More Stories

Informist, Thursday, Dec. 11, 2025

By Janwee Prajapati

MUMBAI – Prices of government bonds ended sharply higher Thursday after the cut-off prices at the Reserve Bank of India's much-awaited open market operation auction to purchase gilts were largely higher than traders' expectations, dealers said. After the INR-500-billion OMO auction result lifted bond prices and traders' spirits, dealers shifted their attention to the second tranche of this month's OMO purchases, scheduled on Dec. 18. The erstwhile 10-year benchmark 6.33%, 2035 gilt outperformed most other bonds, on expectations that the central bank will choose to buy the gilt at next week's OMO auction.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.25, or 6.58% yield, against INR 98.93, or 6.63% yield Wednesday. The 6.33%, 2035 gilt ended at INR 98.04, or 6.61% yield, against INR 97.68, or 6.66% yield, in the previous session. The price of the 6.33%, 2035 bond hit a high of INR 98.14 during the day.

"Market is positive after the auction result, became a bit given (fell slightly) mostly because fall in rupee will definitely impacts us (bond prices)," a dealer at a state-owned bank said. "Anyway prices had fallen quite a bit yesterday (Wednesday), so now it's a good level to buy. I expect the levels (prices) to only improve from here."

Bond prices erased some gains due to profit sales after the sharp rise in prices during the day, dealers said. The fall of the rupee to a record low against the dollar also weighed. The rupee ended at a record closing low of 90.3675 per dollar at 1530 IST. As of 1700 IST, FPIs net sold gilts worth INR 6.20 billion through the fully accessible route Thursday, according to data from Clearing Corp. of India. 

Earlier in the day, trade volumes were thin ahead of the OMO auction result, as traders had mixed expectations about the cut-off prices. Some traders expected the RBI to buy the bonds selected for the auction at prices higher than indicative levels, after a sharp fall in bond prices since RBI Governor Sanjay Malhotra Friday announced INR-1.00-trillion worth of OMO purchases in December. Other traders were sceptical about offering these bonds at higher prices as they preferred getting rid of these bonds, which were largely illiquid, while making small profits.

Traders are now waiting for the RBI to announce the next set of bonds selected for the OMO auction to be conducted on Dec. 18, after the latter had sought suggestions from the market participants on the selection of bonds. Traders expect the RBI to announce the remaining INR-500-billion of the INR 1 trillion OMO purchases this month in relatively more liquid and profitable gilts. Traders covered short bets in the 6.33%, 2035 gilt on hopes that the RBI will likely choose this paper for the OMO auction to be held on Dec. 18, dealers said.   

The rise in bond prices was also supported by purchases from public sector banks at levels seen lucrative. This segment net purchased gilts worth INR 125.67 billion this week till Wednesday, according to data from Clearing Corp. of India. However, gains were capped as private sector banks likely sold gilts Thursday as well, after net sales of INR 124.19 billion from Monday to Wednesday. Prices gave up some gains nearing the end of trade due to short bets placed ahead of the weekly gilt auction. However, more than the fresh supply Friday, traders were focussed on the announcement of next week's OMO auction and said that placing short bets at current levels was not lucrative. 

Bond prices opened higher following a fall in US Treasury yields overnight, after the US Federal Open Market Committee early Thursday cut the federal funds target range by 25 basis points for the third straight meeting to 3.50-3.75%, as widely was expected. The yield on the 10-year US Treasury note fell to 4.13% at 1700 IST, from 4.20% same time Wednesday, following US Federal Reserve Chair Jerome Powell's comments and expectations of more rate cuts in the upcoming sessions in 2026.

"Prices are up...market looks positive today (Thursday)," a dealer at another state-owned bank said. "FOMC has cut rates, even the commentary was dovish, also (6.33%, 2035) bond yields had risen to highs of 65-66 (6.65%-6.66%), so from here it (prices) will only go up on replacement demand." On Wednesday, the yield on the 10-year benchmark gilt had hit its highest level since Aug. 29.   

Turnover in the gilts market was INR 474.05 billion, slightly higher than INR 455.95 billion Wednesday, 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 Thursday, the same as Wednesday.

OUTLOOK

When the market opens on Friday, gilts will track the overnight movement of US Treasury yields. The rupee's movement early in the trade will also lend cues, dealers said.

Traders will also track the result of the weekly gilt auction. The government will sell INR 160 billion of the 6.68%, 2040 bond and INR 120 billion of the 6.90%, 2065 gilt at 1030-1130 IST. Traders will likely place some short bets ahead of the auction to make space in their portfolio for the fresh auction supply. Demand is seen firm due to replacement demand after sale of INR 500 billion worth of gilts to the RBI at the OMO auction Thursday.  

Traders may refrain from aggressive bets ahead of CPI inflation data for November at 1600 IST. India's CPI inflation is expected to rise to 0.7% in November from a record low of 0.25% in the previous month, mainly as the statistical effect of a favourable base fades away, according to an Informist poll of 17 economists. Traders have priced in this estimate, and bond prices may only react--on the downside--if the data comes in at 1.0% or higher. Otherwise, the data may not lend significant cues as the bar for a rate cut in February remains high, dealers said.

Traders also await announcement of the details of the second tranche of the OMO purchases for INR 500 billion on Dec. 18, with expectations that the RBI will buy liquid, profitable papers such as the 6.33%, 2035 gilt.

Traders will monitor developments on the India-US trade deal and may also track crude oil prices for cues. Commerce Minister Piyush Goyal Thursday said the recent visit to India from US officials was not for trade deal talks. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.53-6.63% Friday. The yield on the 6.33%, 2035 bond is seen at 6.56-6.66%.

India Gilts: Sharply up as OMO cut-off prices beat view; rupee fall weighs

MUMBAI--1551 IST--Prices of government bonds surged after the Reserve Bank of India set cut-off prices at par with, and higher than expectations at the first open market operation auction to buy gilts since May, dealers said. The RBI bought seven gilts worth INR 500 billion, the entire notified amount, at the auction. The yield on the 6.33%, 2035 gilt briefly fell below the psychologically crucial 6.60% level after the result was published. Some gains were erased on profit sales, and the fall in the rupee to a record low against the dollar, dealers said.  

The RBI set cut-off prices on five of the seven gilts higher than indicative prices published by Financial Benchmarks India Pvt. Ltd. Traders had largely expected cut-off prices on the 6.67%, 2050 gilt and on the 7.26%, 2032 gilts to be lower due to the highly illiquid nature of the bonds and since several traders did not want to sell these at a loss after picking them up at higher prices than current levels, dealers said. For the other bonds, traders had largely bid at prices sharply higher than indicative prices to match a sharp fall in bond prices this week, dealers said.

"OMO actually went well. Somewhat on expected lines and some papers are extremely better than expected," a trader at a primary dealership said. "Some papers RBI has taken 2-3 basis points lower than the existing yields, the cut-off was good so that's why market (secondary market yields) also moved lower." 

Traders covered short bets, especially in the 6.33%, 2035 gilt, on hopes that the central bank would choose the bond at next week's OMO buy auction on Dec. 18. Traders await the announcement of next week's OMO auction details, with hopes that the RBI will offer to buy "in the money" bonds which are profitable. Most of the papers at Thursday's auction were illiquid and not profitable to sell at current market levels, which led to several banks not tendering bonds inspite of holding them in their books, dealers said. Replacement demand after the sale of bonds to the RBI also buoyed bond prices, dealers said. 

A fall in the rupee to a record low against the dollar weighed on bond prices, dealers said. The rupee ended at a record closing low of 90.3675 per dollar at 1530 IST. Foreign portfolio investors were selling gilts in the secondary market, dealers said. As of 1551 IST, FPIs net sold gilts worth INR 4.07 billion through the fully accessible route Thursday, according to data from Clearing Corp. of India.    

Long-term bonds were up due to purchases at levels seen lucrative, dealers said. Traders expect the RBI to buy more long-term gilts at OMO auctions, especially liquid long-term gilts, to pull down bond yields in this part of the yield curve. Traders are more focussed on the second tranche of the INR-1.00-trillion OMO purchase by the RBI next week, than on India's CPI for November, due 1600 IST Friday. Traders are broadly pricing in a print of 0.7% Friday, and are more concerned over the future trajectory of inflation. The RBI's forecasts show a steady climb in inflation going into FY27.    

At 1530 IST, the turnover in the gilt market was INR 368.45 billion, almost similar to INR 356.80 billion at 1535 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 6.57-6.63% while that on the 6.33%, 2035 bond is seen moving in a range of 6.58-6.65% for the rest of the day.  (Cassandra Carvalho)

India Gilts: Off highs as rupee falls; OMO auction result awaited

MUMBAI--1306 IST--Government bond prices were off highs after the rupee fell to as much as 90.4175 against the dollar, within touching distance of its record low and down sharply from 89.97 against a dollar at Wednesday's close, dealers said. Traders were also cautious ahead of the result of the open market operation auction in which the Reserve Bank of India offered to buy gilts worth up to INR 500 billion. Prices remained up following a fall in US Treasury yields after the US cut rates and amid softer-than-expected remarks by US Federal Reserve Chair Jerome Powell on inflation and jobs, dealers said.

Feedback for the OMO auction was sharply divided with some banks expecting sharply higher prices than indicative levels published by Financial Benchmarks India Ltd. for Wednedsay. With the sharp fall in prices this week, some dealers were looking to tender bonds at higher prices to help recoup even the week's losses. The RBI may also be willing to accept bids above the indicative levels as bonds are cheaper than when it announced the auction on Friday.

The central bank has offered to buy the 6.75%, 2029 gilt, the 7.02%, 2031 gilt, the 7.26%, 2032 gilt, the 6.79%, 2034 gilt, the 7.54%, 2036 gilt, the 6.92%, 2039 gilt, and the 6.67%, 2050 gilt. An Informist poll of nine dealers pegged the cut-off prices on most of the bonds as slightly higher than the indicative levels.

Bonds maturing up to 2034 were favoured by banks at the OMO auction as they were profitable for them to sell from their held-to-maturity portfolios, dealers said. However, some banks tendered these bonds at a moderate discount to indicative levels Wednesday despite the rise in secondary market prices.

"The auction (OMO) went okay...I think the cut-off price will be few paise lower than FBIL (level)," a dealer at a private sector bank said. "Banks did not participate aggressively. Only few banks were there concentrated on a few papers only." The 2029 and 2031 papers may be the most tendered bonds at the auction, while banks did not have much stock of the 6.67%, 2050 gilt to sell to the RBI, dealers said. 

Trade volume was thin as traders avoided placing aggressive bets ahead of the OMO auction result. Traders said they preferred to find exits on these bonds at the OMO even at a small profit as most of the bonds selected for the auction were illiquid, meaning these would be difficult to liquidate in the secondary market. Traders said they had given feedback to the RBI to select relatively liquid bonds such as the 6.33%, 2035 gilt for the next INR-500-billion OMO auction, dealers said. The erstwhile 10-year benchmark rose more than the 6.48%, 2035 gilt Thursday as traders had a greater amount of short sales in the bond, which they covered after the Federal Open Market Committee result. 

Gilts held on to the gains following a slip in US Treasury yields overnight. US Treasury yields fell after the US ederal Open Market Committee Thursday cut the federal funds target range by 25 basis points for the third straight meeting to 3.50-3.75%, as widely expected. The yield on the 10-year US Treasury note fell to 4.13% from 4.20% at the end of Indian market hours Wednesday following Powell's comments and expectations of more rate cuts in 2026.

At 1306 IST, the turnover in the gilt market was INR 137.35 billion, lower than INR 150.90 billion at 1245 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 6.57-6.63% while that on the 6.33%, 2035 bond is seen moving in a range of 6.59-6.66% for the rest of the day.  (Janwee Prajapati)

India Gilts: Sharply up on fall in US yields post FOMC; RBI OMO awaited

MUMBAI--0920 IST--Government bond prices were higher as US Treasury yields fell following the US Federal Open Market Committee's rate cut and softer than expected remarks by US Federal Reserve Chair Jerome Powell on inflation and jobs, dealers said. Traders were also optimistic that the Reserve Bank of India would accept higher cut-off prices than indicative prices on Financial Benchmarks India Ltd. at its open market operation auction to buy bonds.

The yield on the 10-year US Treasury note fell to 4.13% from 4.20% at the end of Indian market hours Wednesday. This likely led traders to cover the short sales taken heading into the US policy outcome. Moreover, investors expect the FOMC to cut rates more than the median estimate of Fed officials' projections of only 25 basis points in 2026, after 100 bps of rate easing in 2024 and 75 bps in 2025.

"There should be an aggressive recovery mirroring the fall," a dealer at a private sector bank said. "Most of the fall in the last few minutes of trade yesterday (Wednesday) looked as if traders were cutting positions before FOMC." The yield on the 10-year benchmark 6.48%, 2035 bond had risen over 13 basis points Wednesday on the view there would be no further rate cuts in India. 

Trade volumes were thin before the INR 500-billion OMO auction at 0930-1030 IST. At the OMO auction, banks are hoping the RBI will allow them to exit their bond positions at a meagre profit after the sharp fall in gilt prices this week. For secondary market prices to remain higher, traders said the central bank would need to accept the notified amount. A reduction in the size that the RBI would buy would deter replacement demand from banks, hurting market sentiment, dealers said.  The central bank has offered to buy the 6.75%, 2029 gilt, the 7.02%, 2031 gilt, the 7.26%, 2032 gilt, the 6.79%, 2034 gilt, the 7.54%, 2036 gilt, the 6.92%, 2039 gilt, and the 6.67%, 2050 gilt.

At 0920 IST, the turnover in the gilt market was INR 25.25 billion, lower than INR 33.40 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 6.57-6.63% while that on the 6.33%, 2035 bond is seen moving in a range of 6.59-6.66% for the rest of the day.  (Cassandra Carvalho)

India Gilts: Seen up on fall in US yields post FOMC decision, before OMO buy

MUMBAI – Government bond prices are seen opening higher post three straight days of losses after US Treasury yields fell following the US Federal Open Market Committee's rate decision at 0030 IST. Traders also said the Reserve Bank of India's open market operation auction to buy gilts worth INR 500 billion at 0930-1030 IST would lend positivity and generate replacement demand, dealers said. 

The 6.48%, 2035 bond is seen in the range of 6.57-6.63% after ending at INR 98.93, or 6.63% yield, Wednesday. The 10-year benchmark yield ended at its highest since Mar. 25 on Wednesday and the bond has lost one rupee in value compared with its cut-off price at an auction Friday. The yield on the erstwhile 10-year benchmark 6.33%, 2035 bond is seen at 6.59-6.66%, against INR 97.68, or 6.66% yield, in the previous session.

The yield on the 10-year US Treasury note fell to 4.14% at 0812 IST from 4.20% at the end of Indian market hours Wednesday after the US policy outcome. Though the 25-basis-point rate cut by the panel was widely expected, comments by US Federal Reserve Chair Jerome Powell were less inflation-focused than expected. He said that underlying job gains may be slower than headline readings while signalling comfort on inflation. Moreover, investors were betting the FOMC could cut rates more than the median estimate of 25 bps in 2026. Fed funds futures were pricing in a 70.4% chance of a 50-bps or greater rate reduction in 2026, according to the CME FedWatch tool.

The fall in US yields would help bond prices recover, though expectations of a domestic rate cut have not been influenced by the US decision, with traders still seeing a high bar for rate cuts by the RBI's Monetary Policy Committee in 2026. Traders are hoping the rise in prices leads to better exits for market participants at the OMO auction, dealers said.

"Market to give gap-up opening of 15 paise (on the 10-year gilt) and should be buy on dips," a dealer at a primary dealership said. 

The RBI will purchase INR 500 billion worth of seven gilts at the auction. The central bank will buy the 6.75%, 2029 gilt, the 7.02%, 2031 gilt, the 7.26%, 2032 gilt, the 6.79%, 2034 gilt, the 7.54%, 2036 gilt, the 6.92%, 2039 gilt, and the 6.67%, 2050 gilt. The cut-offs at the auction and the quantum accepted may provide direction for bond prices, dealers said.

State-owned banks are not enthusiastic about the bonds at auction as most banks do not have large holdings of the bond at profitable levels, dealers said. The RBI's willingness to accept offers at above Wednesday's Financial Benchmarks India Ltd. prices would be key to determine the direction of bond prices in the secondary market. If the RBI does not take the total notified amount at the auction, bond prices would likely give up gains and potentially fall as well.

Even with the OMO result on expected lines, gains may be limited as traders' risk appetite remains low after the sharp fall in bond prices over the last few days. Moreover, foreign banks may cover some short positions but are unlikely to take fresh bets on gilts near the year-end, when they close their accounts, dealers said.

"While US asset classes markets have taken a less-hawkish Fed message positively with mild bull steepening, India's rates market may stay sticky to the bear-steepness, reflecting structural DD-SS (demand-supply) mismatch," said Madhavi Arora, chief economist, Emkay Global Financial Services Ltd.

Later in the day, primary dealers may begin short-selling bonds to make room for gilts at the weekly auction Friday. The government will sell INR 160 billion of the 6.68%, 2040 bond and INR 120 billion of the 6.90%, 2065 gilt at 1030-1130 IST. Demand at the auction for the long-term bonds is likely to be modest, dealers said.  (Aaryan Khanna)

End

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

Edited by Ashish Shirke

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2025. All rights reserved.