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Informist, Tuesday, Nov. 25, 2025

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended higher Tuesday, with gilts maturing in up to seven years rising sharply on bets of a 25 basis point rate cut by the Reserve Bank of India's Monetary Policy Committee next week, after Governor Sanjay Malhotra Monday said the central bank had got no signal from the latest economic data that the scope for rate cuts had reduced. However, prices ended off the day's high as traders, mostly from state-owned and private-sector banks, booked profits after the sharp rise. Some traders were also uncertain about the timing of the rate cut, whether the MPC will cut rates next week or in February, they said. 

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 100.17, or 6.46% yield, against INR 100.02, or 6.48% yield, Monday. The most traded 6.33%, 2035 gilt ended at INR 98.82, or 6.50% yield, against INR 98.68, or 6.52% yield. The five-year benchmark 6.01%, 2030 gilt ended at INR 99.45 or 6.15% yield, hitting a high of INR 99.50 during the day. The bond yield fell over 5 bps Tuesday, the most in a day since Oct. 1, the day of the last MPC policy. Traders expect the bond yield to fall to 6.10-6.12% by the MPC policy next week, unless India's September quarter GDP surprises sharply on the upside. 

 

"Some external sector buying was there since the morning, especially in the five-year and six-year segment," a trader at a primary dealership said. "And after state bond cut-offs, (there is) some traction in the 10-year segment also. The 6.50% (yield on the 6.33%, 2035 bond) has broken."  As of 1700 IST, FPIs net sold gilts worth INR 629 million through the fully accessible route Tuesday, according to data from Clearing Corp. of India. 

 

The 10-year benchmark gilt yield is seen falling to 6.40-6.42?fore next week's MPC outcome, if GDP data is in line with expectations. While Malhotra's comments on Monday significantly boosted expectations of a rate cut next week, traders also cautioned that Malhotra did not specify the timing of a rate cut. Malhotra, in an interview with Zee Business, acknowledged room for rate cuts, but said that whether the rate-setting panel decides to act on it next week would depend on its assessment at the time.  

 

Traders covered short bets in the 10-year bonds Tuesday after covering intraday short sales Monday, dealers said. Some short bets persisted as traders played on yield spreads between 10-year bonds and other tenors, they said. Some traders exited their gilts maturing in more than 10 years to invest in short-term bonds due to expectations of not more than one 25-basis-point cut in the repo rate. 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 158.01 billion in the 6.33%, 2035 gilt, up from INR 148.69 billion Monday.

 

Traders have mixed views on India's GDP for the September quarter, which is due Friday. An Informist poll of 21 economists estimates the print at 7.2%, higher than the RBI's forecast of 7.0%. Most traders have priced in a print of around 7.0-7.2%. Some are cautious about a higher print, while others say that even if GDP surprises on the higher side, the MPC would still cut rates next week due to the narrow window for inflation to remain below the central bank's target range. The RBI has forecast Jan-Mar CPI at 4.0%, and Apr-Jun FY27 CPI inflation at 4.5%. The uncertainty ahead of the key data kept traders from building aggressive positions even after Malhotra's comments, dealers said. 

 

"Even if GDP is good, I think there will be a rate cut (next week) because 7.0-7.5% (GDP growth) is not our (India's) potential right. 8% is our potential, therefore I feel (the MPC will cut rates next week)," a dealer at a state-owned bank said. "The economy doesn't get another chance like this, very low inflation. From here, I think inflation will go up only."   

 

Expectations of the RBI announcing a calendar for open-market purchases of gilts through auctions have reduced after the RBI's on-screen buys this month were seen as replacement demand following the redemption of the 5.15%, 2025 gilt, rather than a liquidity-infusing measure to lower bond yields. If the governor does announce an OMO calendar next week, bond yields could fall by 4 to 5 bps, but are unlikely to sustain the fall, dealers said.  

 

Cut-off yields at the weekly state bond auction were slightly higher than expected, due to tepid demand in papers maturing in 11 to 25 years, dealers said. Some traders also refrained from aggressive bids at the auction due to the large supply of corporate bonds during the day, dealers said. 

 

An overnight fall in US Treasury yields also aided the rise in bond prices, dealers said. The yield on the 10-year benchmark US Treasury note fell to 4.03% at 1700 IST, its lowest in nearly a month, from 4.05% at the same time on Monday. US Federal Reserve Governor Christopher Waller and San Francisco Fed President Mary Daly Monday said they prefer to cut interest rates in December to support the ailing labour market.  

 

Turnover in the gilt market was INR 499.45 billion at market close, up from INR 457.35 billion Monday, 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 Tuesday, compared with 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 Monday.

 

OUTLOOK

On Wednesday, government bond prices may track overnight movements in US Treasury yields following the release of September US retail sales and Producer Price Index data. The impact of the offshore cue may be limited as traders focus on the domestic rate trajectory and bets of a rate cut next month gain momentum, nearing the MPC meeting. However, gains may be limited as traders will refrain from aggressive purchases ahead of India's September quarter GDP data due Friday. Some traders have factored in a higher print, since the RBI has said that while Jul-Sept growth will be strong, the growth trajectory could be weaker later due to external risks, dealers said. However, a growth rate near 8.0% may weigh on rate-cut expectations and drive bond prices down, whereas a reading around 7.0% will fuel rate-cut bets. 

 

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' concerns that the RBI would hold off on monetary policy easing to protect the currency. 

 

Later this week, inflows from the Deposit Insurance and Credit Guarantee Corp., a wholly owned subsidiary of the RBI, may boost prices of the 10-year and 15-year gilts. The RBI arm insures bank deposits up to INR 500,000, and the premium for the first half of the financial year will be paid by the last working day of November. The institution usually invests this premium in gilts, especially in the 10-year and 15-year segments. 

 

Movement of crude oil prices may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.40-6.50% Wednesday. The yield on the 6.33%, 2035 bond is seen at 6.45-6.52%.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	100.1650	6.4557%	100.0200	6.4758%
6.33%, 2035	98.8200	6.4984%	98.6750	6.5194%
6.01%, 2030	99.4500	6.1453%	99.2400	6.1980%
6.68%, 2040	98.1500	6.8816%	98.1000	6.8872%
6.90%, 2065	94.5000	7.3273%	94.4000	7.3355%

 

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India Gilts: Remain up; state bond auction cut-off ylds tad higher than view

 

	1615 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.17	100.20	100.08	100.09	100.02
YTM (%)	6.4550	6.4508	6.4682	6.4661	6.4758

 

	1615 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.83	98.87	98.70	98.75	98.68
YTM (%)	6.4973	6.4912	6.5165	6.5085	6.5194

 

MUMBAI--1615 IST--Prices of government bonds remained up, but gains were capped on likely profit-sales by state-owned banks, dealers said. Some caution ahead of India's September-quarter GDP, due Friday, also limited traders' appetite for gilts, dealers said. The cut-off yields at the state bond auction were slightly higher than expectations, due to lingering uncertainty about the supply of state bonds in the near term, dealers said. Some dealers were also more interested in bidding for corporate bonds over state bonds, amid a heavy supply of the former this week, dealers said. 

 

At the state bond auction, traders bid for bonds maturing in up to 10 years, whereas long-term investors, such as the Employees' Provident Fund Organisation, bid for the longer papers. However, demand for bonds maturing within 11 to 25 years was tepid, dealers said. Fourteen states raised INR 250.67 billion, against a notified amount of INR 265.50 billion at the auction. The Reserve Bank of India set a cut-off of 7.19-7.21% on states' 10-year bonds, against an Informist poll estimate of 7.13-7.16%. Chhattisgarh and Punjab accepted only partial amounts in their 10-year and eight-year bonds, respectively.

 

Fears of state bond supply increasing in the March quarter, a usual seasonal trend, along with preference for gilts in the face of an expected 25 basis point rate cut by the RBI's Monetary Policy Committee in December, deterred some traders from purchasing state bonds, dealers said. Heavy supply of corporate bonds this week also deterred some traders from bidding aggressively for state bonds, dealers said. 

 

"State bond auction was largely along expected lines. There are a few states which traders don't prefer, so those cut-offs are slightly higher and there's heavy corporate bond supply also," a dealer at a state-owned bank said. Around INR 250 billion worth of corporate bonds are scheduled to be issued on Tuesday, of which the National Bank for Agriculture and Rural Development and Power Finance Corp. Ltd. withdrew their 2029 bond issuances due to investors bidding for higher coupons. 

 

In the secondary market, traders and some foreign portfolio investors were purchasing short-term bonds on expectations of a rate cut by the MPC next month, dealers said. Traders also purchased the 10-year 6.48%, 2035 and 6.33%, 2035 bonds and some covered short bets in these papers, dealers said. Before the MPC meeting next week, traders expect the yield on the benchmark 10-year bond to fall to 6.42%. 

 

At 1630 IST, the turnover in the gilts market was INR 444.70 billion, up from INR 320.60 billion at the same time Monday, 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 6.42-6.50%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.48-6.53% for the rest of the day. (Cassandra Carvalho) 

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India Gilts: Remain up; short-term bonds sharply higher on MPC rate cut bets

 

	1349 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.12	100.16	100.08	100.09	100.02
YTM (%)	6.4619	6.4564	6.4682	6.4661	6.4758

 

	1349 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.74	98.80	98.70	98.75	98.68
YTM (%)	6.5107	6.5017	6.5165	6.5085	6.5194

 

	1349 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.01%, 2030
PRICE (INR)	99.42	99.4400	99.3000	99.3000	99.24
YTM (%)	6.1541	6.1478	6.1830	6.1830	6.1980

MUMBAI--1349 IST--Government bond prices remained up on bets of a rate cut by the Reserve Bank of India's Monetary Policy Committee next month after RBI Governor Sanjay Malhotra Monday reiterated that latest economic data raised scope for a rate cut, dealers said. Gilts maturing in up to seven years outperformed other tenures, and traders booked profits in long-term gilts to purchase short-term bonds. Gains were limited due to profit sales. Bets of easing monetary policy boosted demand for state bonds at the weekly auction.

 

"The curve is steepening in up to 5-years of maturity, but there is some flattening bias in the market (rest of the yield curve)," a dealer at a private sector bank said. "The belly portion (bonds having maturity with 8 to 15 years) and further is mostly flat, going ahead if the cut materialises then the long tenure (prices) may move slightly up." 

 

Demand at the weekly state bond auction was firm across tenures, dealers said. Fourteen states aimed to raise INR 265.50 billion through auction. Public sector banks likely picked up papers maturing in up to 15 years, whereas some long-term investors likely picked up longer-tenure papers at auction. 

 

In the secondary gilts market, traders picked up short-term bonds in view of a rate cut in December, dealers said. The 6.01%, 2030 bond last traded at INR 99.40, up 16 paise from Monday's close, and at a yield of 6.16%. Interest in long-term bonds reduced slightly, even as yield spreads of these papers over the 10-year benchmark gilt were seen lucrative, as traders are still uncertain about the trajectory of further rate cuts after an expected 25-basis-point rate cut next month.

 

At 1330 IST, the turnover in the gilts market was INR 248.45 billion, sharply up from INR 132.65 billion at the same time Monday, 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 6.42-6.50%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.48-6.53% for the rest of the day. (Janwee Prajapati) 

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India Gilts: Up on Dec rate cut bets after RBI Malhotra's comments Mon

 

	1018 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.14	100.16	100.08	100.09	100.02
YTM (%)	6.4598	6.4564	6.4682	6.4661	6.4758

 

	1018 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.75	98.80	98.73	98.75	98.68
YTM (%)	6.5085	6.5017	6.5122	6.5085	6.5194

 

MUMBAI--1018 IST--Government bond prices rose, building on Monday's jump in prices, after Reserve Bank of India Governor Sanjay Malhotra's comments renewed expectations of a domestic rate cut next week, dealers said. A fall in US Treasury yields also aided gilts, and traders covered their short sales, which supported the rise in prices.

 

In an interview with Hindi business news channel Zee Business during market hours Monday, Governor Malhotra said none of the economic data released after the last policy review had reduced the scope for further rate cuts in India. The 10-year benchmark yield hit a near-two-week intraday Monday, falling sharply after closing at a high of 6.52% Friday.

 

"Rate cut expectation is now building up due to (the) governor's comments yesterday (Monday)...that there is space for a 25 basis point cut in December," a dealer at a private-sector bank said. "If there is a rate cut and the commentary after that also remains poisitive then the yield curve will shift across tenures."

 

US Treasury yields fell slightly as two officials from the US Federal Reserve Monday backed a rate cut in December citing labour market weakness. US Fed funds futures are pricing in an over 80% chance of a rate cut by the Federal Open Market Committee in December, from 42.4% a week ago, according to the CME FedWatch tool. The increased expectations of a US rate cut also buoyed hopes that the domestic Monetary Policy Committee would cut rates, dealers said. Traders also look ahead to India's September quarter GDP data, due Friday, as it is the last major data point before the MPC's meeting.

 

Gains were capped as state-owned banks likely sold gilts at a profit, dealers said. Some traders also placed short bets before the state bond auction. Fourteen states plan to raise INR 265.50 billion at the first auction in several weeks, which is similar to the indicative amount in the quarterly borrowing calendar. States have undershot the Oct-Dec borrowing calendar by about 35% so far in the quarter.

 

At 1018 IST, the turnover in the gilts market was INR 171.30 billion, more than triple the INR 53.60 billion at 1030 IST Monday, 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) 

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India Gilts: Seen up on fall in US yields, domestic rate cut bets

 

NEW DELHI – Government bond prices may open higher, tracking a fall in US Treasury yields after comments by US Federal Reserve officials raised the prospect of an interest rate cut in the world's largest economy in December. Traders are also likely to drive up gilt prices in the face of renewed expectations of a domestic rate cut next week after Reserve Bank of India Governor Sanjay Malhotra's comments Monday, dealers said. 

 

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.44-6.51% after ending at INR 100.02, or 6.48% yield, Monday. The yield on the most traded 6.33%, 2035 bond is seen at 6.48-6.55%, against INR 98.68, or 6.52% yield the previous session. Both bonds had their best days in over a month on Monday after Malhotra's comments. 

 

In an interview with Hindi business news channel Zee Business during market hours Monday, Malhotra said none of the economic data released after the last policy review had reduced the scope for further rate cuts in India. This followed his comments on Oct. 1, when he said that low inflation had opened up policy space to support growth. Since the policy, CPI inflation fell to a record low of 0.25% in October and has been below the RBI's medium-term target range of 2-6% for three of the past four months. The one-year overnight indexed swap rate was now pricing in nearly a 100% chance that the repo rate would be cut to 5.25% from the current 5.50% in the December policy, dealers said. 

 

Moreover, the 10-year US Treasury yield also dipped to 4.03% from 4.05% at the end of Indian market hours Monday. Both US Fed Governor Christopher Waller and San Francisco Fed President Mary Daly Monday said they prefer to cut interest rates in December to support the ailing labour market. Waller also said rate decisions from January should be on a meeting-by-meeting basis after an influx of economic data in December. Fed funds futures reflected an 80.9% probability of a 25-basis-point rate cut in December, nearly double the 42.4% chance they showed a week ago, according to the CME FedWatch tool. Traders said increased expectations of a US rate cut also boost chances of a rate reduction in India.

 

Following Malhotra's remarks, private sector banks broke a seven-session streak of being net sellers in the secondary market by picking up a net INR 10.81 billion worth of gilts in the secondary market Monday. Some traders are likely to cover their short sales primarily in the most-traded 6.33%, 2035 gilt. Others expect bonds maturing in up to seven years and the 15-year benchmark gilt to outperform the 2035 bond as well as the 10-year benchmark gilt as traders take fresh bets on rate cuts. (Aaryan Khanna)

 

End

 

US$1 = INR 89.22

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

 

Edited by Saji George Titus

 

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