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Informist, Wednesday, Nov. 26, 2025

 

By Cassandra Carvalho

 

MUMBAI – Prices of most government bonds ended slightly higher Wednesday on bets that the Reserve Bank of India's Monetary Policy Committee will cut the repo rate by 25 basis points next week. Some traders are also betting on a soft policy commentary, along with the announcement of an open-market gilt purchase through auction. Purchases by foreign portfolio investors also aided the prices. Gains were, however, capped due to profit sales from state-owned banks and short bets by some traders before the weekly gilt auction Friday, dealers said. 

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 100.20, or 6.45% yield, against INR 100.17, or 6.46% yield, Tuesday. The most traded 6.33%, 2035 gilt ended at INR 98.86, or 6.49% yield, against INR 98.82, or 6.50% yield. The 6.79%, 2031 bond and the 6.28%, 2032 bond outperformed most bonds, as papers of this tenure gained traction amid bets on policy easing. The seven-year benchmark 6.28%, 2032 gilt ended 10 paise higher Wednesday despite the fresh supply of INR 110 billion of the bond at the weekly auction Friday. The five-year benchmark 6.01%, 2030 gilt ended flat after sharp gains in the previous session. The yield on the benchmark 10-year US Treasury note eased to 4.01% at 1700 IST from 4.03% at the same time Tuesday.

 

"Market opened higher, but profit-booking came in at those levels. After that, the market has stabilised. If US (10-year) yield comes down below 4% and stays below 4%, then we can some more movement upwards (in price terms), till (a fall to) 6.45% (yield on the 6.33%, 2035 gilt) on old paper," a dealer at a state-owned bank said. "(For yields to fall) Below that, they (traders) will wait until MPC, but MPC is also actually a selling event. Even if they cut (repo rate), it'll be the last cut. Even if there is a cut, I don't see too much of a rally."  

 

As of 1800 IST, foreign portfolio investors net purchased gilts worth INR 13.21 billion through the fully accessible route Wednesday, according to data from Clearing Corp. of India. A fall in US yields widens the interest rate differential between safe-haven assets and emerging market debt, making the latter more appealing to foreign investors. US yields fell after US Federal Reserve Governor Stephen Miran reiterated his call for a rate cut next month due to a weakening labour market. Traders expect the 10-year US yield to fall to 3.91% in the near term, after falling below the psychologically crucial 4.05% level, amid rising bets of a rate cut by the US Federal Open Market Committee next month. A fall in overnight indexed swap rates due to offshore traders receiving fixed-rate contracts also boosted bond prices, dealers said. 

 

As for the MPC decision next week, traders have mixed views on the outcome. Most are hoping for a 25-bps rate cut. Some also expect the central bank to cut its CPI inflation forecasts after a near-zero inflation print in October and the reduction in goods and services tax rates. However, a rate cut is unlikely to pull the 6.33%, 2035 bond yield below 6.45%, dealers said.

 

Bond yields may actually rise after the repo rate cut as the next cut is likely to be the last cut in this cycle, dealers said. Only if the rate-setting panel and RBI Governor Sanjay Malhotra indicate scope for further rate cuts, do traders see a chance of the 6.33%, 2035 bond yield falling to 6.40%. Some 

traders also expect the RBI to announce a calendar for open-market gilt purchases through auctions, totalling INR 1.50 trillion. If the RBI announces an OMO calendar and the MPC cuts rates by 25 bps next week, then the 6.33%, 2035 bond yield can fall below 6.40% to 6.35%, dealers said.

 

While some traders are unsure whether the MPC will cut rates next week, they are certain of at least one 25 bps cut in December or February, with a section betting on the latter. In the run-up to next week's policy, traders did not place aggressive short bets, despite fresh supply at the gilt auction Friday, since prices are seen rising in the near-term, dealers said. 

 

"At (INR) 98.92 levels (on the 6.33%, 2035 bond), shorting is happening, at (INR) 100.24 on the new paper (6.48%, 2035 bond) these levels we're seeing shorting but its not much, going into policy no one would want to short too much, this is just some intraday shorts and before auction," a dealer at a private sector bank said. 

 

The government will sell INR 90 billion of the 5.91%, 2028 bond, INR 110 billion of the 6.28%, 2032 bond, INR 70 billion of the 7.24%, 2055 bond and INR 50 billion of the 6.98%, 2054 green bond Friday. While all bonds are likely to sail through on rate cut bets, demand for the 6.28%, 2032 bond is seen robust after the RBI rejected all bids for the bond at its last auction on Oct. 31. Since several seven- and eight-year papers are erstwhile 10-year benchmarks, they are viewed as 10-year papers and thus offer higher yields for their maturities, making them lucrative to buy, dealers said. 

 

Turnover in the gilt market was INR 517.40 billion Wednesday, up from INR 499.45 billion in the previous session, 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 Wednesday, the same as Tuesday.

 

OUTLOOK

On Thursday, government bond prices may track overnight movements in US Treasury yields following the release of the second estimate of the September quarter GDP, October personal income and outlays, and other economic data. Traders will also focus on the domestic rate trajectory as bets of a soft policy 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. 

 

Any gains in bond prices Thursday may be tempered by short sales ahead of the INR-320-billion gilt auction Friday. 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.

 

Traders will also watch out for bond purchases of around INR 120 billion from the Deposit Insurance and Credit Guarantee Corp., a wholly owned subsidiary of the RBI. Traders expect the institution to bid for the seven-year gilt at Friday's auction. 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% Thursday. The yield on the 6.33%, 2035 bond is seen at 6.42-6.52%.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	100.2000	6.4508%	100.1650	6.4557%
6.33%, 2035	98.8550	6.4934%	98.8200	6.4984%
6.01%, 2030	99.4500	6.1454%	99.4500	6.1453%
6.68%, 2040	98.1800	6.8784%	98.1500	6.8816%
6.90%, 2065	94.5400	7.3240%	94.5000	7.3273%

 

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India Gilts: Most bonds slightly up on rate cut bets; buying by FPIs supports

 

	1545 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.20	100.24	100.16	100.20	100.17
YTM (%)	6.4508	6.4453	6.4564	6.4508	6.4557

 

	1545 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.87	98.92	98.83	98.85	98.82
YTM (%)	6.4912	6.4840	6.4977	6.4941	6.4984

 

MUMBAI--1545 IST--Prices of most government bonds were slightly higher on bets of a 25 basis points rate cut by the Reserve Bank of India's Monetary Policy Committee next week. Purchases by foreign portfolio investors also buoyed prices, dealers said. As of 1545 IST, FPIs net purchased gilts worth INR 11.16 billion through the fully accessible route Wednesday, according to data from Clearing Corp. of India.

 

"Right now we're tracking mostly US (yields) and some OIS-based flows which are causing an absolute rally in G-sec also," a dealer at a private sector bank said. The yield on the benchmark 10-year US Treasury note fell to 4.01% at 1545 IST from 4.03% at 1700 IST Tuesday, after US Federal Reserve Governor Stephen Miran reiterated his call for a rate cut next month due to a weakening labour market. Subsequently, the five-year overnight indexed swap rate fell to day's low of 5.68% on offshore flows, as traders price in a 25 bps rate cut in both the US and in India. 

 

Bets of a rate cut next week were evident in the result of the INR-190-billion Treasury bill auction, dealers said. The cut-off yields on T-bills of all three tenures were lower than expectations. The INR-60-billion supply each of the 182-day and 364-day papers were swept in 5 bids and 9 bids respectively, likely by a large investor, dealers said.

 

After the sharp rise in price of the five-year benchmark 6.01%, 2030 bond Tuesday, traders purchased the seven-year 6.28%, 2032 bond Wednesday on hope of a rate cut by the MPC, dealers said. Till the MPC meeting decision next week, the five-year bond yield is not seen falling below 6.12%, and traders said there is a greater scope for fall in the yields of the seven-year papers.

 

FPIs were also likely purchasing these papers, dealers said. The 6.28%, 2032 bond last traded at INR 99.35, up 10 paise from Tuesday's close. However, the bond was off the day's high of INR 99.42 as some primary dealers placed short bets on the gilt to make room for its fresh supply Friday. The government will sell INR 110 billion of the bond Friday, along with three other bonds. Inspite of the fresh gilt supply, traders are unlikely to place aggressive short bets before the auction since prices are seen on an upward trend until the MPC decision next week. 

 

At 1545 IST, the turnover in the gilts market was INR 424.85 billion, higher than INR 322.65 billion at 1530 IST Tuesday, 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 6.45-6.50% for the rest of the day. (Cassandra Carvalho) 

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India Gilts: Most steady as traders await GDP data, weekly gilt auction Fri

 

	1500 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.22	100.24	100.16	100.20	100.17
YTM (%)	6.4481	6.4453	6.4564	6.4508	6.4557

 

	1500 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.90	98.91	98.83	98.85	98.82
YTM (%)	6.4876	6.4854	6.4977	6.4941	6.4984

 

MUMBAI--1500 IST--Prices of most government bonds remained steady as traders await GDP data at the end of the week, dealers said. The 10-year benchmark 6.48%, 2035 gilt and the most traded 6.33%, 2035 gilt rose slightly due to a fall in US Treasury yields. Persistent hopes of a domestic rate cut in December after Reserve Bank of India Governor Sanjay Malhotra's comments on Monday kept bond prices up, though gains were capped by profit-booking.

 

Traders await Jul-Sept GDP data, due Friday, the final major data point before the Monetary Policy Committee's meeting on Dec. 3-5. An Informist poll of economists pegged the GDP growth at a three-quarter low of 7.2% on year in Jul-Sept. A growth rate near 8.0% may weigh on rate cut expectations and pull bond prices down, whereas a reading around 7.0% will fuel rate cut bets.

 

Meanwhile, some traders short-sold gilts before the weekly gilt auction of INR 320 billion Friday, though the activity was muted in the face of expected firm demand. Traders and investors, including Deposit Insurance and Credit Guarantee Corp., are likely to pick up the INR 110 billion supply of the 6.28%, 2032 gilt at auction. The RBI had rejected all bids for the gilt at its last auction on Oct. 31, bringing down its supply. The yield on the seven-year benchmark gilt hit a two-week low Tuesday despite heading into the debt sale.

 

"There won't be as many shorts (short sales) before this auction because RBI did not accept bids (for the 7-year bond) last time," a dealer at a private sector bank said. "However, there will be good demand from traders for the 7-year bond at auction...this segment (7-year) should perform better, there is only 5 bps (basis points) spread between the 10-year bond and the 7-year bond."

 

Domestic rate cut expectations propelled short-term bonds higher on Tuesday and some banks continued to pick up gilts maturing in under five years on Wednesday, including illiquid bonds. The rate-sensitive instruments usually perform well during a rate cut and banks had trimmed their holdings of 10-15 year bonds in favour of these gilts, dealers said.

 

Long-term bonds were also slightly higher, likely on traders' buys as life insurers and other long-term investors kept to the sidelines, dealers said. Traders found the 40-year benchmark gilt's spread over the 10-year benchmark, at nearly 90 basis points, attractive and likely to compress. They also preferred long-term gilts rather than state bonds, which offered relatively poor spread over gilts in that segment, dealers said. 

 

At 1500 IST, the turnover in the gilts market was INR 388.95 billion, lower than INR 263.30 billion at 1430 IST Tuesday, 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: Off highs after surge since Mon; GDP, gilt auction Fri in focus

 

	1030 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	100.18	100.24	100.16	100.20	100.17
YTM (%)	6.4543	6.4453	6.4564	6.4508	6.4557

 

	1030 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.83	98.91	98.83	98.85	98.82
YTM (%)	6.4970	6.4854	6.4977	6.4941	6.4984

 

MUMBAI--1030 IST--Prices of government bonds gave up most of the early gains on profit booking Wednesday after the sharp rise since Monday. Bond prices were up slightly at the open after an overnight fall in US Treasury yields, dealers said. Traders refrained from aggressive buys ahead of the September quarter GDP data and gilt auction, due Friday.

 

The 10-year US Treasury yield fell to 4.01% due to the September US retail sales and producers price index data being weaker than expected, boosting the expectation of a rate cut at the upcoming US Federal Open Market Committee meeting. Combined with optimism on domestic rate cuts, bond prices have risen sharply this week after Reserve Bank of India Governor Sanjay Malhotra's comments Monday, which were seen by traders as making the case for a rate cut in India. These expectations are largely reflected in prices of bonds maturing in 10 years and above, while short-term bonds may gain further during the day, dealers said.

 

"...right now there is not much cue to look forward to," a dealer at a primary dealership said. "We are waiting for the GDP data and the gilt auction this week."

 

Traders await the Jul-Sept data, due Friday, the final data point before the Monetary Policy Committee meeting on Dec. 3-5. An Informist poll of economists pegged the GDP growth at a three-quarter low of 7.2% on year in Jul-Sept. A growth rate near 8.0% may weigh on rate-cut expectations and pull bond prices down, whereas a reading around 7.0% will fuel rate-cut bets.

 

Meanwhile, some traders placed short bets before the weekly gilt auction of INR 320 billion on Friday to make space in their portfolio for the fresh supply. Primary dealers had covered existing short bets Tuesday amid the sharp rise in prices and net bought INR 19 billion of gilts, Clearing Corp. of India data showed. Purchases from the Deposit Insurance and Credit Guarantee Corp. are expected to push up prices of bonds maturing between seven and 15 years and the deposit insurer is also expected to pick up the 6.28%, 2032 gilt at auction. Banks make their Apr-Sept premium payments to the Deposit Insurance and Credit Guarantee Corp. at the end of November.

 

At 1030 IST, turnover in the gilts market was INR 106.55 billion, lower from INR 171.30 billion at the same time Tuesday, 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: Seen up on fall in US yields, India Dec rate cut bets

 

NEW DELHI – Government bond prices are likely to open higher due to a fall in US Treasury yields and expectations of another rate cut in India in December, dealers said. The gains may be limited by profit-booking after the sharp rise in prices over the past two days.

 

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.42-6.48% after ending at INR 100.17, or 6.46% yield, Tuesday. Comments by Reserve Bank of India Governor Sanjay Malhotra seen by traders as favouring a rate cut in December have driven the benchmark yield down 6 basis points from Monday's highs. The yield on the most traded 6.33%, 2035 bond is seen at 6.46-6.52%, against INR 98.82, or 6.50% yield the previous session.

 

The 10-year US Treasury yield dipped below 4% for the first time in November and was at 4.01% at 0830 IST, against 4.03% at the end of Indian market hours Tuesday. Economic data released Tuesday made a stronger case for a December rate cut in the US. Producer price index inflation was up 2.7% on year in September, the same as in August, while core producer price inflation was 2.6% on year, against 2.9% in August. Meanwhile, retail sales grew 0.2% on month in September, lower than the 0.6% growth in August and missing the consensus estimate of a 0.4% rise, according to a Reuters poll.

 

Fed funds futures reflected an 84.4% chance of a December rate cut of 25 bps by the Fed, slightly higher than the previous day and up from 50.1% a week ago. On Tuesday, Fed Governor Stephen Miran reiterated his call for a rate cute next month due to a weakening labour market.

 

The fall in US yields comes alongside stronger expectations of policy easing in India as well. Malhotra said Monday that the central bank had got no signal from the latest economic data that the scope for rate cuts had reduced. However, whether the Monetary Policy Committee would act on that room at next week's meeting would depend on its assessment at the time, the RBI governor said. Still, overnight indexed swap rates had priced in a certain 25-basis-point rate reduction on Dec. 5 to 5.25%. 

 

Amid the optimism about a rate cut, traders are likely to continue building up their gilt portfolios. Short-term bonds may remain in favour as most traders expect only a single rate cut, which will aid rate-sensitive gilts maturing in less than seven years more than long-term bonds. India's GDP data for the September quarter is also awaited for interest rate cues before the MPC decision.

 

The central bank's activity in the foreign exchange market after the rupee hit a record low Friday is also being closely watched, dealers said. Some traders also expect the announcement of an India-US trade deal soon, which may dent bond prices. A deal being struck would lead to a better growth outlook and reduce the need for open-market operations auctions, dealers said. Iy may also support the rupee and allay traders' concerns that the RBI would hold off on monetary policy easing to protect the currency.  (Aaryan Khanna)

 

End

US$1 = INR 89.27

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

 

Edited by Saji George Titus

 

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