More Stories

Informist, Tuesday, Dec. 16, 2025

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended higher Tuesday as traders bought bonds ahead of the open market operation auction of INR 500 billion Thursday, amid a lack of other significant triggers, dealers said. Some traders picked up bonds to fill their books after sales to the central bank at last week's OMO auction, and ahead of this week's auction. Some traders also bought gilts to bump up prices ahead of the OMO auction, dealers said. Traders hope that the Reserve Bank of India will purchase gilts at the auction at higher prices after it bought gilts at prices higher than those indicated by Financial Benchmarks India Pvt. Ltd. at the OMO auction last week.  

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.31, or 6.57% yield against INR 99.18, or 6.59% yield Monday. The 6.33%, 2035 gilt ended at INR 98.32, or 6.57% yield, against INR 98.18, or 6.59% yield in the previous session. Both bonds traded at largely the same yield, compressing from a yield spread of 8 basis points at end of October. Trade volume picked up in the erstwhile 10-year benchmark 6.33%, 2035 due to its inclusion in Thursday's OMO auction, dealers said. 

 

The rise in bond prices was capped due to higher-than-expected cut-off yields at the state bond auction. The cut-off yields on states' 10-year bonds were 7.23-7.56%, a yield spread of 66-99 bps over the 10-year benchmark 6.48%, 2035 gilt yield, and higher than 58-61 bps seen last week.

 

"Spreads will only widen going ahead as states will borrow more towards the end of the year to meet their borrowing requirements," a dealer at a state-owned bank said. "(State bond and gilt) yields will rise going ahead because of the demand-supply mismatch."  

At the state bond auction, banks likely bought bonds having maturity up to 15 years, whereas investors such as insurers and pension funds picked up bonds with maturity of more than 15 years.

 

Some traders had expected banks to buy state bonds at auction for their held-to-maturity books. Others said banks have limited space in their portfolios for state bonds and did not bid aggressively at auction, dealers said. Traders are not likely to shift to state bonds despite lucrative yields as they lack the risk appetite, dealers added.

 

Some traders expect the central bank to buy another INR 500 billion worth of bonds at open market operation auctions in December in addition to the INR-1-trillion announced on Dec. 5. Others see the RBI's next tranche of bond buys coming only in the March quarter, of at least INR 1 trillion.

 

"Long-term bonds are preferable right now because of the expectation of more OMOs," said a dealer at a primary dealership. "If there are more OMOs going ahead, then the yield will definitely come down, so the price-to-yield movement in the long-term bonds will be more than the short term bonds."

 

"If you want bonds for Thursday's OMO then today (Tuesday) is the last day to buy," a dealer at a private sector bank said. "Basically the settlement cycle is slightly different, settlement on RBI and settlement on CCIL. So basically, if you want clean stock, today is the last day to buy."

 

Traders pointed out that the spread between the 10-year benchmark bond and bonds offered at the OMO auction has contracted as traders bought these bonds at lower prices so as to offer at a higher price at auction. 

 

Bond prices fell in early trade due to a sharp fall in the rupee against the dollar as the rupee fell to a record low of 91.07 per dollar, intraday. However, the impact of the fall in the rupee was offset after trader stocked up on 6.33%, 2035 bond at around 6.60%, a level considered lucrative, dealers said.

 

"Nothing else it's just the (fall in) rupee...market activity is lacklustre right now," a dealer at a private sector bank said. "People are only taking positions in 6.33%, 2035 bond before OMO auction Thursday as they want to pull up the (bond) prices. We will only get to see any significant reaction tomorrow (Wednesday) when people will actually take position."

 

Traders also exercised caution ahead of the US non-farm payrolls report and retail data, released at 1900 IST, for further cues on the US Federal Reserve's policy path. Turnover in the gilts market was INR 360.20 billion, down from INR 353.00 billion Monday, 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, 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. Traders will monitor developments around 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 6.52-6.63%. The yield on the 6.33%, 2035 bond is seen at 6.53-6.64%.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.3125	6.5745%	99.1800	6.5931%
6.33%, 2035	98.3200	6.5714%	98.1800	6.5918%
6.01%, 2030	98.7650	6.3221%	98.7700	6.3206%
6.68%, 2040	97.1500	6.9946%	96.9500	7.0171%
6.90%, 2065	93.8000	7.3848%	93.9000	7.3765%

---

India Gilts: Rise as traders stock up before OMO Thu; rupee's fall caps gains

 

	1330 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.31	99.33	99.14	99.14	99.18
YTM (%)	6.5749	6.5724	6.5988	6.5988	6.5931

 

	1330 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.29	98.31	98.12	98.22	98.18
YTM (%)	6.5761	6.5729	6.6006	6.5867	6.5918

 

MUMBAI-–1330 IST--Prices of government bonds rose as traders stocked up on securities ahead of the INR-500-billion open market operation auction Thursday, dealers said. A fall in the rupee to a record low of 91.08 against the dollar capped the gains, dealers said.

 

"I think PSU (public sector undertakings) banks are buying because the levels were really good, a dealer at a private sector bank said. "Market was down in the morning, so the levels were good to buy...some positivity ahead of OMO is also there." 

 

Traders had mixed expectations from the cut-off prices at the INR-178.50-billion state bond auction. Some traders looked to buy state bonds at auction at higher yield compared to gilts, while others lacked the risk appetite, dealers said. 

 

At the state government bond auction on Dec. 9, the cut-off yields on states' 10-year bonds were 7.29-7.32%, a spread of 58-61 basis points over the 10-year benchmark gilt issued by the Centre. Traders and banks are likely to pick up state bonds maturing in up to 15 years, while long-term investors such as pension funds and insurers will bid for long-term papers at the auction. The higher supply of state bonds also weighed on bond prices as traders expect states' borrowing quantum to increase further. Traders await the auction result for further cues.

 

At 1330 IST, the turnover in the gilt market was INR 205.90 billion, higher than INR 144.05 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 6.56-6.62%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.52-6.62% for the rest of the day.  (Janwee Prajapati)

---

India Gilts: Steady amid lack of triggers; state bond sale result awaited

 

	0932 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.20	99.21	99.14	99.14	99.18
YTM (%)	6.5903	6.5889	6.5988	6.5988	6.5931

 

	0932 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.18	98.22	98.15	98.22	98.18
YTM (%)	6.5918	6.5860	6.5962	6.5867	6.5918

 

MUMBAI-–0932 IST--Prices of government bonds were steady amid lack of fresh cues, dealers said. Trade volumes were thin and the turnover in the erstwhile 10-year benchmark 6.33%, 2035 gilt trumped that of the current 10-year benchmark 6.48%, 2035 gilt, ahead of the Reserve Bank of India's purchase of the former at the open market operation auction Thursday. The total turnover in the 6.33%, 2035 gilt was more than the 10-year benchmark for the first time since Dec. 5, the day of the Monetary Policy Committee's decision. 

 

The rupee hit a fresh low of 90.82 in early trade. However, since the move was not significantly lower than Monday's low of 90.79, bond traders largely dismissed it, and will only react if the rupee breaches the 90.90 per dollar mark, dealers said. 

 

Traders await the result of the INR-178.50-billion state bond auction. Several traders are looking to purchase state bonds at higher yield spreads over gilts for investment books nearing the Jan-Mar quarter, during which states' borrowing is usually higher, dealers said. This is furthered by space to hold more securities due to sales from banks' held-to-maturity books at the RBI's OMO auctions, dealers said. Some banks are likely to have increased their internal holding limits for state bonds to maintain a higher average yield of their books, they said. 

 

"7 to 8 years (state bond yield) is more than 7%, compared to G-sec, definitely people will load at these levels. People want the spread," a dealer at a private sector bank said. "We want the portfolio yield, and now people are selling at OMO from their HTM (held-to-maturity) books, so there is space."  

 

At 0930 IST, the turnover in the gilt market was INR 12.25 billion, lower than INR 20.00 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 6.56-6.62%, while that on the 6.33%, 2035 bond is seen moving in a range of 6.52-6.62% for the rest of the day.  (Cassandra Carvalho)

---

India Gilts: Seen steady, likely fall in rupee to weigh

 

MUMBAI – Prices of government bonds are seen opening steady Tuesday but may fall tracking the rupee, which is expected to fall, dealers said. The erstwhile 10-year benchmark 6.33%, 2035 gilt may continue to outperform the current 10-year benchmark 6.48%, 2035 gilt after the former's inclusion in Thursday's open market operation auction. The 6.33%, 2035 gilt yield ended 2 basis points lower Monday, while the 6.48%, 2035 gilt yield ended flat.  

The 6.48%, 2035 bond is seen in the range of 6.56-6.62% yield after ending at INR 99.18, or 6.59% yield Monday. The yield on the erstwhile 10-year benchmark 6.33%, 2035 bond is seen at 6.52-6.62%, against INR 98.18, or 6.59% yield, in the previous session. The yield on the benchmark 10-year US Treasury note was 4.17% at 0815 IST, unchanged from 1700 IST Monday.

 

The rupee is seen continuing its falling streak Tuesday, after it hit a record low of 90.79 Monday. Gilts have not priced in any further depreciation in the local currency and may closely track its movement, as seen Monday. The result of the Reserve Bank of India's $5 billion dollar/rupee buy/sell swap auction Tuesday may impact swap rates, which would subsequently influence the movement of bond prices, dealers said. Bond prices may move in a narrow range due to lack of other triggers until the RBI's INR-500-billion OMO auction Thursday, dealers said. 

 

Traders will closely track the yield spread between the 6.33%, 2035 gilt and the 6.48%, 2035 gilt. The yield spread between the two was flat Monday, compressing from a high of 8 bps at market close on Oct. 30. Traders may also play on spreads between the 10-year benchmark and longer-term gilts such as the 6.68%, 2040 bond and the 6.90%, 2065 gilt, dealers said.

 

Traders may also track the result of the INR-178.50-billion state bond auction. The indicative calendar for state borrowing for Oct-Dec showed states would borrow INR 176.90 billion on Tuesday. Some traders are looking to purchase state bonds at higher yield spreads over gilts for investment books nearing the Jan-Mar quarter, during which states' borrowing is usually higher, dealers said. Some banks are likely to have increased their internal holding limits for state bonds to maintain a higher average yield of their books, they said. (Cassandra Carvalho)

 

End

 

US$1 = INR 91.03

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

 

Edited by Tanima Banerjee

 

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.