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Informist, Monday, Dec. 15, 2025

By Janwee Prajapati

MUMBAI – Prices of government bonds ended mixed Monday, with most bonds ending steady. The erstwhile 10-year benchmark 6.33%, 2035 bond ended higher due to its inclusion in the Reserve Bank of India's open market operation auction Thursday, dealers said. Bond prices recovered losses as traders covered short bets and purchased gilts at levels seen as lucrative. Prices were down in early trade, tracking a fall in the rupee to a record low of 90.79 per dollar.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.18, or 6.59% yield, flat against Friday. The 6.33%, 2035 gilt ended at INR 98.18, or 6.59% yield, against INR 98.04, or 6.61% yield in the previous session. The yield spread between the 6.33%, 2035 bond and the 6.48%, 2035 bond was flat, compressing from a high of 8 bps at market close on Oct. 30. Traders favoured the erstwhile 10-year benchmark due to its inclusion in OMO auction, dealers said. 

Likely sales from private sector banks weighed on bond prices, dealers said. This segment of gilt market participants net sold gilts worth INR 32.79 billion Friday, according to data from Clearing Corp. of India. Foreign portfolio investors also likely sold gilts, dealers said. As of 1700 IST, FPIs net sold gilts worth INR 6.32 billion through the fully accessible route Monday, data from Clearing Corp. of India showed.

"The two papers which are important (at the OMO auction) are the 6.75%, 2029 (gilt) and the 6.33%, 2035 (gilt)," a dealer at a private sector bank said. "There is some hope that if RBI accepts higher amount and gives a cut-off which is higher in terms of prices, significantly higher than market (prices), then it can be seen as a yield management signal."

Bond prices were up at open as traders were enthusiastic about the open market operation Thursday after the RBI announced that it will purchase the erstwhile 10-year benchmark 6.33%, 2035 bond at the auction following feedback from market participants asking for inclusion of liquid bonds. The RBI has offered to buy INR 500 billion of seven bonds at the OMO auction--the 6.75%, 2029 bond; the 6.10%, 2031; the 6.54%, 2032; the 7.18%, 2033; the 6.33%, 2035; the 7.23%, 2039; and the 7.09%, 2054 gilt.

Some traders expect a third OMO auction in December while others see the RBI buying bond via auction only in January. The expected quantum of another OMO is around INR 500 billion to INR 1.5 trillion, dealers said.

The spread between the 6.33%, 2035 bond and the 6.48%, 2035 bond compressed to less than 1 basis point, similar to the spread before the Monetary Policy Committee meeting on Dec. 5, due to inclusion of the former in the OMO auction. Traders had expected the spread between the two bonds to widen after the weekly gilt auction of 6.48%, 2035 bond, which added to the total outstanding amount of this bond.

Some traders likely bought the 6.68%, 2040 bond and sold the 6.48%, 2035 bond, which also weighed on the prices of the new 10-year benchmark bond, dealers said. However, others said that the risk is too high for such a trade.     

Long-term gilts were up due to the inclusion of the 7.09%, 2054 gilt in Thursday's OMO. The bond last ended at INR 97.25, 75 paise higher than Friday's close. Moreover, current prices of long-term bonds were extremely lucrative to buy, dealers said. The 7.09%, 2054 bond currently offers a yield spread of over 72 bps over the 10-year benchmark gilt, which may reduce further if the RBI continues to buy long-term gilts at OMOs.

Bond prices were little changed after the result of the INR-150-billion switch auction. The RBI set cut-off prices sharply higher than expectations on all five destination securities, and switched five source securities worth INR 88.08 billion. Traders offered bonds at higher prices to book some profit as the prices in the secondary market have fallen significantly.

Turnover in the gilts market was INR 353.00 billion, down from INR 370.85 billion Friday, 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 Monday, the same as Friday.

OUTLOOK

On Tuesday, gilts are expected to track the overnight movement of US Treasury yields. The rupee's movement early in the trade will also lend cues, dealers said.

Traders look forward to the OMO auction Thursday which is expected to lend further cues to the bond prices. Before the OMO auction Thursday, 10 states will raise INR 178.50 billion Tuesday, slightly higher than INR 176.90 indicated in the borrowing calendar for Oct-Dec. Demand at the auction is likely to be firm from traders as the yield spread between the gilts and state government bonds has widened from the last weekly state bond auction following a rise in yields of the state bonds, dealers said.

Traders will monitor developments on the India-US trade deal and may also track crude oil prices for cues. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.55-6.63%. The yield on the 6.33%, 2035 bond is seen at 6.56-6.64%.

India Gilts: Most tad down; trade choppy tracking movement of rupee

MUMBAI--1532 IST--Prices of most government bonds were slightly lower in thin trade, closely tracking the movement of the rupee against the dollar, dealers said. Prices roses briefly earlier, when the rupee was off the day's low, but gave up the gains when the Indian currency hovered near a record low again. Some traders covered short bets as current bond prices are lucrative, dealers said.

The rupee ended at a record closing low of 90.73 per dollar, and bond prices traded lower as foreign portfolio investors likely sold gilts, dealers said. As of 1532 IST, FPIs net sold gilts worth INR 1.16 billion through the fully accessible route Monday, data from Clearing Corp. of India showed.

Trade volume was thin due to lack of major cues until the Reserve Bank of India's open market operation auction Thursday, dealers said. Traders bet on the RBI accepting at least INR 200 billion worth of the 6.33%, 2035 gilt at the INR-500-billion auction. The 6.33%, 2035 gilt traded largely higher due to its inclusion in Thursday's open market operation auction, though a further rise in the bond's price would depend on how much of the liquid bond the RBI chooses to buy at the OMO auction, dealers said. Traders also hope that the RBI will buy the bond at future OMO auctions that it is expected to conduct. 

The spread between the erstwhile 10-year benchmark 6.33%, 2035 gilt and the current 10-year benchmark 6.48%, 2035 gilt narrowed to less than a basis point, as traders favoured the former ahead of the OMO auction. Some traders who had purchased the 6.68%, 2040 gilt at the gilt auction Friday hedged their purchase by placing short bets on the 10-year benchmark, dealers said.

"The spread (yield spread between 6.33%, 2035 gilt and 6.48%, 2035) could invert if the RBI keeps buying the 6.33% (2035 gilt) at OMOs. It also depends on how much he (RBI) buys of the 6.33% (2035 gilt)," a trader at a primary dealership said. "But if he buys 6.33%, then mutual funds will offload that stock, which will push them to buy the 6.48%. The spread could widen again or it could remain flat also."

Long-term gilts were up due to the inclusion of the 7.09%, 2054 gilt in Thursday's OMO. The bond last traded at INR 97.25, 75 paise higher than Friday's close. Moreover, current prices of long-term bonds were extremely lucrative to buy, dealers said. The 7.09%, 2054 bond currently offers a yield spread of over 72 bps over the 10-year benchmark gilt, which may reduce further if the RBI continues to buy long-term gilts at OMOs.

Bond prices were little changed after the result of the INR-150-billion switch auction. The RBI set cut-off prices sharply higher than expectations on all five destination securities, and switched five source securities worth INR 88.08 billion. Traders had expected such a result since the RBI, at Thursday's open market operation auction, and at the last switch auction on Nov. 17, set cut-off prices higher than traders' estimates.

At 1532 IST, turnover in the gilts market was INR 251.60 billion, slightly lower than INR 275.55 billion at 1530 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For remainder of the session, the yield on the 6.48%, 2035 benchmark bond is seen at 6.57-6.62%, while that on the 6.33%, 2035 bond is seen in a range of 6.56-6.64%. (Cassandra Carvalho)

India Gilts: Off lows on buys at levels seen lucrative; switch result eyed

MUMBAI--1328 IST--Prices of government bonds were off lows as current prices were lucrative to buy gilts, dealers said. The Reserve Bank of India's choice of bonds for Thursday's open market operation auction also supported prices. Bond prices remained down due to an intraday fall in the rupee against the dollar to record lows. 

"Rupee weakness is showing in the bond prices," a dealer at a public sector bank said. "Since morning, bonds were trading (at) higher (prices) due to OMO (open market operation) auction, and two VRRs (variable rate repo auctions) were also positive."

The RBI post-market hours Friday said it will conduct two variable rate repo auctions for a total of INR 1.50 trillion this week, and the liquidity support from the RBI was positive for bond prices, dealers said. At the 11-day INR-750-billion variable rate repo auction held Monday, RBI took all bids worth INR 249.69 billion. The RBI will hold a 10-day variable rate repo auction for the same quantum Tuesday. The reversal of both tenders will take place on Dec. 26. 

Traders bought gilts at yield levels sween lucrative, dealers said, as the yield on the 10-year benchmark bond hovered near its highest level since Sept. 1. Some traders also covered short bets they had placed on the 10-year 6.33%, 2035 and 6.48%, 2035 bonds, due to lucrative levels, and due to the inclusion of the 6.33%, 2035 bond at Thursday's open market operation 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. At 1328 IST, trades worth INR 141.86 billion were recorded in the 6.33%, 2035 gilt, down from INR 145.45 billion Friday.

Participation is seen firm at the INR-150-billion switch auction Monday. Traders bid for the destination securities at prices higher than those indicated by Financial Benchmarks India Pvt. Ltd. Friday, they said. Several traders bid at higher prices since the RBI, at Thursday's open market operation auction, and at the last switch auction on Nov. 17, set cut-off prices higher than traders' estimates. At the switch auction, traders expect the government to switch INR 40 billion to INR 150 billion of the source securities, dealers said. According to an Informist poll, the median of estimates at which traders will bid for destination securities were slightly higher than indicative levels. 

Traders were more enthusiastic about the open market operation Thursday after the RBI announced that it will purchase the erstwhile 10-year benchmark 6.33%, 2035 bond at the auction following feedback from market participants asking for inclusion of liquid bonds. The RBI has offered to buy the 6.75%, 2029 bond; the 6.10%, 2031; the 6.54%, 2032; the 7.18%, 2033; the 6.33%, 2035; the 7.23%, 2039; and the 7.09%, 2054 gilts at the auction. 

Trade volume remained thin as traders awaited the switch auction result for further cues. At 1328 IST, the turnover in the gilts market was INR 150.30 billion, higher than INR 124.35 billion at 1330 IST Friday, 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 6.57-6.62%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.56-6.64%, for the rest of the day.  (Janwee Prajapati)

India Gilts: Erase most gains on rupee fall; 6.33%, 2035 up on OMO inclusion

MUMBAI--0934 IST--Prices of government bonds erased most gains after the rupee fell to record lows in early trade. Bond prices were up earlier after the Reserve Bank of India chose to buy liquid gilts which are profitable to sell at current levels, at the open market operation auction of INR 500 billion Thursday, dealers said. The erstwhile 10-year benchmark 6.33%, 2035 gilt outperformed the current 10-year benchmark 6.48%, 2035 gilt, since the RBI will buy the former at the auction Thursday. The 6.33%, 2035 gilt yield had fallen around 5 basis points late last week on bets that the RBI would buy the bond at OMO auction after banks had passed on their feedback to the RBI to buy more liquid gilts at OMOs. 

The rupee fell past 90.60 per dollar in early trade, as risk appetite among investors remained dampened owing to prolonged delay in the India-US trade deal. Subsequently bond prices gave up most gains. 

"In the morning, it (bond prices) were little up due to announcement of the 10-year (6.33%, 2035) in the OMO auction," a dealer at a private sector bank said. "But now, some retracement is there. Rupee depreciation is continuing to impact bond market because we are also seeing FII outflows from bond market, so this combination will impact." Foreign portfolio investors have net sold gilts worth INR 81.98 billion through the full accessible route so far in December till Friday, according to data from Clearing Corp. of India.

Bond prices were up at market open, and the 6.33%, 2035 bond was sharply up after the RBI said it would buy the bond at its OMO auction Thursday. At this week's auction, the RBI will buy the 6.75%, 2029; the 6.10%, 2031; the 6.54%, 2032; the 7.18%, 2033; the 6.33%, 2035; the 7.23%, 2039; and the 7.09%, 2054 gilts. The central bank's choice of bonds at the OMO is seen as a move to pull bond yields lower across the curve, dealers said.

Traders will also track the result of the INR-150-billion switch auction Monday. Participation is seen moderate, and cut-off prices are seen near Friday's indicative prices from Financial Benchmarks India Pvt. Ltd., dealers said. 

At 0934 IST, the turnover in the gilt market was INR 22.70 billion, slightly lower than INR 26.10 billion at 0940 IST Friday, 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 6.55-6.62%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.56-6.65% for the rest of the day.  (Cassandra Carvalho)

India Gilts: Seen higher post inclusion of 6.33%, 2035 in Thu OMO

MUMBAI – Prices of government bonds are seen opening higher Monday, after the Reserve Bank of India said it would buy the erstwhile 10-year benchmark 6.33%, 2035 gilt at Thursday's open market operation auction, dealers said. The bond is likely to outperform the current 10-year benchmark 6.48%, 2035 gilt Monday, they said. 

The 6.48%, 2035 bond is seen in the range of 6.55-6.61% yield after ending at INR 99.18, or 6.59% yield, Friday. The yield on the erstwhile 10-year benchmark 6.33%, 2035 bond is seen at 6.52-6.62%, against INR 98.04, or 6.61% yield, in the previous session. The yield on the benchmark 10-year US Treasury note was 4.18% at 0808 IST, up from 4.16% at 1700 IST on Friday.

The RBI will Thursday buy seven government bonds worth INR 500 billion in the second tranche of OMO purchases this month, the central bank said after gilt market hours Friday. The RBI has offered to buy the 6.75%, 2029; the 6.10%, 2031; the 6.54%, 2032; the 7.18%, 2033; the 6.33%, 2035; the 7.23%, 2039; and the 7.09%, 2054 gilts at the auction. The addition of 'on the run' or liquid papers which are profitable to sell at current market levels, such as the 6.33%, 2035 gilt and the 30-year benchmark 7.09%, 2054 bond is likely to increase tendering of bonds by banks at the auction, after a modest bid-offer ratio at last week's OMO purchase, dealers said. The RBI's choice of bonds is seen as a move to pull bond yields lower across the curve.

Banks had passed on their feedback to the RBI to buy more liquid gilts at OMO auctions. The RBI's choice of bonds to buy at its OMO auction this week is seen favourable and providing profitable exits to traders, dealers said. Traders also expect short-term bond prices to be supported as the RBI will buy the 6.75%, 2029 bond Thursday after purchasing the same bond at the OMO auction last week, they said.

The rise in bond prices may be capped due to a rise in longer-term US Treasury yields over the weekend. The rupee's movement will also lend cues after the local currency fell to a record low of 90.56 per dollar Friday, dealers said. Traders may also track result of INR 150-billion switch auction Monday. (Janwee Prajapati)

End

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

Edited by Deepshikha Bhardwaj

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