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Informist, Friday, Dec. 19, 2025

 

By Janwee Prajapati

 

MUMBAI - Prices of most government bonds ended down Friday after the Reserve Bank of India set a lower cut off price on the 6.01%, 2030 paper at the weekly gilt auction, dealers said. However, the sharp recovery of the rupee against the dollar prevented a further fall in gilt prices. The rupee appreciated to close at 89.27 per dollar after hitting 90.29 during the day. Gilt purchases by public sector banks towards the end of trade at current levels seen as lucrative helped bond prices recover a bit, dealers said.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.12, down from INR 99.32 Thursday. The closing yield was 6.6017%, up from 6.5738% Thursday. The 6.33%, 2035 gilt ended at INR 98.04, down from INR 98.15 Thursday. The closing yield on this bond was 6.6125%, up from 6.5963% Thursday. The auction cut off on the 6.01%, 2030 bond weighed on its price as it ended at INR 98.65, down from INR 98.81 Thursday. The closing yield on this paper was 6.3527%, up from 6.3110%.  

 

Following the auction result, traders and primary dealers likely off-loaded their auction purchases as the cut-off price of INR 98.65 on the 6.01%, 2030 bond was far below the expected level of INR 98.75, dealers said. This sell-off dragged down bond prices. However, long-term bonds rose as the cut-off price on the 7.09%, 2074 paper was better than expected.

 

"The market was fairly rangebound throughout the day (Friday), it (bond prices) fell only after the cut-off on 5-year (6.01%, 2030) paper," a dealer at a state-owned bank said. "...I think the market will remain like this for the rest of the month if there is no announcement on OMO (open market operation)."

 

Bonds maturing in up to 15 years fell following the lower cut off price set on the 6.01%, 2030 bond at the auction. Traders had expected the demand for the 5-year paper to be robust from banks after banks sold short-term gilts to the RBI at its open market operations auction Thursday, which likely created space in their portfolios for fresh supply. However, a lower cut off price on the 6.01%, 2030 showed appetite for gilts was weak due to a lack of signals on further rate cuts and some traders preferred higher-yielding short-term state bonds instead, dealers said.

 

Prices of long-term bonds rose sharply after the auction results. Some traders purchased long-term gilts after losing out on them for two consecutive auctions. The RBI accepted only 14 out of 139 bids for the 7.09%, 2074 bond at auction at a cut-off price of INR 96.30, way above the consensus estimate of INR 95.92. Investors soaked up all the supply of the bond, just as they had taken in the 6.90%, 2065 gilt at the auction last week. Around INR 30 billion to INR 40 billion of the bond was likely purchased for bond forward rate agreements, dealers said. Some traders picked up long-term gilts as the spread between the long-term bonds and the 10-year benchmark 6.48%, 2035 gilt seemed lucrative, dealers said.

 

"Banks were there at the auction, it looks like some other smaller segment of the market participant did not bid aggressively," a dealer at another state-owned bank said. "If banks had not been there, then the weighted average yield would have been even higher."

 

In the secondary market, public sector banks likely bought gilts Friday. These banks net bought gilts worth INR 19.51 billion Thursday, according to Clearing Corp. of India Ltd. data. Traders now expect the short and long end of the curve to outperform the mid-tenure papers because any movement in yields impacts gilts maturing up to 10–15 years more than shorter-tenure papers, dealers said. Some traders will likely prefer short-term papers over long-term papers as they look to reduce the duration of their portfolio.

 

Some traders are now hopeful that the RBI will announce another open market operation in December, while others expect such an announcement only in January. The announcement of another OMO auction will largely depend on the liquidity conditions, dealers said. The quantum of the next OMO auction is expected to be around INR 1.75 trillion to INR 2 trillion.

 

"People are expecting, but I don't expect an OMO announcement this month, because he (RBI Governor Sanjay Malhotra) had said INR 1 trillion only in December," a dealer at a private sector bank said. "RBI wants to keep inflation at a neutral level and higher liquidity will only lead to higher inflation."

 

Turnover in the gilts market was INR 357.50 billion Friday, lower than INR 361.00 billion Thursday, 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 Friday, the same as Thursday.

 

OUTLOOK

Gilts are not traded Saturday. On Monday, they are expected to track the overnight movement of US Treasury yields. The movement of OIS and rupee in early trade will lend cues to bond traders, dealers said. 

 

Traders will monitor developments around the India-US trade deal and will also track crude oil prices. Some traders are hopeful the likely inclusion of Indian bonds in the Bloomberg's Global Aggregate Index in January will pull up bond prices next week, dealers said.

 

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

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.1200	6.6017%	99.3175	6.5738%
6.33%, 2035	98.0400	6.6125%	98.1500	6.5963%
6.01%, 2030	98.6500	6.3527%	98.8100	6.3110%
6.68%, 2040	96.9700	7.0153%	97.1850	6.9908%
6.90%, 2065	94.0500	7.3641%	93.8400	7.3815%

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India Gilts: Most down after poor cut-off price on 2030 bond; long-term up

 

	1531 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.17	99.33	99.04	99.30	99.32
YTM (%)	6.5946	6.5721	6.6126	6.5763	6.5738

 

	1531 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.04	98.17	97.96	98.12	98.15
YTM (%)	6.6133	6.5935	6.6239	6.6008	6.5963

 

	1531 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.01%, 2030
PRICE (INR)	98.68	98.83	98.58	98.81	98.81
YTM (%)	6.345	6.3065	6.3707	6.3116	6.311

 

MUMBAI--1531 IST--Prices of government bonds maturing in up to 15 years were down after the cut-off price on the 6.01%, 2030 gilt at auction was lower than expectations, dealers said. The INR-180-billion bond supply was too large for market participants' current appetite, amid low trading volume, dealers said. Some dealers also preferred short-term state bonds to replenish their books after sales to the central bank, rather than five-year gilts.      

 

The RBI set a cut-off of INR 98.65 for the 6.01%, 2030 gilt at auction, below the estimate of INR 98.75 in an Informist poll. State-owned banks were expected to absorb the bond supply after selling gilts with similar maturities to the central bank in large quantities. However, appetite for gilts was weak amid a lack of signals on further rate cuts, and some traders preferred higher-yielding short-term state bonds in their investment books, dealers said. Since market segments other than state-owned banks had sold bonds to the RBI Thursday, the replacement demand from state-owned banks was not enough to push up the cut-off price, dealers said.      

 

"If you look at the notified amount (of INR 180 billion), it is a bit higher than current market appetite," a trader at a primary dealership said. "People are getting hit with stock, the PDs basically are stuck, so they're selling in secondary." 

 

Primary dealers sold gilts in the secondary market after being left with the 6.01%, 2030 bond supply, dealers said. A few traders triggered stop-loss orders when prices fell after the auction results were published. In contrast, prices of long-term bonds rose sharply after the auction results. Some traders purchased long-term gilts after losing out on long-term bond supply for two consecutive auctions. The RBI accepted 14 out of 139 bids for the 7.09 74bond at auction, at a cut-off price of INR 96.30, above consensus estimates of INR 95.92. Investors swept off the bond, after sweeping off the 6.90%, 2065 gilt at last week's auction.  

 

Post-market hours, traders await the minutes of the RBI's Monetary Policy Committee's December meeting. Traders expect the panel members to show a neutral to soft tone on easing monetary policy, with some anticipating comments on further liquidity infusions. Some traders expect the Reserve Bank of India to announce, after market hours, another open market operation auction of at least INR 250 billion to be conducted this month.

 

At 1530 IST, the turnover in the gilt market was INR 268.75 billion, similar to INR 271.00 billion at the same time Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 10-year benchmark 6.48%, 2035 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: Mixed in thin trade; long-term gilts up ahead of auction result

 

	1226 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.27	99.33	99.23	99.30	99.32
YTM (%)	6.5805	6.5721	6.5862	6.5763	6.5738

 

	1226 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.10	98.17	98.05	98.12	98.15
YTM (%)	6.6045	6.5935	6.6111	6.6008	6.5963

 

	1226 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
7.09%, 2074
PRICE (INR)	96.19	96.20	95.85	95.85	95.85
YTM (%)	7.3789	7.3781	7.4057	7.4057	7.4058

 

MUMBAI--1226 IST--Prices of government bonds were mixed in thin trade, with the 6.33%, 2035 and 6.48%, 2035 gilts both down. Trade was thin, which amplified the movement of bond prices, dealers said. Long-term bonds were up on demand from insurance companies, and traders, on expectations of a high cut-off price on the 7.09%, 2074 bond at the weekly gilt auction, dealers said. Bond prices are seen rising after the auction result, if long-term investor demand for the fresh supply is firm, dealers said.

 

An Informist poll estimated the cut-off price on the 7.09%, 2074 bond at INR 95.92. The bond last traded at INR 96.19 in the secondary market, up 34 paise from Thursday's close. Pension funds and insurance companies, and some traders, bid for the bond, dealers said, especially since several investors and traders did not get stock of the long-term 6.90%, 2065 bond at last week's auction after a state-owned insurance company and pension funds lapped up supply. Around INR 30 billion to INR 40 billion of the bond will be purchased for bond forward rate agreements, dealers said. Demand for Separate Trading of Registered Interest and Principal of Securities has deteriorated recently, dealers said.

 

"Right now, there is no demand for STRIPS, people don't want STRIPS anymore because market itself is so volatile and now the valuations of strips are so high, especially for long-term STRIPS. So people who have it have taken a hit on their books," a trader at a primary dealership said. "And the long-end spread has also gone for a toss, from a 30 bps we're now at an 80 bps spread." 

 

The yield level of the 2074 bond was lucrative to investors, and healthy inflows into insurers and other long-term investors aided demand for the gilt at auction, dealers said. The yield spread of the 2074 bond over the 10-year benchmark 6.48%, 2035 bond is 80 basis points as of 1226 IST, up from 34 bps on Feb. 7, the day the RBI's Monetary Policy Committee cut the repo rate for the first time in five years. The 'others' segment of gilt market participants have net bought gilts worth INR 178.44 billion in the secondary market so far this month until Thursday, according to data from Clearing Corp. of India. 'Others' include insurance companies, provident funds, and the Reserve Bank of India. Initially, traders had speculated that the central bank was buying gilts onscreen, after the RBI bought gilts worth INR 272.80 billion onscreen in November. However, RBI data did not show any buys, which brought back focus on investor demand, along with likely purchases from corporate entities, dealers said.   

 

As for the 6.01%, 2030 bond at auction, state-owned banks are seen bidding for the bond after they sold short-term bonds to the RBI in large quantums and higher-than-expected cut-off prices at the open market operation auction Thursday. Several traders also prefer short-term bonds, and are trimming stock of the 10-year bonds due to lack of indications of further rate cuts by the RBI's MPC, dealers said. Losses in the 10-year bonds were limited on expectations of the RBI post market hours announcing an OMO auction for atleast INR 250 billion for next week. The RBI is likely to buy bonds across the yield curve if it does announce an OMO, a pattern seen in the last two OMO auctions, dealers said. 

 

At 1226 IST, the turnover in the gilt market was INR 94.65 billion, slightly higher than INR 68.45 billion at the same time Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 10-year benchmark 6.48%, 2035 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: Steady before bond sale; PSU banks seen bidding for 6.01%, 2030

 

	0943 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.31	99.33	99.29	99.30	99.32
YTM (%)	6.5749	6.5721	6.5777	6.5763	6.5738

 

	0943 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.33%, 2035
PRICE (INR)	98.15	98.17	98.12	98.12	98.15
YTM (%)	6.5964	6.5935	6.6008	6.6008	6.5963

 

MUMBAI--0943 IST--Government bond prices opened steady in thin trade Friday as short sales before the weekly gilt auction offset purchases tracking a rise in the rupee against the dollar, dealers said. The rupee rose to 89.96 in intraday trade against the dollar from 90.24 per dollar at 1530 IST Thursday. Traders refrained from placing aggressive bets before the auction, due to which trade volumes were thin.

 

Some traders placed short bets ahead of the auction, which capped gains in the secondary market. Some traders were forced to cover their short sales in the 6.33%, 2035 gilt and 6.48%, 2035 gilt on Thursday as they got "squeezed", 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 Clearcorp Repo Order Matching System. The data at 0943 IST showed trades worth INR 151.17 billion in the 6.33%, 2035 gilt, down from INR 168.69 billion Thursday.

 

At the gilt auction Friday, the government will sell INR 180 billion of the 6.01%, 2030 bond and INR 120 billion of 7.09%, 2074 gilt. Demand for the 6.01%, 2030 paper is likely to be firm from public sector banks after they sold a large quantum of short-term gilts from their portfolios Thursday at the INR-500-billion open market operation auction, dealers said. Insurance companies and pension funds are likely to bid for the 7.09%, 2074 gilt as several investors missed out on supply of the 6.90%, 2065 gilt at last week's auction, dealers said. A large state-owned insurance company and pension funds had lapped up supply of the 6.90%, 2065 bond last week, dealers had said.  

 

"Auction demand will likely be firm, similar to what the market is expecting," a trader at a primary dealership said. "In the long term (7.09%, 2074 gilt), there could be 3–4 thousand (INR 30–40 billion) of FRA (forward rate agreements) demand, we will get to know for sure once underwriting result comes." 

 

At 0943 IST, the turnover in the gilt market was INR 12.70 billion, lower than INR 14.85 billion at 0935 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 10-year benchmark 6.48%, 2035 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. (Janwee Prajapati)

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India Gilts: Seen tad higher; short bets before gilt auction to offset gains

 

MUMBAI – Prices of government bonds are seen opening slightly higher Friday on expectations that the Reserve Bank of India will, after market hours, announce another open market operation auction of at least INR 250 billion to be conducted in December. This is after the RBI Thursday conducted the second tranche of the INR-1.00-trillion OMO purchases for December announced by RBI Governor Sanjay Malhotra at the outcome of the Monetary Policy Committee meeting earlier this month. Replacement demand after largely better-than-expected cut-off prices at the OMO auction Thursday and easing of US Treasury yields overnight are likely to aid the rise in prices, dealers said. However, short sales before the INR-300-billion gilt auction are likely to offset the gains, they said.

 

The 6.48%, 2035 bond is seen in the range of 6.54-6.62% yield after ending at INR 99.32, or 6.57% yield Thursday. The yield on the erstwhile 10-year benchmark 6.33%, 2035 bond is seen at 6.56-6.65%, against INR 98.15 or 6.60% yield, in the previous session. The yield on the benchmark 10-year US Treasury note was 4.13% at 0815 IST, against 4.14% at 1700 IST Thursday. US Treasury yields eased after US CPI for November, released post Indian market hours Thursday, rose 2.7% on year, lower than the estimate of 3.1% in a poll by The Wall Street Journal.

 

At the OMO auction Thursday, 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 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. 

 

Traders also await Bank of Japan's rate decision Friday for cues on global bond yield movements. The Bank of Japan is expected to raise rates to its highest level since 1995. 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, dealers said. (Cassandra Carvalho)

 

End

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

 

Edited by Vandana Hingorani

 

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