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Informist, Monday, Nov. 24, 2025

By Cassandra Carvalho

MUMBAI – Prices of government bonds surged near the end of trade Monday, after the Reserve Bank of India Governor Sanjay Malhotra said the latest economic data supported scope for a rate cut. The turnover in the gilt market more than doubled after Malhotra's remark, as expectations of a 25-basis-point rate cut by the RBI's Monetary Policy Committee next month increased and traders covered short bets, dealers said. The 6.33%, 2035 bond yield fell nearly 5 bps Monday, the most in a day since the MPC's decision on Oct. 1. 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 100.02, or 6.48% yield, against INR 99.72, or 6.52% yield, Friday. The move comes after the bond yield ended at its highest since its issuance on Oct. 3, on Friday. The most traded 6.33%, 2035 gilt ended at INR 98.68, or 6.52% yield, against INR 98.35, or 6.57% yield. Turnover in the gilt market doubled, after Malhotra's remarks, to INR 457.35 billion at market close from around INR 201.60 billion at 1530 IST, but was still lower than INR 570.20 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.

In an interview with Hindi business news channel Zee Business that was screened 1600 IST, Malhotra said recent macro indicators support the scope for a rate cut, following which the yield on the benchmark 10-year 6.48%, 2035 bond fell below the psychologically crucial 6.50% level after hovering at this level for most of the day. Traders speculated that the governor's comments, coming just days before the MPC's meeting kicks off Dec. 3, were an indication from the central bank that it was supportive of lower bond yields. 

"The comments are in line with the October policy statement only," a dealer at a private sector bank said. "Whether he will use the space or not, that depends on the policy. It (the comment) is nothing much but saying it just two weeks before the (December) policy makes lot of sense. Lot of people are reading between the lines. Rewording (reiterating) it again has given market a hope to stay alive." On Oct. 1, Malhotra had said that low inflation opened up policy space to further support growth.

Traders covered short bets after Malhotra's comments, dealers said. A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 1800 IST showed trades worth INR 148.69 billion in the 6.33%, 2035 gilt. Traders expect this figure to fall by atleast INR 20 billion for Monday. Trade volume in the 6.33%, 2035 gilt surpassed all other gilts, at INR 211.80 billion Monday, nearly four times more than INR 55.25 billion in the 10-year benchmark 6.48%, 2035 gilt. 

Several traders who were on the sidelines also stepped in to purchase gilts as the yield on the 6.33%, 2035 bond hovered near the psychologically crucial 6.55% mark earlier in the day. The 6.55% yield level is seen as lucrative to buy gilts since traders do not expect the 10-year yield to rise above this due to expected support from the central bank, dealers said.  

A fall in swap rates aided the rise in bond prices. The five-year swap rate ended at 5.71%, down 6 bps from Friday. Some dealers said that Malhotra's comments on the rupee were also positive. The depreciation of the currency is normal in the long run, Malhotra said, after the rupee slumped to a record low on Friday. On Monday, the rupee appreciated, ending at 89.2300 per $1 at 1530 IST, from 89.4800 at the same time Friday. This pushed up bond prices earlier in the day, which were also supported by a fall in US Treasury yields, dealers said.

The yield on the benchmark 10-year US Treasury note was 4.05% at 1700 IST, down from 4.09% at the same time Friday. US yields fell after New York Federal Reserve President John Williams said interest rates could be cut in the near term without putting the US Federal Reserve's inflation target of 2% at risk. Fed funds futures now price in a 77.7% chance of a rate cut of 25 basis points at the US Federal Open Market Committee meeting in December, according to the CME FedWatch tool, up from 42.4% a week ago after other Fed officials had signalled they favoured holding rates for the time being. The 4.05% level on the 10-year US yield is a technical level, and if the yield falls below it, it could fall to 4.00% before rebounding, dealers said. 

Short-term bonds gained traction after Malhotra's comments, after lagging gilts of others tenures for most of the day. The 6.01%, 2030 gilt also marked its best day since Oct. 1 Monday. The bond ended at INR 99.24, 15 paise higher from Friday's close, and at a yield of 6.20%, down nearly 4 bps. Trades worth INR 16.05 billion were conducted in the 7.04%, 2029 gilt under the 'Reported deals T+1' segment of the RBI's NDS-OM platform.

"This (the 7.04%, 2029 trades) are mainly due to switch," a dealer at a state-owned bank said. "Its a switch of one paper with another paper with a counterparty...switch of the 7.04% with the 7.10%, 2029, or the 7.26%, 2029 (bonds). It can be to book profit, or if someone sees an opportunity in other papers."

At market open, prices were buoyed as traders who had shed bonds Friday, based on the erroneous data that the RBI had net sold gilts onscreen, bought gilts, dealers said. After market hours Friday, the central bank corrected the data to show it bought INR 148.10 billion worth of bonds in the Nov. 14 week through open market operations in the secondary market.

There were two trades for INR 100 million in the 6.79%, 2034 gilt and two trades for INR 500 million in the 6.33%, 2035 gilt using the RBI's wholesale e-rupee pilot Monday, while no trades were conducted using this method Friday.

OUTLOOK

On Tuesday, bond prices may open higher as bets of a rate cut by the MPC next month gain momentum nearing the MPC meeting. 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. However, gains may be limited as traders will refrain from aggressive purchases ahead of India's September quarter GDP data due Friday. 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 data.

The central bank's management of the rupee, after it hit a record low Friday, would also be closely watched, dealers said. 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 6.42-6.50% Tuesday. The yield on the 6.33%, 2035 bond is seen at 6.48-6.55%.

India Gilts: At day's high; RBI Malhotra's remarks raise Dec rate cut hopes

MUMBAI--1611 IST--Prices of government bonds rose further to hit the day's high, and volumes rose after comments from Reserve Bank of India Governor Sanjay Malhotra raised hopes of a rate cut by the central bank's Monetary Policy Committee at its December meeting, dealers said. Until the remarks were made, traders had been pricing in only around a 50% chance of a 25-basis-point rate cut next month, they said.

In an interview with Hindi business news channel Zee Business, Malhotra said recent macro indicators support the scope for a rate cut, following which the yield on the benchmark 10-year 6.48%, 2035 bond fell below the psychologically crucial 6.50% level after hovering at this level for most of the day.

"Market is interpreting that since the comments were during market hours, RBI is also supportive of lower yields and there could be a rate cut in December," a dealer at a private sector bank said. "Sentiment has changed because of this positive commentary, some are covering shorts and those who were on the sidelines are making positions also because 6.55% (yield on the 6.33%, 2035 bond) is a good level to buy."

Gains were limited due to profit sales likely from primary dealerships and private sector banks, dealers said. Bond prices were up earlier in the day after the rupee appreciated against the dollar, and after the central bank corrected the data to show it bought INR 148.10 billion worth of bonds in the week ended Nov. 14 through open market operations in the secondary market.

At 1621 IST, the turnover in the gilt market was INR 330.55 billion, lower than INR 508.30 billion at 1630 IST Friday, but marked a sharp rise from INR 201.60 billion from an hour ago, 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 6.45-6.51%, 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)

India Gilts: Up on buys after Friday's sell-off; investors largely absent

MUMBAI--1428 IST--Government bond prices rose, though trade volumes were thin. Traders covered some short bets after the rupee recovered from its record low hit Friday, which had spooked bond traders and led to gilt prices tumbling, dealers said. Investors, however, were reluctant to place aggressive bets before the release of India's GDP data Friday.

The purchases brought down the 10-year benchmark 6.48%, 2035 gilt below 6.50%, after it closed above that yield level Friday for the first time since its issuance. Dealers said sustaining these levels until the end of the day would be crucial for traders to place fresh bets on bond prices rising.

The rupee recovered to as high as 89.11 a dollar Monday after hitting a record low of 89.4950 a dollar Friday. Meanwhile, hopes of a December rate cut in the US hovered around 70% after comments from New York Federal Reserve President John Williams on Friday, which in turn gave a fillip to traders betting on a rate cut in India as well at next week's Monetary Policy Committee meeting.

"Its (bond prices) range bound mostly because investors are not ready to buy, the movement is because of trader's activity only," a dealer at a state-owned bank said. "Investors are waiting for any cues like the trade deal (between US and India) or (any development) on the Russian oil sanction...higher inflation level is also acting as a negative for them (investors)."

Purchases from state-owned banks had limited losses and traders were now trying to spur a recovery ahead of the GDP data and after Reserve Bank of India data showed it bought bonds in the Nov. 14 week, as expected, dealers said. India's GDP may grow at 7.0-7.5% in the September quarter from 7.8% in Apr-June, according to market estimates. State Bank of India pegs it at the higher end of the range while the RBI's forecast is at 7.0%. The data is crucial for traders to place bets on the rate trajectory, dealers said. Some market participants were of the view that the economy must show a negative impact of the 50% US tariff on Indian exports for the RBI to cut the repo rate further from the current 5.25%.

At 1428 IST, the turnover in the gilt market was INR 179.30 billion, lower than INR 263.95 billion at 1430 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 6.46-6.52%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.54-6.58% for the rest of the day. (Janwee Prajapati)

India Gilts: Off highs on caution around rupee weakness; fall in US ylds aid

MUMBAI--1030 IST--Government bond prices were off highs on continued caution over the weakness in the rupee since Friday and its impact on domestic monetary policy. Most bonds gained early after a fall in US Treasury yield and the Reserve Bank of India's revised data showing it bought bonds in the Nov. 14 week, after it erroneously released data during market hours Friday that it had sold gilts that week.

The Indian currency declined 78 paise, the most in a day since May 8, to a record closing low of 89.4800 a dollar Friday. 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. The domestic unit gained Monday against the dollar, helped by the RBI's hefty dollar sales in the spot and non-deliverable forwards market. Currency weakness is seen dissuading the central bank from easing monetary policy, which usually leads to outflows from the domestic bond market.

"The (RBI) governor had said early on that the monetary policy route is not the best way to defend the rupee, so I don't think that it'll have a material impact on the rate decision," a dealer at a private-sector bank said. "What the rupee weakness will do is have a negative impact on trader positioning on a rate cut, which is what is playing out."

Meanwhile, the 10-year US Treasury yield fell to 4.07% from 4.09% at the end of Indian market hours Friday as comments from New York Federal Reserve President John William increased hopes of a December rate cut in the US. This led to a fall in the five-year overnight indexed swap rates and pulled up gilt prices, with greater rate cut expectations in the US seen boosting the chances of a rate cut by the Monetary Policy Committee at its Dec. 3-5 meeting, dealers said.

Bond prices rose early in the day after data showed the RBI bought, not sold, INR 148.10 billion of gilts in the week ending Nov. 14. This brought its total purchase of INR 272.80 billion since Nov. 3. Traders had avoided buying gilts and some banks trimmed positions late Friday after the erroneous data showing sales and picked up gilts early Monday.

State-owned banks were likely buyers as yields on the most traded bonds were attractive, dealers said. State-owned banks were top net buyers on Friday with a net purchase of INR 27.26 billion in the secondary market. They bought gilts after the 6.33%, 2035 bond yield rose above 6.55% and the yield on 6.48%, 2035 bond rose above 6.50%, both of which are considered the psychologically crucial level for the respective bonds.

"The market will definitely track any movement in the INR today (Monday)," said a dealer at a primary dealership. "...RBI will not let the rupee freefall, and if it intervenes, it will be a positive for the market. I expect the market to remain range-bound around 57-52 (6.52%-6.57%) for the 6.33 bond (6.33%, 2035) and around 50-53 (6.50%-6.53%) for the 6.48 (6.48%, 2035) bond." 

At 1030 IST, the turnover in the gilt market was INR 53.60 billion, higher than INR 48.20 billion at the same time 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 6.46-6.52%, 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)

India Gilts: Seen up as RBI corrects data to show buys, US yields fall

NEW DELHI – Government bond prices may open higher Monday as traders, who had shed bonds based on the erronous data that the Reserve Bank of India sold gilts, add to their portfolios, dealers said. After market hours, the central bank corrected the data to show it bought INR 148.10 billion worth of bonds in the Nov. 14 week through open market operations in the secondary market.

In data released during market hours, the data showed that the central bank sold gilts of that quantum after buying INR 124.70 billion worth of gilts in the week ended Nov. 7, leading to jitters among traders. Some banks may also pick up gilts as the yield on the most-traded bond ended at a three-week high Friday and because of a fall in US Treasury yields, dealers said. 

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.46-6.54% after ending at INR 99.72, or 6.52% yield, Friday. The yield on the most traded 6.33%, 2035 bond is seen at 6.51-6.59%, against INR 98.35, or 6.57% yield the previous session. The movement of the rupee will be closely watched after the domestic currency ended at a record closing low of 89.48 a dollar Friday, which had initially triggered bond sales by traders. 

Traders said the RBI's on-screen bond purchases are at an end since Nov. 13 and the central bank is likely to avoid any further activity until the Monetary Policy Committee meeting on Dec. 3-5. Net secondary market purchases by the 'others' segment – which includes the RBI, provident funds and life insurers – totalled INR 31.31 billion Friday, according to Clearing Corp. of India data. These are likely to reflect purchases by life insurers after the gilt auction rather than the central bank, dealers said.

The yield on the 10-year US Treasury note settled at 4.07% Friday, lower than 4.09% at 1700 IST Friday when Indian markets closed. New York Federal Reserve President John Williams said interest rates could be cut in the near term without putting the US Federal Reserve's inflation target of 2% at risk. Fed funds futures zoomed to price in a 69.4% chance of a rate cut of 25 basis points at the US Federal Open Market Committee meeting in December, according to the CME FedWatch tool. The pricing of a rate cut had fallen to below 30% last week after other Fed officials had signalled they favoured holding rates for the time being.

This may also aid bets of rate cuts in India, though traders said the biggest beneficiary would be the five-year overnight indexed swap rate rather than gilts. On the domestic front, traders await the release of September quarter GDP data on Friday. 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 expect a growth reading of around 7.0-7.5%, against the RBI's forecast of 7.0% for the September quarter.  (Aaryan Khanna)

End

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

Edited by Deepshikha Bhardwaj

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