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Informist, Thursday, Dec. 18, 2025

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended higher Thursday on expectations that the Reserve Bank of India, after market hours, may announce another open market operation auction to buy bonds, dealers said. The two 10-year 2035 bonds also rose as traders looked to cover their short bets, dealers said.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.32, or 6.57% yield, against INR 99.14, or 6.60% yield Wednesday. The 6.33%, 2035 gilt ended at INR 98.15, or 6.60% yield, against INR 98.10, or 6.60% yield in the previous session.

 

Traders expect the RBI to announce another OMO auction of INR 1 trillion, which kept them from taking positions aggressively, dealers said. The central bank has bought INR 1-trillion worth of government bonds at two OMO auctions in December, including INR 500 billion on Thursday. Some traders also expect the 6.33%, 2035 paper to be selected again by the RBI in the next OMO announcement.

 

"I think market will hover now, it now all depends on when will the RBI have the next OMO (auction)," a trader at a primary dealership said. "Some people are expecting one this month itself but I really doubt that he (the RBI) will bring one this particular month, I think they (who expect another OMO) will be disappointed."

 

A 4-basis-points fall in the five-year overnight indexed swap rate also aided bond prices, dealers said. The five-year OIS closed at 5.91% against 5.95% on Wednesday. The 10-year benchmark 6.48%, 2035 bond was up as traders switched this paper with the erstwhile 10-year 6.33%, 2035 bond.

 

Some traders bought the 6.33%, 2035 gilt and 6.48%, 2035 gilt in the secondary market after their short bets were "squeezed", dealers said. The weighted average rate for the 6.33%, 2035 gilt in the special repo segment of the Clearcorp Repo Order Matching System was 0.95%, with a low of 0.01%. Rates nearing zero suggest lack of bonds available to cover short sales. The total traded amount on the 2035 bond in the special repo segment – a proxy for tracking short sales – was INR 168.69 billion.

 

At the OMO auction Thursday, the cut-off prices on bonds bought by the RBI were broadly in line with the expectations of traders. Some traders were left disappointed by the cut-off price on the 6.33%, 2035 bond, which was lower than what they had paid for, dealers said. After the auction result was released, price of the erstwhile 10-year benchmark fell as mutual funds likely sold the bond to buy the 6.48%, 2035 gilt in the secondary market, dealers said.

 

The cut-off price on the 7.18%, 2033 bond was slightly higher than expected at INR 103.32, and the RBI accepted INR 118.01 billion of the bond. State-owned banks sold the gilt from their held-to-maturity books at prices lower than expectations to book profits, dealers said.

 

"Banks just wanted to sell it off (at OMO auction)...the 7.18%, 2033 paper," a dealer at a state-owned banks said. "If you (banks) get to sell it and make some space in your portfolio for fresh bonds why not sell it? It doesn't even count in your (banks) 5% limit."

 

The price of the 6.01%, 2030 bond rose on replacement demand after traders sold gilts at the OMO auction following the higher-than-expected cut off prices set on the short-term bonds, dealers said. This is likely to boost demand for the 6.01%, 2030 bond at the weekly gilt auction Friday, dealers said. The government will sell INR 180 billion of the 6.01%, 2030 bond and INR 120 billion of the 7.09%, 2074 bond Friday.

 

Demand for both bonds is seen robust. Investors who were not able to pick up the bond at the previous auction will likely bid aggressively for the long-term paper at Friday's auction, dealers said. The RBI set lower cut-off price for the 6.90%, 2065 bond at the previous weekly gilt auction following aggressive bids from the state-owned life insurer and pension funds.

Other than the gilt auction, traders await the minutes of the RBI Monetary Policy Committee's December meeting, due Friday. However, traders do not expect any significant impact on the bond prices.

 

Turnover in the gilts market was INR 361.00 billion, higher from INR 314.65 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

On Friday, gilts are expected to track the overnight movement of US Treasury yields. The movement of OIS and rupee early in the trade may also lend cues, dealers said. Traders may refrain from taking large bets early in the day ahead of the INR-300-billion gilt auction.

 

Traders await the release of US CPI for November, due after market hours. However, most traders do not expect any significant impact on bond prices. Traders also await Bank of Japan's rate decision Friday for cues on global bond yield movements.

 

Traders will monitor developments around the India-US trade deal and may also track crude oil prices. 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%.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.3175	6.5738%	99.1350	6.5995%
6.33%, 2035	98.1500	6.5963%	98.1000	6.6036%
6.01%, 2030	98.8100	6.3110%	98.7850	6.3172%
6.68%, 2040	97.1850	6.9908%	97.0800	7.0026%
6.90%, 2065	93.8400	7.3815%	93.6000	7.4014%

 

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India Gilts: Remain mixed; 6.33%, 2035 dn, traders buy 6.48%, 2035 post OMO

 

	1530 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.24	99.29	99.11	99.17	99.14
YTM (%)	6.5847	6.5777	6.6030	6.5953	6.5995

 

	1530 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.06	98.25	97.93	98.25	98.10
YTM (%)	6.6102	6.5817	6.6286	6.5817	6.6036

 

MUMBAI--1530 IST--Prices of government bonds were mixed, with most papers trading higher, in thin trade, after the Reserve Bank of India bought gilts worth the entire notified amount of INR 500 billion at the open market operation auction Thursday, dealers said. The result was met with mixed views from traders, and bond prices were volatile just after the result was published. The cut-off prices on five of the seven gilts the central bank offered to buy were above those estimated in an Informist poll.

 

The quantum of the 6.33%, 2035 bond accepted by the RBI, and the cut-off price at the auction disappointed most traders. The bond's price fell after the result. The RBI bought only INR 94.94 billion of the gilt, against traders' expectations of at least INR 200 billion. The cut-off price on the bond was INR 98.21, against an Informist poll estimate of INR 98.22. The weighted average price on the gilt was even lower, at INR 98.19. Some traders had bid at prices much higher than INR 98.22, and did not get to sell the bond. Mutual funds likely sold the 6.33%, 2035 bond at the OMO auction, and in the secondary market, to purchase the liquid, "on the run" 10-year benchmark 6.48%, 2035 gilt, dealers said.

 

"What we are looking at right now is that, INR 500 billion has just been sucked into the system (through OMO auction), doesn't matter what the cut-off prices are," a dealer at a state-owned bank said. "It (OMO gilt cut-offs) was a bit of a shock, but PSBs (state-owned banks) knew they were going to undercut (sell bonds below indicative prices) at the auction." 

 

The cut-off price on the 7.18%, 2033 gilt at auction was also a tad lower than expected at INR 103.32, and the RBI accepted INR 118.01 billion of the bond. State-owned banks sold the gilt from their held-to-maturity books at prices lower than expectations to book profits, dealers said. This bond was "deep in the money" or highly profitable for them, dealers said. State-owned banks were front-running some of the replacement demand from sales of bonds at the OMO, earlier in the week itself, and will now wait for yields to rise before purchasing gilts aggressively, dealers said. 

 

The most positive surprise from the OMO auction result was that the central bank accepted the largest quantum of INR 175.19 billion for the short-term 6.54%, 2032 gilt, at a cut-off price higher than expectations at INR 100.20. The RBI also set higher-than-expected cut-off prices on other short-term securities at the auction. This is likely to boost demand for the 6.01%, 2030 bond at the weekly gilt auction Friday, dealers said. The government will sell INR 180 billion of the 6.01%, 2030 bond and INR 120 billion of the 7.09%, 2074 bond Friday. Demand for both bonds is seen robust. Investors and traders who missed on the 6.90%, 2065 gilt supply at last week's auction will bid for the long-term paper, dealers said. A large state-owned insurance company and pension funds lapped up the supply of the 6.90%, 2065 bond last week, dealers had said. 

 

Other than the gilt auction, traders await the minutes of the RBI Monetary Policy Committee's December meeting, due Friday. Some traders also expect an announcement of an OMO auction post market hours Friday, to be conducted next week, of at least INR 250 billion, dealers said. 

 

Some traders purchased the 6.33%, 2035 gilt in the secondary market after getting "squeezed" in the bond, dealers said. The negative carry generated from short sales led some traders to cover their bets, dealers said. The weighted average rate for the 6.33%, 2035 gilt in the special repo segment of the Clearcorp Repo Order Matching System was 0.95%, with a low of 0.01%. Rates nearing zero suggest a lack of bonds available to cover short sales. The total traded amount on the 2035 bond in the special repo segment – a proxy for tracking short sales – was INR 168.69 billion.

Globally, traders await the release of US CPI for November, due after market hours. Traders also await the Bank of Japan's rate decision Friday for cues on global bond yield movements. At 1530 IST, the turnover in the gilt market was INR 277.25 billion, slightly higher than the INR 226.60 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 6.55-6.62%, 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)

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India Gilts: Mixed in thin trade; OMO auction result to lend further cues

 

	1139 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.19	99.23	99.13	99.17	99.14
YTM (%)	6.5918	6.5861	6.6009	6.5953	6.5995

 

	1139 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.07	98.25	98.02	98.25	98.10
YTM (%)	6.6080	6.5817	6.6150	6.5817	6.6036

 

MUMBAI--1139 IST--Prices of government bonds were mixed in thin trade as traders await the result of the INR-500-billion open market operation auction Thursday. Focus will be on the quantum accepted and cut-off price set by the Reserve Bank of India on the erstwhile 10-year 6.33%, 2035 bond at the auction, dealers said. At 1139 IST, the turnover in the gilt market was INR 48.50 billion, nearly 50% lower than the INR 95.80 billion at 1130 IST Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.

Traders expect the Reserve Bank of India to buy bonds worth the entire notified amount of INR 500 billion at the OMO auction. Focus will be on the 6.33%, 2035 gilt. Traders largely expect the cut-off price on the 6.33%, 2035 gilt to be set 10-20 paise above INR 98.12, the indicative price set by Financial Benchmarks India Pvt. Ltd. Wednesday. For the other six gilts the RBI has offered to buy, traders expect cut-off prices at par with, or lower than indicative prices. Some traders expect slightly higher cut-off prices for the 6.75%, 2029 gilt and the 7.09%, 2054 gilt. Public sector banks likely offloaded stock of papers maturing below 10-years from their held-to-maturity books at the auction, dealers said.

 

The 6.33%, 2035 bond price was a tad down due to a rise in short bets placed on this bond, dealers said. Traders likely placed short bets on hope of the spread between the 6.33%, 2035 bond and the 6.48%, 2035 bond widening, dealers said. After the auction result, the yield spread between the 10-year benchmark 6.48%, 2035 gilt and the 6.33%, 2035 bond is likely to widen to 3-4 basis points from nearly 2 bps as of 1139 IST, and after both papers were traded at same yield level earlier this week, dealers said. 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. The data at 1139 IST showed trades worth INR 168.69 billion in the 6.33%, 2035 gilt, slightly up from INR 163.26 billion Wednesday.

"There is not much volume in the secondary market, only some papers are traded," a dealer at a private sector bank said. "People are waiting for a significant trigger to take positions, we will see movement only after the (OMO) auction result. Traders are cautious now, even the cut-off at T-bill (Treasury bill auction) was higher than expected. Also in rupee, we (bond prices) are falling when rupee is down but it is not recovering as fast when rupee is appreciating... we are not sure which way the market will move." Bond prices rose slightly tracking a rise in the rupee against the dollar. The rupee appreciated to 90.15 per dollar from 90.38 at 1530 IST Wednesday, dealers said.

 

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. (Janwee Prajapati)

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India Gilts: Mixed in thin trade ahead of OMO auction

 

	0913 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.16	99.22	99.16	99.17	99.14
YTM (%)	6.5960	6.5879	6.5960	6.5953	6.5995

 

	0913 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.08	98.25	98.08	98.25	98.10
YTM (%)	6.6066	6.5817	6.6066	6.5817	6.6036

 

MUMBAI--0913 IST--Prices of government bonds were mixed in thin trade, after opening higher ahead of the Reserve Bank of India's INR-500-billion open market operation auction Thursday, which is the second tranche of the INR-1.00-trillion OMO purchases announced by RBI Governor Sanjay Malhotra for December at the outcome of the Monetary Policy Committee meeting earlier this month.

 

The 6.33%, 2035 gilt opened sharply higher ahead of the bond's purchase by the RBI at the auction, as traders expect the RBI to buy at least INR 200 billion of the bond at the OMO auction, at a cut-off price at least 20 paise above the current market price. Prices may rise later in the day, after the OMO auction ends, on hope that the RBI will set cut-off prices much higher than those indicated by Financial Benchmarks India Pvt. Ltd. Wednesday. 

 

"People have already bought the OMO stock, so these (secondary and primary) are two different markets right now," a dealer at a private sector bank said. "The last OMO auction we had also, price action in secondary market was not great but cut-offs (prices) were much better." 

 

At 0913 IST, the turnover in the gilt market was INR 5.95 billion, much lower than INR 23.40 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 6.54-6.65%, 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)

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India Gilts: Seen up before OMO auction; US yields inch dn before Nov CPI

 

MUMBAI – Prices of government bonds are seen opening higher Thursday ahead of the Reserve Bank of India's INR-500-billion open market operation auction, wherein the central bank has offered to buy seven gilts, including the erstwhile 10-year benchmark 6.33%, 2035 bond. While optimism on tendering bonds at prices higher than indicated have reduced after a sharp fall in bond prices Wednesday, traders still hope that the RBI will set cut-off prices at a mark up to indicated prices in a move to pull down bond yields. 

 

The 6.48%, 2035 bond is seen in the range of 6.54-6.65% yield after ending at INR 99.14, or 6.60% yield Wednesday. The yield on the erstwhile 10-year benchmark 6.33%, 2035 bond is seen at 6.56-6.65%, against INR 98.10 or 6.60% yield, in the previous session. The yield on the benchmark 10-year US Treasury note was 4.15% at 0800 IST, lower than 4.18% at 1700 IST Wednesday. US Treasury yields eased ahead of the release of US CPI for November, due 1900 IST Thursday. US CPI is seen rising 3.1% on year in November, according to a Wall Street Journal poll. 

 

Traders 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 Wednesday, dealers said.

 

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. Focus is on the 6.33%, 2035 gilt, the 6.75%, 2029 gilt and the 7.09%, 2054 gilts. 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, some dealers said. Some dealers will also track the quantum and cut-off price set on the 2054 paper, as the inclusion of this bond is seen as a move to pull down long-term bond yields, dealers said. The RBI is expected to buy around INR 40 billion to INR 50 billion of the bond, a dealer said.    

 

Traders anticipate that the RBI will hold another OMO auction of at least INR 250 billion in December itself, before announcing at least INR-1.00-trillion more worth of OMO buys in Jan-Mar. During the day, the movement in the rupee against the dollar may also lend cues to bond prices, along with the movement of overnight indexed swap rates, after a surge in the five-year swap Wednesday led to a fall in bond prices. Nearing the end of trade, caution before US CPI for November may limit activity, dealers said. (Cassandra Carvalho)

 

End

 

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

 

Edited by Ashish Shirke

 

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