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Informist, Wednesday, Dec. 3, 2025

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended sharply lower on Wednesday as the data from the Clearing Corp. of India indicated that the Reserve Bank of India did not buy gilts in the secondary market Tuesday, contrary to market expectations, dealers said. Some traders also placed short bets ahead of INR 320 billion of fresh supply of the 10-year benchmark 6.48%, 2035 gilt Friday, they said. 

 

A fall in the rupee past the psychological 90/$1 mark also weighed on bond prices. Traders refrained from placing aggressive bets amid lingering uncertainty about the outcome of the RBI's Monetary Policy Committee meeting on Friday. The rate-setting panel's three-day meeting began Wednesday.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.77, or 6.51% yield, against INR 99.92, or 6.49% yield Tuesday. The most-traded 6.33%, 2035 gilt ended at INR 98.56, or 6.54% yield, against INR 98.70, or 6.52% yield, in the previous session.

 

"After the rumours of RBI buying were not true, the market is under pressure right now," a dealer at a private sector bank said. "People who might have stuck-positions (may be offloading), but there's not much depth or volume to justify a position building, might be some intraday volatility."

 

The 'others' segment of gilt market participants, which includes the central bank, insurers and provident funds, net bought gilts worth less than INR 1 billion in the secondary market Tuesday, according to Clearing Corp. of India data. Speculation about heavy purchases by the RBI on Tuesday had pulled down the yield on the 6.33 35bond by 6 basis points, the most in a day in over two months. The data showed that the buyers on Tuesday were largely state-owned banks. Public sector banks net bought gilts worth nearly INR 30 billion Tuesday. 

 

Some traders placed short bets ahead of the gilt auction. 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 1700 IST showed trades worth INR 170.89 billion in the 6.33%, 2035 gilt, up from INR 161.56 billion Tuesday. Short bets in the 10-year benchmark gilt were INR 40.05 billion, similar to the previous session. More

Bond prices fell in early trade as traders exited positions after they bought heavily on Tuesday on speculation about on-screen gilt purchases by the RBI. Data from the Clearing Corp of India released after market hours on Tuesday showed that the 'others' segment, which consists of the RBI, insurance companies, provident funds, and others, net bought only INR 0.95 billion of gilts, whereas public sector banks net bought gilts worth INR 29.75 billion.

 

"Had there been only a 10-year auction and no MPC, then people would have placed aggressive short bets on the 6.33%, 2035 bond and would have bought other shorter tenures like 5-7 years," a dealer at a state-owned bank said. "... but now that there is MPC and there is no certainty on the rate cut decision, people are not certain how to strategise."

 

Some traders covered short bets as gilt prices fell, while others placed short bets to make room in their portfolios for the fresh supply of the 10-year benchmark bond at auction Friday. The government will auction INR 320 billion of 6.48%, 2035 gilt Friday. Some traders likely covered their short bets on expectations of soft commentary from the rate-setting panel.

 

The MPC may avoid cutting rates amidst the recent weakness in the rupee, dealers said. The domestic currency fell to a record low of 90.29 a dollar on Wednesday, due to uncertainty around the trade deal between India and the US.

 

"We are going (into MPC) light (portfolio) only, nothing heavy, only some position in 10-year (6.33%, 2035 bond)," a dealer at a private sector bank said. "... (we are) not expecting a rate cut any more. Must be an OMO (open market operation purchases through auction) announcement, but you don't need to position for OMO beforehand. Also, if it (open market operation purchases through auction) is less than 1 lakh (INR 1 trillion), then there will be no impact on the market." 

 

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. Some traders speculate that the RBI will buy gilts with maturities between 7 and 14 years, while others expect that support could also be available in long-term papers to bring down yields. The spread between the 6.90%, 2065 paper and the 10-year benchmark was about 90 basis points on Wednesday.

 

Foreign investors likely bought gilts maturing in up to 5 years, citing lucrative spreads over US Treasury yields, dealers said. FPIs net bought gilts worth INR 6.89 billion through the fully accessible route Tuesday, according to data from Clearing Corp. of India. The spread of the 10-year benchmark Indian gilt yield over the 10-year US Treasury yield was 245 basis points as of 1813 IST. 

 

OUTLOOK

On Thursday, bond prices may track overnight movements in US Treasury yields at market open. As the MPC kicked off its three-day meeting Wednesday, caution over the outcome may cap market volatility, dealers said.

 

On the global front, investors await the release of the delayed US Personal Consumption Expenditures Price Index data for September due Friday. Traders will watch the US Federal Open Market Committee's rate decision next week, with some saying the MPC could avoid a rate cut this week and wait for the FOMC's outcome. Traders also await 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 RBI's rate-setting panel may avoid cutting rates amid the rupee's recent weakness. Movement of crude oil prices may also influence gilts. 

 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.42-6.54% Thursday. The yield on the 6.33%, 2035 bond is seen at 6.48-6.56%.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.7650	6.5111%	99.9200	6.4896%
6.33%, 2035	98.5550	6.5369%	98.7025	6.5155%
6.01%, 2030	99.1050	6.2332%	99.1875	6.2122%
6.68%, 2040	97.7650	6.9249%	97.8400	6.9164%
6.90%, 2065	93.4500	7.4140%	93.5500	7.4056%

 

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India Gilts: Remain down on short sales; buying by PSU banks limit losses

 

	1620 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.74	99.87	99.74	99.81	99.92
YTM (%)	6.5146	6.4965	6.5146	6.5049	6.4896

 

	1620 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.53	98.65	98.50	98.62	98.70
YTM (%)	6.5405	6.5238	6.5445	6.5275	6.5155

 

NEW DELHI--1620 IST--Government bond prices remained lower as traders placed short bets ahead of the weekly gilt auction Friday amid uncertainty on rates, dealers said. Bond prices had recovered some losses, likely on purchases by state-owned banks at levels they considered lucrative. Some banks also expected bond prices to shoot up from current levels, betting on the Reserve Bank of India's Monetary Policy Committee to cut the repo rate and announce open market operations, dealers said.

 

"If you notice, when PSU banks buy big at a particular level, they will always have follow-up buying for the next two days," a dealer at a primary dealership said. "That is enough to keep the market afloat right now, as there is too much uncertainty about a rate cut for traders to take large positions." State-owned banks have net bought INR 152.85 billion over the last four sessions and were the top net buyers on Tuesday, according to data from Clearing Corp. of India. 

 

However, primary dealers were likely placing fresh short bets, especially on the liquid 2035 bonds, ahead of the INR 320-billion auction of the 10-year benchmark 6.48%, 2035 gilt Friday. This section of the market had aggressively covered their intraday short sales Tuesday, leading to a surge in gilt prices after an initial spurt of purchases from state-owned banks following the poor result of the state bond auction, dealers said. 

 

Traders remained divided on whether the rate-setting panel would cut the repo rate by 25 basis points. The MPC has held rates since June. Traders are widely expecting the RBI to announce open market bond purchases via auctions soon, but said such an announcement may come outside the monetary policy review, dealers said. If the MPC decides not to cut rates, bond prices are expected to fall sharply as traders have retained their hopes of rate cuts, especially in short-term bonds, they said.

 

At 1620 IST, turnover in the gilt market was INR 318.70 billion, down from INR 479.10 billion at 1630 IST Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the rest of the day, the yield on the 6.48%, 2035 benchmark bond is seen at 6.46-6.54% and that on the 6.33%, 2035 bond is seen in a range of 6.50-6.56%.  (Aaryan Khanna)

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India Gilts: Remain down on lack of RBI buys, rupee fall; eyes on MPC outcome

 

	1211 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.77	99.86	99.75	99.81	99.92
YTM (%)	6.5104	6.4979	6.5139	6.5049	6.4896

 

	1211 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.52	98.64	98.50	98.62	98.70
YTM (%)	6.5420	6.5242	6.5445	6.5275	6.5155

 

MUMBAI--1211 IST--Government bond prices remained down as traders sold gilts after purchases from the 'others' segment of market participants did not suggest that the Reserve Bank of India had bought bonds Tuesday, dealers said. Depreciation of the rupee against the dollar to a record low further weighed on gilt prices. Trade volume remained thin as traders refrained from taking aggressive bets ahead of the RBI's Monetary Policy Committee meeting decision Friday.

 

"Yesterday (Tuesday), prices rallied because people thought RBI is there, but the numbers showed it was public sector banks," a dealer at a private sector bank said. "But if you see, the style of buying was very different from PSUs (banks), prices rose across tenures...PSU banks usually buy at certain levels."

 

Traders exited positions after they bought a hefty volume of gilts Tuesday on speculation of RBI support through on-screen gilt purchases under the 'others' segment of market participants. The 'others' segment of gilt market participants, which consists of the RBI, insurance companies, and provident funds, net bought a meagre INR 0.95 billion of gilts, whereas public sector banks net bought gilts worth INR 29.75 billion Tuesday, according to the data from Clearing Corp of India. The fall of the rupee to a record low of 90.29 against a dollar also weighed on bond prices.

 

Some traders expect bond prices to recover during the day as traders will likely cover their short bets before the MPC meeting decision Friday, on expectations of a soft commentary from the panel. Traders expect a 50% probability of a rate cut by the rate-setting panel. However, others said bond prices may fall further as traders will likely place fresh short bets ahead of the weekly gilt auction Friday. A proxy for calculating short sales is the number of trades in a bond in the special repo segment of the Negotiated Dealing System-Order Matching platform. At 1211 IST, the data from Clearing Corp. of India showed trades worth over INR 165 billion in the 6.33%, 2035 bond and over INR 10 billion in the 6.48%, 2035 gilt.

 

Foreign portfolio investors are likely purchasing gilts Wednesday, dealers said. However, the quantum of purchases is likely to be small and not expected to impact domestic bond prices. FPIs net bought gilts worth INR 6.89 billion through the fully accessible route Tuesday, according to data from Clearing Corp. of India.

 

At 1211 IST, turnover in the gilt market was INR 131.20 billion, down from INR 176.80 billion at 1230 IST Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Rest of the day, the yield on the 6.48%, 2035 benchmark bond is seen at 6.46-6.54% and that on the 6.33%, 2035 bond is seen in a range of 6.50-6.56%.  (Janwee Prajapati)

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India Gilts: Down after data does not suggest RBI buys Tue; rupee fall weighs

 

	0955 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.75	99.86	99.75	99.81	99.92
YTM (%)	6.5132	6.4979	6.5132	6.5049	6.4896

 

	0955 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.56	98.64	98.53	98.62	98.70
YTM (%)	6.5362	6.5242	6.5405	6.5275	6.5155

 

NEW DELHI--0955 IST--Government bond prices fell as traders were disappoined with data that suggested the Reserve Bank of India had not bought bonds Tuesday as they had speculated. The rupee's fall to a record low past 90 a dollar also weighed on gilt prices, dealers said.

 

"The market was expecting external support but there is no external support, which means we can play against it," a dealer at a private sector bank said. "But prices are not likely to move significantly lower as PSU (state-owned) bank support will continue and there are hopes of both a rate cut and OMO (operation market operation) announcement at the policy." The RBI's Monetary Policy Committee's rate decision is on Friday.

 

'Others' net bought less than INR 1 billion in the secondary market Tuesday, according to Clearing Corp. of India data released after market hours. Traders had speculated heavy purchases by the RBI Tuesday in helping the most-traded 6.33%, 2035 bond record its best day in two months. From the data, the buyers Tuesday were largely state-owned banks, dealers said. Public sector banks net bought nearly INR 30 billion Tuesday. 

 

The central bank's expected secondary market purchases were seen as a key signal it would announce auctions to buy gilts from the open market in order to inject durable liquidity into the banking system. Market etimates for open market bond purchases by the RBI up to March are INR 1.5 trillion to INR 2 trillion, though traders are uncertain whether the purchases would begin in December or be conducted only in the March quarter, dealers said. Traders held onto hope of such an announcement Friday, though they were more divided on rate cut bets. 

 

Some traders fear the MPC may avoid cutting rates in the face of the rupee's recent weakness. The domestic currency fell to a record low of 90.14 Wednesday a dollar due to lack of a trade deal between India and the US and the prevailing 50% tariff on India's exports to the nation. The six-quarter high GDP growth of 8.2% in the September quarter had dented those hopes late last week as the pressure on the RBI to ease policy was seen less amid resilient growth, dealers said. 

 

At 0950 IST, the turnover in the gilts market was INR 68.80 billion, up against INR 52.15 billion at 0930 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 6.46-6.54%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.56% for the rest of the day.  (Aaryan Khanna)

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India Gilts: Seen steady as MPC meet begins, momentum from Tue may sustain

 

NEW DELHI – Government bond prices may open steady and on a cautious note as the Reserve Bank of India's three-day Monetary Policy Committee meeting gets underway Wednesday. The positive momentum from the surge in prices Tuesday may remain even as data showed that 'others' – a segment that includes the RBI – did not net buy a material quantum of bonds as speculated, dealers said. 

 

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.44-6.53?ter ending at INR 99.92, or 6.49% yield, Tuesday. The yield on the most traded 6.33%, 2035 bond is seen at 6.46-6.56%, against INR 98.70, or 6.52% yield in the previous session. The latter's yield fell nearly 6 basis points Tuesday to post its best session since Oct. 1 due to a surge in buying interest in the second half of trade. 

 

Traders had attributed this to the RBI's secondary market purchases to cap yields ahead of the MPC's decision and the 10-year aution Friday. Instead, state-owned banks have net bought INR 152.85 billion over the last four sessions and it was this segment that was a net buyer Tuesday, to the tune of INR 29.75 billion, according to Clearing Corp. of India data. This suggested that organic demand for liquid paper in the run-up to the MPC decision was quite robust, which may further buoy prices Wednesday, dealers said. 'Others' net bought less than INR 1 billion in the secondary market Tuesday.

 

"(It) means the PSUs (banks) know something that we don't," a dealer at a private sector bank said. Now that prices have risen sharply, traders expect a 'buy on dips' approach that may cap the 10-year benchmark yield at 6.52% and the 6.33%, 2035 bond's yield at 6.55?fore the policy decision. 

 

Meanwhile, traders are widely split on what to expect at the MPC's decision Friday. Some expect the MPC to cut the repo rate by 25 basis points in order to support growth after near-zero CPI inflation in October. Others said the rate-setting panel would avoid using its limited rate ammunition after data showed India's GDP grew was at a six-quarter high of 8.2% in the September quarter.

 

However, a majority of traders expect the RBI to announce fresh measures to infuse liquidity, including a potential calendar for open market operations to buy gilts starting as soon as December. Intraday, the central bank's management of the rupee near the crucial 90 a dollar mark is being closely watched, dealers said.  (Aaryan Khanna)

 

End

 

US$1 = INR 90.19

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

 

Edited by Saji George Titus

 

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