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Informist, Thursday, Dec. 4, 2025

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended on a mixed note. Most bonds ended off lows after the rupee recovered from a record low and ended higher against the dollar Thursday. The most-traded 6.33%, 2035 bond ended higher on hope the bond would be included in open market operation auction to buy gilts by the Reserve Bank of India, which the market is hoping will be announced at the Monetary Policy Committee decision Friday. The 6.48%, 2035 bond underperformed ahead of its auction Friday.

 

The 6.48%, 2035 gilt closed at INR 99.75, or 6.51% yield, against INR 99.77, or 6.51% yield Wednesday. The 10-year benchmark had fallen to as low as INR 99.63 intraday. The 6.33%, 2035 gilt ended at INR 98.63, or 6.53% yield, rebounding from INR 98.44 at the day's low. It ended at INR 98.56, or 6.54% yield, in the previous session.

 

Bonds prices had fallen after the rupee fell to a record low of 90.42 a dollar early in the day. Traders fear that the RBI's Monetary Policy Committee would refrain from cutting rates Friday to prevent further depreciation in the local currency, dealers said. However, the local unit recovered all losses and ended at 89.98 a dollar Thursday, helped by demand from exporters and dollar sales by the RBI. 

 

"Market was very dicey throughout the day and mostly given (gilt prices were down)," a dealer at a state-owned bank said. "Some (gilts) recovered after the rupee improved...it was bound to happen if the rupee recovers our (gilts) market will definitely track that."

 

Traders bought the 6.33%, 2035 papers as they remain hopeful of an open market operation calendar announcement by RBI Governor Sanjay Malhotra at the MPC meeting outcome Friday. Traders expect the central bank to purchase bonds maturing between 2028 to 2040, similar to earlier this year, through OMO auctions. The quantum of open market operation is expected between INR 1.00 trillion and INR 2.50 trillion by March. An announcement of around INR 1.5 trillion is already priced in and a higher number will likely push up gilt prices, dealers said. 

 

The spread of the 6.33%, 2035 bond over the 10-year benchmark 6.48%, 2035 gilt compressed to less than 2 basis points from a high of 8 bps at market close on Oct. 30. Some traders said the contraction was due to the fresh supply on the 6.48%, 2035 bond and MPC result being on the same day. Traders remained divided on the view over the spread, which traders said was unusual especially because of the lack of volume in the newer bond four months after its first issuance. 

 

Traders placed short bets ahead of the weekly gilt auction to make space in their portfolio to buy the fresh supply of 6.48%, 2035 bond, as the government will sell INR 320 billion of this paper at 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 1700 IST, data from the Clearing Corp. of India showed trades worth INR 37.91 billion in the bond. The 6.33%, 2035 bond had a total trade amount of INR 167.02 billion in the special repo segment. An unexpected positive from the policy may thus reduce the spread between the two bonds further as traders cover their short sales in the most-traded gilt.

 

Traders remain more hopeful of an OMO announcement than a rate cut after India's GDP growth zoomed to a six-quarter high of 8.2% in the September quarter. However, others see the central bank and its MPC would cut rates after CPI inflation fell to a record low of 0.25% in October and RBI Governor Sanjay Malhotra's statement on Nov. 24 where he hinted that the scope to cut rates noted in the October policy review had not reduced. He did caution that the MPC will have to decide whether to act on that room at the policy meeting and his comments came before the GDP data. 

 

"I think market is expecting 60-70% chances of a rate cut tomorrow (Friday)," a dealer at a private-sector bank said. "This expectation is predominantly because of two things, one governor himself said there is space for a rate cut a week ago and second is in the previous policy two members had accommodative stance, so I think there will be a rate cut tomorrow." While the 7.38%, 2027 gilt was unusually the fifth-most traded gilt Thursday, it fell slightly ahead of the MPC decision. 

 

After the decision, market participants will be more focused on comments from the RBI governor and the panel on the future direction of rates. If the MPC cuts rates and indicates further scope for policy easing, the 6.33%, 2035 bond may go to as low as 6.32% for the first time since August. However, a rate cut followed by a signal that no further easing was forthcoming may lead to a rise in the 10-year benchmark gilt yields. If there is no announcement to buy bonds and the MPC also holds on to its policy ammunition, the 10-year yield is likely to approach 6.60%, dealers said. 

 

Bond prices fell early in the day due to the fall in the rupee and caution before the auction and the rate decision. State Bank of India's economic research team said in a note Wednesday that it no longer saw a rate cut due to the currency slide as monetary policy easing typically leads to further weakness in the local unit.

 

Turnover in the gilts market was INR 458.30 billion, higher than INR 353.80 billion in the previous session, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trade using the RBI's wholesale e-rupee pilot Thursday.

 

OUTLOOK

On Friday, gilt prices may open steady before RBI Governor Sanjay Malhotra outlines the decisions of the Monetary Policy Committee at 1000 IST, dealers said. An overnight movement in US Treasury yields and the rupee's early movement may lend cues before the announcement.

 

Traders remain divided on whether the MPC will cut the repo rate or maintain status quo for the third straight meeting. Dealers are more hopeful the central bank will announce open market operations to buy bonds in the rest of the financial year ending March, which will buoy gilt prices.

 

After the policy announcement, focus will shift to the gilt auction at 1230-1330 IST. The government will sell INR 320 billion of the 6.48%, 2035 gilt. Traders said the rate decision and commentary would likely determine demand for the 10-year benchmark gilt at auction.

 

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.

 

Movement of crude oil prices may also influence gilts. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.40-6.56% Friday. The yield on the 6.33%, 2035 bond is seen at 6.32-6.60%.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.7500	6.5132%	99.7650	6.5111%
6.33%, 2035	98.6250	6.5267%	98.5550	6.5369%
6.01%, 2030	99.1000	6.2347%	99.1050	6.2332%
6.68%, 2040	97.7800	6.9232%	97.7650	6.9249%
6.90%, 2065	93.4000	7.4181%	93.4500	7.4140%

 

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India Gilts: Mixed; 6.33%, 2035 reverses losses tracking rupee's rise

 

	1532 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.76	99.78	99.63	99.74	99.77
YTM (%)	6.5115	6.5090	6.5300	6.5146	6.5111

 

	1532 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.63	98.65	98.44	98.53	98.56
YTM (%)	6.5260	6.5238	6.5543	6.5405	6.5369

 

MUMBAI--1532 IST--Prices of government bonds were mixed, with some remaining down. The 6.33 35bond reversed losses to trade higher, tracking the rupee's appreciation against the dollar, dealers said. The 10-year benchmark 6.48%, 2035 gilt was marginally lower, as traders placed short bets on the gilt ahead of its INR-320-billion supply Friday. 

 

The rupee reversed its earlier fall to a record low and rose above the psychologically crucial 90/$1 mark. Dealers speculated that the Reserve Bank of India was selling dollars in the spot market. After the rupee had hit a record low, some traders had feared that the RBI's Monetary Policy Committee would refrain from cutting rates Friday to prevent further depreciation in the local currency, dealers said. The Indian currency had fallen due to a delay in finalising the trade deal with the US, dealers said. Some traders said the rupee's fall also indicated that it was pricing in a rate cut. Gilts and overnight indexed swap rates are currently not fully pricing in a 25 basis point rate cut Friday.

 

The yield spread between the 6.33%, 2035 bond and the 10-year benchmark 6.48%, 2035 gilt compressed to lesser than 2 bps--the lowest since the latter's issuance--from a high of 8 bps at market close on Oct. 30. Traders placed short bets on the 6.48%, 2035 bond before the auction, and favoured the 6.33%, 2035 bond on expectations that the RBI would purchase the bond through open market purchase of gilts through auction. Traders largely expect the RBI to announce a calendar of OMO auctions for Dec-Mar to the tune of INR 2.00 trillion Friday. 

 

"Any kind of rupee intervention (by the RBI) is seen as bond-positive only because liquidity is getting sucked in (drained from the banking system)," a dealer at a private sector bank said. "Now market is tracking the OMO-OMO-OMO theme, so that (rupee intervention) will enhance the need for OMOs more."

 

Traders await geopolitical developments as Indian Prime Minister Narendra Modi is set to meet Russian President Vladimir Putin on home turf Thursday for a two-day summit. Closer ties with Russia could push an India-US trade deal to the backseat, dealers said. A trade deal is seen as detrimental to the bond market, as it will boost Indian exports and growth, thereby weakening the case for rate cuts.

 

At 1530 IST, the turnover in the gilts market was INR 350.70 billion, higher than INR 280.60 billion at the same time Wednesday, 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 6.50-6.56%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.57% for the rest of the day.  (Cassandra Carvalho)

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India Gilts: Off lows on PSU bks' buys amid rupee's recovery from record low

 

	1320 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.72	99.75	99.66	99.74	99.77
YTM (%)	6.5178	6.5132	6.5254	6.5146	6.5111

 

	1320 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.55	98.54	98.47	98.53	98.56
YTM (%)	6.5380	6.5391	6.5500	6.5405	6.5369

 

MUMBAI--1320 IST--Prices of government bonds recovered some losses due to likely purchases by public sector banks at yields seen lucrative ahead of the Monetary Policy Committee's rate decision Friday. The fall in the rupee to a record low against the dollar also weighed on gilt prices but its recovery to near the 90.00 a dollar mark helped. Most bonds remained down as traders placed short bets ahead of the weekly gilt auction Friday, dealers said.

 

"If there is a dovish (easing) commentary at the policy meet tomorrow (Friday), then the demand will be good (at auction)," a dealer at a private sector bank said. "But if there is only a rate cut and no signal for further easing, then it (yield on 6.33%, 2035) may actually rise till 60 (6.60%)."

 

Traders placed short bets ahead of the weekly gilt auction to make space in their portfolio to buy fresh supply of 6.48%, 2035 bond as the government will sell INR 320 billion of this paper at an 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 1235 IST, data from the Clearing Corp. of India showed trades worth INR 37.91 billion in the bond. The 6.33%, 2035 bond had trades of INR 165.30 billion in the special repo segment. 

 

Some insurers likely shifted from long-tenure bonds to short-term bonds as they expect an open-market operation calendar announcement by Reserve Bank of India Governor Sanjay Malhotra Friday, dealers said. Traders expect the central bank to buy gilts maturing in 2028 to 2040, similar to earlier this year. The 7.24%, 2055 bond's price fell the most and the 30-year benchmark yield rose 2 basis points from Wednesday's close.

 

Meanwhile, traders expect further weakness in the domestic currency after it fell to a record low of 90.42 a dollar earlier Thursday before recovering to 90.07 a dollar at 1248 IST. The movement in the rupee did not have a significant impact on gilt prices as a fall to 90.50 a dollar was priced in but some traders feared the rupee's weakness would deter the MPC from cutting rates. State Bank of India's economic research team said in a note Wednesday that they no longer saw a rate cut due to the currency slide, as monetary policy easing typically leads to further weakness in the local unit.

"I think the rupee will fall to 92 as the trade deal is looking bleak now," a dealer at a primary dealership said. "This fall may come by the end of this year or in the next quarter. RBI will not use its reserves to intervene right now...although not seeing too much of a impact on the (gilt) market."

 

Foreign portfolio investors likely bought India's bonds as the spread of the 10-year gilt yield over the 10-year US Treasury yield was seen lucrative at nearly 250 bps, dealers said. Foreign investors' holdings of India's fully accessible route bonds was at a record high of INR 3.22 trillion before the policy decision.

 

At 1320 IST, the turnover in the gilts market was INR 235.15 billion, higher than INR 202.40 billion at 1330 IST Wednesday, 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 6.49-6.55%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.57% for the rest of the day.  (Janwee Prajapati)

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India Gilts: Down on rupee's fall, lack of aggressive buys before MPC

 

	0934 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.69	99.75	99.68	99.74	99.77
YTM (%)	6.5216	6.5132	6.5230	6.5146	6.5111

 

	0934 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.48	98.54	98.47	98.53	98.56
YTM (%)	6.5478	6.5391	6.5500	6.5405	6.5369

 

MUMBAI--0934 IST--Prices of government bonds opened lower, tracking a fall in the rupee against the dollar, and due to lack of aggressive purchases by any market segment ahead of the Reserve Bank of India's Monetary Policy Committee decision Friday, dealers said.

 

The rupee hit a record low of 90.4225 per dollar in early trade, and some traders unwound bets of a rate cut by the MPC this week with the view that the rate-setting panel would avoid cutting rates to prevent further depreciation of the local currency. Other traders said the fall in the rupee was already priced in, and recent comments by government officials did not indicate any discomfort with the falling currency. Chief Economic Adviser to the Government V. Anantha Nageswaran Wednesday said he was not worried about the rupee's fall against the dollar and that the Indian currency was expected to "come back" next year. Some speculate that the central bank's comfort with letting the rupee fall past the psychological 90/$1 level is a signal of a rate cut.

 

Some traders were concerned about the lack of aggressive buys by any market segment, while others said this was expected ahead of the MPC decision, since several traders have already built positions before the policy outcome and would not want to add more. On Wednesday, public sector and private sector banks each net purchased gilts of around INR 1 billion or less, according to data from Clearing Corp. of India. Foreign banks and the 'others' segment of market participants, which includes insurance companies, provident funds, and the RBI, were net buyers Wednesday. However, traders were expecting a larger quantum of purchases by 'others', for any indication that the central bank was purchasing gilts onscreen to pull bond yields. Short sales before INR 320 billion of fresh supply of the 6.48%, 2035 bond Friday also weighed on bonds, dealers said.  

 

"Volumes are muted and people are avoiding positions before the MPC (outcome)," a dealer at a state-owned bank said. "Most participants are not trying to buy gilts right now, firstly because of MPC and secondly because of the rupee. Everyone has taken positions much earlier at much better levels (prices) than this, than current levels, so we're just waiting for MPC."

 

At 0934 IST, the turnover in the gilts market was INR 24.80 billion, lower than INR 47.95 billion at 0930 IST Wednesday, 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 6.49-6.55%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.50-6.57% for the rest of the day.  (Cassandra Carvalho)

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India Gilts: Seen largely steady on caution ahead of MPC decision Fri

 

MUMBAI – Prices of government bonds are seen opening largely steady with a downward bias Thursday due to short sales before the weekly gilt auction Friday. Traders' focus will be on the decision of the Reserve Bank of India's Monetary Policy Committee Friday. Traders may refrain from aggressive bets before the policy outcome.

 

The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.49-6.54?ter ending at INR 99.77, or 6.51% yield, Wednesday. The yield on the most traded 6.33%, 2035 bond is seen at 6.50-6.56%, against INR 98.56, or 6.54% yield in the previous session. The yield on the benchmark 10-year US Treasury note was 4.08% at 0800 IST, unchanged from 1700 IST Wednesday. 

 

Nearing the key policy decision, traders are still divided over the outcome. Adding to the uncertainty is the INR 320 billion of fresh supply of the 10-year benchmark gilt Friday. Some traders expect a rate cut of 25 basis points, while others expect the panel to continue with a pause on rates. Instead of a rate cut, the central bank could announce a calendar of open market operation purchase of gilts through auction, dealers said. Dealers also expect the central bank to downgrade its inflation forecasts, and raise GDP growth estimates. 

 

The rupee's movement against the dollar will also be closely tracked. The domestic currency fell to a record low of 90.29 a dollar Wednesday before closing at 90.19 a dollar, also a record. Some traders fear the RBI may avoid cutting rates amid the rupee's recent weakness. Others speculate that the central bank's comfort with letting the rupee fall past the psychological 90/$1 level is a signal of a rate cut. 

 

The movement in US Treasury yields may also lend cues, though the impact may be limited ahead of the key domestic event, dealers said. Investors also await the delayed US Personal Consumption Expenditures Price Index data for September Friday. Traders will look to the US Federal Open Market Committee's policy decision next week, with some saying the MPC may avoid a rate cut this week and decide on it in the February policy after seeing the FOMC outcome. Traders also await news on the next US Federal Reserve chair appointee, as current Chair Jerome Powell's term ends in May. US President Donald Trump has said he has decided on his pick for the seat and made it clear he expects the new appointee to cut interest rates. (Cassandra Carvalho)

 

End

 

US$1 = INR 89.98

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

 

Edited by Akul Nishant Akhoury

 

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