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Informist, Wednesday, Dec. 17, 2025

 

By Janwee Prajapati

MUMBAI – Prices of government bonds ended sharply lower Wednesday tracking a sharp rise in the five-year overnight indexed swap rate, dealers said. Offshore traders paid fixed rate contracts in swaps. Foreign banks and foreign portfolio investors likely sold gilts as the end of the calendar year draws near, dealers said. FPIs net sold gilts worth INR 669.89 million through the fully accessible route as of 1800 IST Wednesday, according to data from Clearing Corp. of India.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.14, or 6.60% yield, against INR 99.31, or 6.57% yield Tuesday. The 6.33%, 2035 gilt ended at INR 98.10, or 6.60% yield, against INR 98.32, or 6.57% yield in the previous session. The five-year OIS closed at 5.95%, after hitting a day's high of 5.96%, from 5.90% at Tuesday's close. 

 

Traders also pared their bets that the Reserve Bank of India would set higher cut-off prices at the open market operation Thursday, after Wednesday's fall in prices implied that the Financial Benchmarks India Pvt. Ltd would set lower indicative prices. Since traders were planning on tendering the bonds at OMO at a mark-up to indicative prices, the fall in prices Wednesday has reduced chances of high cut-off prices at the OMO auction and this led to even more sales in the secondary market in the latter part of the day, dealers said.

 

Buying interest in the 6.33%, 2035 gilt had diminished earlier in the day itself. Some dealers had said that due to the 'T+1' settlement of trades on the RBI's Negotiated Dealing System-Order Matching platform, traders who wished to sell bonds to the central bank at the OMO Thursday would have to purchase these gilts in the secondary market Tuesday itself. However, since the RBI only requires the bonds tendered at the OMO auction to be available in the sellers' Subsidiary General Ledger account by Friday noon, traders can buy such bonds even on Wednesday and tender these at the OMO auction Thursday. 

 

"Even in 6.33%, 2035 bond, after initial optimism, that buying optimism has faded," a trader at a primary dealership said. "If you see the books of the banks, what we analysed is that it is not in the money. The cost (of the bond) is 40-50 paisa above current levels, so they're going to bid at higher levels (prices). Those who bought after announcement also are hardly in the money. So chances are, the signalling that market was expecting will not be there. In two days, the average (price of the bond was) only 18-19 (INR 98.18-98.19)."

 

The earlier rise in prices incentivised public sector banks to book profits, followed by foreign banks and foreign portfolio investors, dealers said. Foreign banks net sold gilts worth INR 7.89 billion Tuesday, according to Clearing Corp. of India data. Foreign portfolio investors likely continued their selling momentum throughout the month as the calendar year nears its end, dealers said.

 

Traders placed short bets on the erstwhile 10-year benchmark bond ahead of the open market operation as they expect the spread between the 6.33%, 2035 bond and the 10-year benchmark 6.48%, 2035 bond to widen going ahead. If the RBI sets a higher cut-off price at the OMO auction, the price of this bond in the secondary market will also rise, which will lead to traders booking profits and a subsequent fall in prices.

 

Traders expect the yield on the 6.33%, 2035 bond to rise while the yield on the 6.48%, 2035 bond will likely fall. Some traders also shorted the 6.33%, 2035 bond to buy the 6.48%, 2035 bond, dealers said. This also dragged down bond prices. 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 1700 IST, trades worth INR 163.26 billion were recorded in the 6.33%, 2035 gilt, up from INR 155.23 billion Tuesday and from INR 141.86 billion Monday.

 

"It all depends on the cut-offs now," a dealer at a state-owned banks said. "If the cut-off and the quantum is large, then traders may book profit which will widen the spread."

 

The spread between the erstwhile 10-year benchmark bond and the new 10-year benchmark started to widen as was expected by traders ahead of the OMO announcement. The widening was recorded after traders were done buying the 6.33%, 2035 bond Tuesday as it was the last day to buy gilts that are to be offered at the OMO auction Thursday, dealers said. Some traders bought gilts to bump up prices ahead of the OMO auction, on the hope that RBI will purchase the bonds at the OMO auction Thursday at cut-off prices higher than those indicated by Financial Benchmarks India, dealers said.

 

The 6.33%, 2035 bond yield rose to an intraday high of 6.66% on Dec. 11, prior to the last OMO auction, and eased 10 basis points post its inclusion in Thursday's auction. The yield spread between the 6.33%, 2035 bond and the 10-year benchmark 6.48%, 2035 bond, which was overlapping Tuesday, widened to around 1 bps Wednesday.

 

Traders had divided views on the tenure on the yield curve that is likely to outperform. Some traders took position in the shorter end of the curve as they do not expect a rate cut by the Monetary Policy Committee in February. The 6.01%, 2030 bond prices hit its day's high of INR 98.92, up 16 paise from Tuesday's close. Some traders also pointed out that a spread of about 27 bps between the 5-year and the 10-year benchmark bonds is seen lucrative. Others preferred the long-term bonds as they expect the bond yields to soften following the series of OMOs which will inject durable liquidity in the market. A slight change in rates causes a larger move in prices of long-term bonds as the price-to-yield ratio is high for long-term bonds. On the belly of the curve, traders preferred the 6.68%, 2040 bond citing the lucrative spread between the 15-year bond and the benchmark bond, dealers said.

 

Turnover in the gilts market was INR 314.65 billion, down from INR 360.20 billion Tuesday, 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 Wednesday, the same as Tuesday.

 

OUTLOOK

 

On Thursday, gilts are expected to track the overnight movement of US Treasury yields. The OIS and 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 bond prices. Traders will monitor developments around the India-US trade deal and may also track crude oil prices for cues. Some traders are also hopeful of likely inclusion of Indian bonds in the Bloomberg's Global Aggregate Index in January, which will pull up bond prices, dealers said.

 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.54-6.63%. The yield on the 6.33%, 2035 bond is seen at 6.56-6.65%.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.1350	6.5995%	99.3125	6.5745%
6.33%, 2035	98.1000	6.6036%	98.3200	6.5714%
6.01%, 2030	98.7850	6.3172%	98.7650	6.3221%
6.68%, 2040	97.0800	7.0026%	97.1500	6.9946%
6.90%, 2065	93.6000	7.4014%	93.8000	7.3848%

 

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India Gilts: Sharply down on rise in OIS, risk-trimming before OMO auction

 

	1612 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.16	99.41	99.14	99.35	99.31
YTM (%)	6.5960	6.5608	6.5988	6.5692	6.5745

 

	1612 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.10	98.40	98.10	98.28	98.32
YTM (%)	6.6032	6.5598	6.6032	6.5773	6.5714

 

MUMBAI--1612 IST--Prices of government bonds were sharply down, tracking a rise in overnight indexed swap rates, dealers said. Traders trimmed risk ahead of the INR-500-billion open market operation auction Thursday, dealers said. Some feared that the cut-off prices at the auction, especially on the 6.33%, 2035 gilt, may not be as high as expected. 

 

Offshore traders were paying fixed rate contracts in swaps, dealers said. The five-year OIS last traded at 5.96%, from 5.93% a little earlier in the day and 5.90% at Tuesday's close. An intraday rise in the 10-year US Treasury yield to 4.18% from a low of 4.16?rlier in the session also weighed on gilt prices and pushed up swap rates, dealers said. Traders also trimmed risk ahead of the OMO auction, in case the cut-off prices set by the RBI are not as high as expected, dealers said.

 

"One thing is that tomorrow (Thursday) there's OMO auction and the other thing is that we're seeing OIS inching up because offshore paying, which is affecting the G-sec trade also," a trader at a primary dealership said.  

 

At 1612 IST, the turnover in the gilt market was INR 266.55 billion, slightly lower than INR 293.40 billion at the same time 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 6.55-6.62% and that on the 6.33%, 2035 bond is seen moving in a range of 6.57-6.65%. (Cassandra Carvalho)

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India Gilts: 10-yr off highs as buying interest fades; other tenures rise

 

	1332 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.33	99.41	99.31	99.35	99.31
YTM (%)	6.5721	6.5608	6.5749	6.5692	6.5745

 

	1332 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.27	98.40	98.24	98.28	98.32
YTM (%)	6.5787	6.5598	6.5831	6.5773	6.5714

 

	1332 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.01%, 2030
PRICE (INR)	98.815	98.92	98.7775	98.7775	98.765
YTM (%)	6.3095	6.2826	6.3191	6.3191	6.3221

 

MUMBAI--1332 IST--Prices of most government bonds were up, but the prices of the 10-year benchmark 6.48%, 2035 gilt and the erstwhile 10-year benchmark 6.33%, 2035 gilt were off their day's highs. Dealers preferred purchasing gilts across other parts of the yield curve, since traders had already built positions in the 10-year papers ahead of the Reserve Bank of India's purchase of the 6.33%, 2035 bond, amongst other gilts, at the open market operation auction Thursday. Gains in bond prices were capped as traders booked profits nearing the end of the calendar year and the December quarter, dealers said. 

 

Due to the 'T+1' settlement of trades conducted on the RBI's Negotiated Dealing System-Order Matching platform, traders who wish to sell bonds to the central bank at the OMO Thursday, had to purchase these gilts in the secondary market Tuesday itself, dealers said. This lessened demand for these bonds Wednesday, dealers said. Traders also did not want to sell the bonds selected for the OMO in the secondary market until the auction Thursday, dealers said.

 

Traders favoured other tenures such as the five-year benchmark 6.01%, 2030 bond. The bond hit its day's high of INR 98.92, up 16 paise from Tuesday's close. Traders placed tactical trades on spreads between tenures, due to lack of a view on the domestic rate cut front, dealers said.

 

Traders bet on the yield spread between the 10-year benchmark and the erstwhile 10-year benchmark gilts widening, to at least 3 to 4 basis points by end of this week. Price of the 6.33%, 2035 gilt rose this week just because of the bond's inclusion in the OMO Thursday. It may fall once enthusiasm around the bond's selection fades post auction, dealers said. For the spread between the two to widen, traders bet that 6.48%, 2035 bond yield could fall to 6.55% in the near-term. However, the fall in the 10-year benchmark yield would hinge on how much quantum of the 6.33%, 2035 gilt and the 6.75%, 2029 gilt the RBI buys Thursday, dealers said.

 

Traders expect bond prices to rise if the RBI buys at least INR 200 billion of the more-liquid 6.33%, 2035 gilt at the OMO auction, a paper which is more profitable to sell at current market prices, they said. The erstwhile five-year benchmark 6.75%, 2029 gilt is also more "on the run", or profitable than other papers the RBI will buy Thursday, dealers said.

 

"After this rally (rise in the bond's price), we expect the 6.33%, 2035 to see some correction," a dealer at a state-owned bank said. "The 6.48% (2035 bond), can see some rally (price rise); we're targetting 6.55% (yield), but there's also lot of profit-booking because December is year-end, mutual funds will also see heavy redemptions."

 

At the INR-190-billion Treasury bill auction, the RBI set a cut-off yield on 91-day T-bill lower than expectations, higher on the 182-day bill and same as expected on the 364-day bill. A crunch in systemic liquidity put upward pressure on cut-off yields, but this was offset by firm demand from mutual funds and banks for the liquid short-term securities, dealers said. The RBI's net injection into the banking system – a proxy for the liquidity deficit – was INR 607.88 billion Tuesday, against a net absorption of INR 1.20 trillion Monday.

 

At 1330 IST, the turnover in the gilt market was INR 165.20 billion, lower than INR 203.25 billion at the same time 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 6.54-6.60% and that on the 6.33%, 2035 bond is seen moving in a range of 6.54-6.62%. (Cassandra Carvalho)

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India Gilts: Most tad up on rupee rise, bets of strong OMO cut-off prices

 

	0945 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.36	99.41	99.32	99.35	99.31
YTM (%)	6.5678	6.5608	6.5735	6.5692	6.5745

 

	0945 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.34	98.40	98.28	98.28	98.32
YTM (%)	6.5685	6.5598	6.5773	6.5773	6.5714

 

MUMBAI-–0945 IST--Prices of most government bonds rose Wednesday following a sharp rise in the rupee against dollar, dealers said. A slight fall in US Treasury yields overnight after the release of non-farm payrolls data for November post-market hours Tuesday aided. Trade volume was thin ahead of the much-awaited open market operations auction Thursday, amid a lack of other significant cues.

 

"Currently we are only tracking rupee as it is moving a lot," a trader at a primary dealership said. "NFP (non-farm payroll) data did not impact as much." Rescheduled data released post Indian market hours showed that US non-farm payrolls rose by 64,000 in November, more than an estimate of 45,000 in a poll by The Wall Street Journal. Non-farm payrolls in October fell by 105,000. The unemployment rate in the US rose to 4.6% last month, against a consensus estimate of 4.5%.

 

Bonds prices rose across the curve following a rise in the rupee against the dollar to a day's high of 90.0125 per dollar. The local currency had fallen to a record low of 91.0750 Tuesday. Traders will closely track any further movement in the rupee against dollar for cues, dealers said.

 

Later in the day, bond prices may rise on the hope that the Reserve Bank of India will purchase the bonds at the OMO auction Thursday at cut-off prices higher than those indicated by Financial Benchmarks India Pvt. Ltd. Some traders bought gilts to bump up prices ahead of the OMO auction, dealers said, after the inclusion of the erstwhile 10-year benchmark 6.33%, 2035 bond at the auction. 

 

At 0945 IST, the turnover in the gilt market was INR 41.90 billion, higher than INR 12.25 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 6.54-6.60%, 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)

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India Gilts: Seen tad up on pre-OMO buys; US ylds slip, rupee may be steady

 

MUMBAI – Prices of government bonds are seen opening a tad higher Wednesday as traders front-run their 'replacement demand' and purchase bonds ahead of the Reserve Bank of India's open market operation auction Thursday. Bond prices may also open higher, tracking a slight overnight fall in US Treasury yields, dealers said. After economic data in the US painted a mixed picture, US yields and the dollar slipped overnight. A weak dollar is likely to limit further fall in the rupee Wednesday after the local currency fell past the 91-per-dollar mark Tuesday, dealers said. 

 

Traders may also react to RBI Governor Sanjay Malhotra's comment that the central bank's projections indicated interest rates "should remain low for a long period of time", in an interview with Financial Times.

 

The 6.48%, 2035 bond is seen in the range of 6.54-6.60% yield after ending at INR 99.31, or 6.57% yield Tuesday. The yield on the erstwhile 10-year benchmark 6.33%, 2035 bond is seen at 6.52-6.62%, against INR 98.32 or 6.57% yield, in the previous session. The yield on the benchmark 10-year US Treasury note was 4.16% at 0800 IST, slightly lower than 4.18% at 1700 IST Tuesday. US yields slipped after economic data in the US indicated slight weakness, but did not help in forming a clear view on the interest rate trajectory in the world's largest economy. A fall in crude oil prices may also aid bond prices, dealers said. 

 

On the domestic front, traders are seen purchasing bonds, especially the erstwhile 10-year benchmark 6.33%, 2035 gilt, ahead of the INR-500-billion OMO auction Thursday. Traders hope the RBI 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. Prices may rise further in the day on bets of strong cut-off prices at Thursday's auction, dealers said.

 

Due to lack of significant domestic triggers until the RBI's OMO auction Thursday, traders may focus on offshore cues. Rescheduled data released post Indian market hours showed that US non-farm payrolls rose by 64,000 in November, more than an estimate of 45,000 in a poll by The Wall Street Journal. Non-farm payrolls in October fell by 105,000. The unemployment rate in the US rose to 4.6% last month, against a consensus estimate of 4.5%. The 4.6% rate is the highest in more than four years. Atlanta Federal Reserve President Raphael Bostic said the US economy no longer faced a risk of a sharp rise in the unemployment rate. US President Donald Trump is set to interview Christopher Waller for the post of US Federal Reserve Chair, to succeed Jerome Powell next year. (Cassandra Carvalho) 

 

End

 

US$1 = INR 90.38

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

 

Edited by Tanima Banerjee

 

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