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Informist, Tuesday, Dec. 2, 2025

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended sharply higher Tuesday as traders speculated that the Reserve Bank of India bought gilts after the yield on the 6.33%, 2035 bond rose to highest in over a month, dealers said. Traders were of the view that the central bank wanted to cap the bond's yield near 6.56?fore the decision of its Monetary Policy Committee and fresh supply of the 10-year benchmark bond, both on Friday.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.92, or 6.49% yield, against INR 99.62, or 6.53% yield Monday. The most-traded 6.33%, 2035 gilt ended at INR 98.70, or 6.52% yield, against INR 98.31, or 6.57% yield, in the previous session. The 6.33%, 2035 gilt yield fell 7 basis points intra-day, from the day's high of 6.59%.

 

Bond prices had opened lower but were up through most of the day as state-owned banks were likely buying gilts at levels they considered lucrative. However, the delay in the result of the state bond auction led traders to expect there was poor demand for the INR 313.50 billion of fresh supply. Those expectations were well founded – 13 states raised INR 297.25 billion through bonds, with the RBI setting the cut-off rates on 10-year bonds in the 7.20-7.49% range, against 7.25-7.29% expected in an Informist poll. Immediately, traders expected gilt prices to fall but the speculated RBI purchases in a sizeable quantum in the secondary market pushed up gilts, dealers said.

 

"It is purchases from 'others'...I think its RBI (Reserve Bank of India)," a dealer at a state-owned bank said. "If you see the top buyer numbers from yesterday (Monday), only 'others' and PSU (public sector) banks were buying, also the number is a net off, the actual number must be higher." The 'others' segment of gilt market participants, which consists of the RBI, insurance companies and provident funds, net bought gilts worth INR 63.35 billion whereas public sector banks net bought gilts worth INR 69.76 billion Monday, according to the data from Clearing Corp of India. 

 

At the state bond auction, private and public sector banks picked up bonds of up to 15-year maturity while long-term investors like life insurers and pension funds bought the longer-term state bonds, dealers said. The cut-off yields at the auction were much higher than expected as traders favoured bonds of only some states and tenures, dealers said. Some traders had expected cancellation of long-term state bonds at the auction due to tepid demand from long-term investors. Investors likely reduced the duration of their portfolio as they sold long-term bonds to buy gilts maturing in up to 10 years.

 

Traders have pared bets of the Monetary Policy Committee cutting the repo rate by 25 bps Friday after India's GDP print for the September quarter was much higher than expected, at 8.2%. Some traders are of the view that a sharp depreciation of the rupee against dollar is also likely to deter the RBI's Monetary Policy Committee to cut rates in the upcoming meeting. During the day, some gains in bond prices were erased after the rupee hit yet another record low against the dollar. Other than the rate cut, traders are more concerned about RBI Governor Sanjay Malhotra's comments after the policy meeting, which may indicate further action from the rate-setting panel going ahead. If there is a rate cut of 25 bps Friday and the governor leaves the door open for future rate cuts, then the yield on the 6.33%, 2035 could fall to 6.40%, dealers said.

 

Apart from monetary policy easing, traders expect the central bank to Friday announce a calendar for open market operations to purchase gilts through auction. The quantum of the operation is expected to be between INR 1.00 trillion and INR 2.50 trillion. An OMO calendar of INR 1.50 trillion has been priced in, and only a quantum of INR 2.50 trillion will pull bond yields lower, dealers said. Dealers hope the OMOs begin in December itself, though most expect the auctions to begin in January.

 

Turnover in the gilts market was INR 621.55 billion, higher than INR 485.50 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 Tuesday, the same as Monday.

 

OUTLOOK

On Wednesday, bond prices may track the overnight movement of US Treasury yields when the market opens. Traders will also pay close attention to the quantum of purchases from the 'others' segments of market participants, for any indications that the central bank purchased gilts on-screen Tuesday. As the MPC kicks off its three-day meeting Wednesday, caution over the outcome may cap market volatility, dealers said.

 

On the global front, investors await the delayed US Personal Consumption Expenditures Price Index data for September due Friday. Traders will look to the US Federal Open Market Committee's rate decision later in the month, with some saying that the MPC could avoid a rate cut this week, and take a decision in February only after the FOMC's outcome. Traders also await any news on the appointment of the next US Federal Reserve chair, as the current Chair Jerome Powell's term ends in May. US President Donald Trump said he has decided on his pick for the next Fed chair, after making clear he expects the appointee to cut interest rates.

 

Traders will also track geopolitical developments, especially those related to the India-US trade deal. Most traders expect more clarity on this front by the month-end. With no recent developments, dealers said a continued 50% tariff on India's exports to the US may prompt the RBI to ease monetary policy.

 

The rupee's movement against the dollar will also be closely tracked, as some traders fear the rate-setting panel of the RBI may avoid cutting rates in the face of the rupee's recent weakness. The domestic currency is seen falling to a record low of 90.00 a dollar in the near term unless a trade deal is struck.

 

Movement of crude oil prices may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.42-6.52% Wednesday. The yield on the 6.33%, 2035 bond is seen at 6.48-6.56%.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.9200	6.4896%	99.6200	6.5314%
6.33%, 2035	98.7025	6.5155%	98.3050	6.5732%
6.01%, 2030	99.1875	6.2122%	98.9825	6.2640%
6.68%, 2040	97.8400	6.9164%	97.4300	6.9622%
6.90%, 2065	93.5500	7.4056%	93.3025	7.4263%

 

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India Gilts: Sharply up on speculation of RBI buying gilts on-screen 

 

	1601 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.84	99.85	99.62	99.62	99.62
YTM (%)	6.5007	6.4993	6.5314	6.5314	6.5314

 

	1601 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.58	98.63	98.21	98.27	98.31
YTM (%)	6.5336	6.5264	6.5867	6.5783	6.5732

 

MUMBAI--1601 IST--Prices of government bonds were sharply up on speculation that the Reserve Bank of India was buying gilts on-screen, dealers said. Cut-off yields at the state bond auction were sharply higher than expectation for most bonds and bond prices temporarily gave up gains after the result, dealers said. The cut-off yields on states' 10-year bonds were in a range of 7.20-7.49%, most of which were sharply higher than the Informist poll estimate of 7.25-7.29%.

 

Traders speculated that the central bank was likely buying bonds to cap a further rise in yields after the disappointing state bond auction results, ahead of the RBI's Monetary Policy Committee meeting, dealers said. State-owned banks were on the buying side earlier in the day but traders said they did not have the risk appetite for such aggressive purchases, especially due to uncertainty about the MPC outcome and INR 320 billion supply of the 6.48%, 2035 gilt on Friday.

 

"May be RBI is there, may be, I'm not sure but the way levels are protected," a dealer at a state-owned bank said. "Someone is protecting market. If you analyse, the whole (most) trades are being done at 38-40 level, (INR 98.38 and INR 98.40 on the 6.33%, 2035 bond). The weighted average price is INR 98.3778. Someone is buying at 38 level and someone selling at 40, 40 plus level."

 

At 1530 IST, the turnover in the gilts market was INR 303.85 billion, a tad lower than INR 384.80 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 6.48-6.55%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.60% for the rest of the day. (Cassandra Carvalho)

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India Gilts: Remain up on likely PSU bks' buys; state bond sale result eyed

 

	1326 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.70	99.72	99.62	99.62	99.62
YTM (%)	6.5206	6.5181	6.5314	6.5314	6.5314

 

	1326 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.42	98.43	98.21	98.27	98.31
YTM (%)	6.5565	6.5554	6.5867	6.5783	6.5732

 

MUMBAI--1326 IST--Prices of government bonds remained up due to likely purchases by public sector banks as current market prices are seen lucrative, with the 6.33%, 2035 bond yield hitting its highest in over a month, dealers said. Traders refrained from taking aggressive bets as they await the state bond auction result for cues on the direction of bond prices later in the day. Some traders remain hopeful that the Reserve Bank of India will Friday announce a calendar for open market operations to purchase gilts through auction.

 

"PSUs (public sector banks) are selling and then adding back...as it is (bond yields) moving in a band of 6.48%-6.55%," a dealer at a state-owned bank said. "They are buying (the 6.33%, 2035 bond) when the yield is around 6.55%, then booking (profits) again around 6.48% level." 

 

Traders preferred the most-traded, 6.33%, 2035 paper since they expect the RBI to buy this paper through OMO auctions. Additionally, the trade volume of the newly-issued 10-year benchmark 6.48%, 2035 gilt has been subdued recently, making it harder to exit trades conducted in this paper in times of volatility. At 1330 IST, the turnover in the 6.33%, 2035 gilt was INR 142.85 billion, while the turnover in the 6.48%, 2035 bond was INR 34.20 billion, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Some traders also picked up the 6.68%, 2040 bond as they considered the yield spread between the bond and the 6.33%, 2035 gilt favourable. 

 

"(Yield) spreads (between gilts maturing in more than 10 years and the 10-year benchmark) on long-term bonds (gilts) have risen significantly as they haven't priced in the rate cut (at the MPC meet in December)...it (spread) should not be this high," a dealer at another state-owned bank said. "Going forward, if there is a rate cut, the spread might come down as the yield on the long term bonds will fall." 

 

At the state bond auction, some traders were of the view that the long-term bonds offered were likely to be bid at a lower yield than initially expected. Traders said any cancellation of the bonds on offer would be positive for bond prices. Cut-off yields at the auction could be 4–5 basis points lower than initially estimated, and lower than those of bonds of comparable maturity issued at last week's auction, dealers said. An Informist poll estimated cut-off yields on states' 10-year bonds at the auction at 7.25-7.29%, a spread of 73-77 basis points over the 10-year benchmark gilt issued by the Centre, compared to a spread of 69–76 bps on 10-year state bonds at last week's auction. Public sector banks likely picked up state government bonds maturing in up to 15 years at the auction, dealers said.  

 

At 1326 IST, the turnover in the gilts market was INR 229.35 billion, a tad lower than INR 278.25 billion at 1330 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 6.48-6.55%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.60% for the rest of the day. (Janwee Prajapati)

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India Gilts: Up on bets of soft MPC outcome; gains tempered on fall in rupee

 

	1030 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.68	99.71	99.62	99.62	99.62
YTM (%)	6.5227	6.5188	6.5314	6.5314	6.5314

 

	1030 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.39	98.43	98.21	98.27	98.31
YTM (%)	6.5608	6.5554	6.5867	6.5783	6.5732

 

MUMBAI--1030 IST--Prices of government bonds were up Tuesday, reversing an early fall, as traders covered short bets on hopes of a soft policy outcome by the Reserve Bank of India's Monetary Policy Committee meeting this Friday. Bets of the RBI announcing a calendar of open market operation gilt purchases through auction increased, and traders bought gilts which they expect the RBI to buy through these operations, especially the 10-year gilts, dealers said. Bond prices had opened lower tracking an overnight rise in US Treasury yields. 

 

Traders have pared bets of the MPC cutting the repo rate by 25 bps Friday, and are instead piling on to bonds they expect the RBI to buy through OMO auctions, dealers said. While an OMO calendar is also largely priced in, dealers said the total quantum and timeline of the calendar is uncertain. An OMO calendar of INR 1.50 trillion has been priced in, and only a quantum of INR 2.50 trillion will pull bond yields lower, dealers said. Dealers hope for the OMOs to begin in December itself, though most expect the auctions to begin in January. 

 

State-owned banks were likely buying gilts at levels seen lucrative, as the 6.33%, 2035 bond yield hit its highest in over two months, dealers said. State-owned banks have been net buyers of gilts since Thursday, with total purchases worth INR 117.08 billion till Monday. Some gains were erased after the rupee hit yet another record low against the dollar, dealers said.    

 

"Some expectations of OMO are increasing, so there's buying in securities expected at the OMO," a dealer at a state-owned bank said. "6.33%, 2035 is the expected security, so some buying in that."  

 

Demand at the INR-313.50-billion state bond auction is seen firm, as yields are at lucrative spreads over the bond yields of similar maturity, dealers said. Yield spread of 10-year state bonds over the 10-year benchmark 6.48%, 2035 gilt is seen at around 80 basis points Tuesday, against 69-76 bps at last week's auction.

 

At 1030 IST, the turnover in the gilts market was INR 102.85 billion, up from INR 77.25 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 6.48-6.55%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.60% for the rest of the day.  (Cassandra Carvalho)

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India Gilts:Seen tad lower before state bond supply, rise in US ylds to weigh

 

MUMBAI – Prices of government bonds are seen opening slightly lower Tuesday ahead of the INR-313.50-billion state bond auction, dealers said. An overnight rise in US Treasury yields will also weigh on bond prices, dealers said. 

 

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.50-6.57?ter ending at INR 99.62, or 6.53% yield, Monday. The yield on the most traded 6.33%, 2035 bond is seen at 6.50-6.65%, against INR 98.31, or 6.57% yield in the previous session.

 

On Tuesday, thirteen states will raise INR 313.50 billion through bonds, nearly 50% higher than INR 210.00 billion indicated in states' borrowing plan for Oct-Dec. This is the largest quantum being raised through a single auction so far in this quarter. This has led to traders' fears regarding heavy state bond supply, a seasonal occurence seen nearing the end of the financial year. Yield spreads of 10-year state bonds over the 10-year benchmark 6.48%, 2035 gilt is seen at around 80 basis points Tuesday, against 69-76 bps at last week's auction. Further, fresh supply of INR 320 billion of the 10-year benchmark 6.48%, 2035 gilt on Friday, the same day as the Reserve Bank of India's Monetary Policy Committee meeting outcome, may weigh on bond prices, dealers said. 

 

The 6.33%, 2035 bond yield may rise up to 6.60% this week, dealers said. However, at 6.60%, value buyers will step in to buy gilts on hope of some support to lower bond yields from the RBI. In case the MPC does cut the repo rate by 25 bps Friday, but does not announce an open market calendar to purchase gilts, bond yields are seen rising in the near term. If the RBI doesn't deliver either on softer policy or on liquidity support, the 6.33%, 2035 bond yield could rise to 6.70%, dealers said. Traders expect the tone and commentary of the rate-setting panel to indicate support through further rate cuts or other measures.

 

The yield on the benchmark 10-year US Treasury note was 4.09% at 0800 IST, touching a high of 4.11% overnight, against 4.05% at 1700 IST Monday. US yields rose, tracking a rise in Japanese and Eurozone government bond yields, after Bank of Japan Governor Kazuo Ueda indicated a possible rate hike. Investors await the delayed US Personal Consumption Expenditures Price Index data for September on Friday. Overnight, a speech by US Federal Reserve Chair Jerome Powell did not touch upon monetary policy and the economic outlook due to the official blackout period before the US Federal Open Market Committee's policy meeting next week. Domestic traders will look to the FOMC's decision later in the month, with some saying that the MPC could avoid a rate cut this week, and take a decision in February only after the FOMC's outcome. Traders also await any news of the next US Federal Reserve chair appointee, as current chair Powell's term ends in May. US President Donald Trump said he has decided on his pick for the next Fed chair, after making clear he expects the appointee to cut interest rates. (Cassandra Carvalho)

 

End

 

US$1 = INR 89.87

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

 

Edited by Ashish Shirke

 

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