight fall in US Treasury yields, dealers said. Demand at the INR-300-billion gilt auction is seen firm, though traders are slightly on edge with regard to appetite from long-term investors for the 7.09%, 2074 bond. The announcement of a variable rate repo auction by the Reserve Bank of India may buoy prices during the day, 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 99.94, or 6.49% yield, Thursday. The yield on the 6.33%, 2035 bond is seen at 6.49-6.56%, against INR 98.59, or 6.53% yield, Thursday. The yield on the 10-year US Treasury note fell to 4.10% at 0815 IST from 4.14% at the end of Indian market hours Thursday.

 

US Treasury yields fell as the US employment report for September showed that the unemployment rate in the same month rose to 4.4%--the highest level in almost four years, even as non-farm payrolls rose sharply higher than expected. Expectations of a 25-basis-point rate cut at the Federal Open Market Committee's December meeting rose to 39.1% from 30.1?ay ago, according to the CME FedWatch tool. Demand for safe-haven assets amid a global rout in technology stocks also pushed yields lower.  

 

On the domestic front, the government will sell INR 180 billion of the 6.01%, 2030 bond and INR 120 billion of the 7.09%, 2074 bond Friday. The five-year auction is seen sailing through, and after a recent rise in long-term bond prices, demand for the long-term gilt is also seen firm, though the cut-off yield on the latter may be higher than the bond's current market price, dealers said. 

 

Post market hours Thursday, the Reserve Bank of India said it will conduct a seven-day variable rate repo auction for INR 500 billion Friday. While the small size and long tenure of the auction surprised some traders, the support from the RBI is a move welcomed by traders as outflows for goods and services tax put pressure on systemic liquidity. (Cassandra Carvalho)

 

End

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

 

Edited by Deepshikha Bhardwaj

 

 

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