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Informist, Monday, Dec. 29, 2025

 

By Janwee Prajapati

 

MUMBAI – Most government bond prices ended lower Monday, with the 10-year benchmark 6.48%, 2035 gilt ending sharply lower after the result of the INR-500-billion open market operation auction. A larger-than-indicated state bond auction Tuesday also weighed on bond prices as it is among the largest in the current financial year that began in April, dealers said.   

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.20, down from INR 99.39 Friday. The bond's yield ended at 6.5912%, up from 6.5637% on Friday. The 6.90%, 2065 bond ended at INR 94.32, up 17 paise from Friday's close.

 

The OMO auction result was largely in line with expectations, but the cut-off for the 6.67%, 2035 bond was disappointing at INR 99.71, sharply below an Informist poll estimate of INR 99.95, which weighed on 10-year bond prices in the secondary market, dealers said. 

 

Moreover, the fall in the 10-year benchmark gilt price was also due to short bets placed ahead of the large state bond auction Tuesday as traders made space in their portfolios to pick up fresh supply, dealers said. The RBI on Friday said 15 states will raise INR 354.50 billion through bond sales on Tuesday, compared with the INR 153.21 billion indicated in the Oct-Dec borrowing calendar. Some dealers said that primary dealerships were selling gilts ahead of the INR-320-billion worth of supply of 10-year bonds at the weekly gilt auction Friday. Traders were in no rush to replenish the stocks sold to the RBI at the OMO auction Monday, with some hoping to refill their books at the state bond and gilt auctions this week, dealers said. The price decline was limited by purchases from public-sector banks at yields considered attractive, dealers said.   

 

"Public sector banks are buying at these levels," a dealer at a state-owned bank said. "They are buying after they offloaded a lot last week when the prices were up after the announcement of the OMO auction, so they have space."

 

States' borrowing this week is primarily concentrated in tenures between 10 and 20 years, weighing on gilts of similar maturity Monday. Only INR 40 billion of the total amount will be raised through bonds with maturities of 20 years or more Tuesday. Due to the higher-than-indicated state bond supply, traders expect the yield spread between state bonds and gilts of similar tenure to widen by 3-4 bps from last week's auction, dealers said. The rise in state bond yields is likely to percolate into gilts, leading to a fall in gilt prices in the secondary market, dealers said. 

 

Traders are also concerned about the quantum of states' borrowing in the Jan-Mar quarter, as states typically borrow larger amounts near year-end, dealers said. Most traders expect the borrowing amount to be between INR 4.25 trillion and INR 5.00 trillion, while a few expect it to be below INR 4.00 trillion. If the state borrowing quantum is sharply higher than expectations, the yield on the 6.48%, 2035 bond may rise to 6.65%, dealers said. On the downside, due to three tranches of OMO auctions scheduled for January, along with the expected inclusion of Indian bonds in Bloomberg's Global Aggregate Index, the yield on the 10-year benchmark gilt could fall to 6.50%, dealers said.

 

Some traders were also focused on the weekly gilt auction Friday, wherein the government will sell INR 320 billion of a 10-year bond as they look to buy the bond at a lower price than current market levels. Traders booked profit in the secondary market after a spike in prices following the OMO auction result, which was broadly in line with expectations, dealers said. Some traders also placed short bets ahead of the state bond and gilt auctions, which also weighed on the price of the 6.48%, 2035 bond. 

 

"I think there is no demand for replenishment in the 10-year bond (6.48%, 2035 bond)," a dealer at a primary dealership said. "Traders will likely wait for the SGS (state bond) auction tomorrow (Tuesday)... also, if they want to buy, they will buy at the auction Friday at a lower price. People may also replace it (bonds sold to the RBI at OMO) with state bonds because now they just want higher yields."  

 

Towards the end of the session, the index of industrial production showed robust growth of 6.7% in November, the highest in two years, compared with the consensus estimate of 3.2% in an Informist poll. Some traders feared that after a strong IIP growth print, GDP data for the December quarter may be on the higher side.

 

Turnover in the gilt market was INR 280.75 billion Monday, lower than INR 335.25 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. On Monday, there were no trades using the RBI's wholesale e-rupee pilot, the same as Friday. 

 

OUTLOOK

On Tuesday, at open, gilts will likely track overnight movement in US Treasury yields, dealers said. The rupee's movement against the dollar in early trade will also provide cues for bond prices. Later in the day, traders will focus on the state bond auction result for further cues.

 

Demand at the state bond auction is likely to be subdued as traders fear an even higher quantum of state borrowing in the March quarter, as is usually seen in the last quarter of the financial year, dealers said. Higher-than-estimated cut-off yields at the state bond auction will likely drag down gilt prices in the secondary market, dealers said. Fifteen states are in line to borrow INR 345.50 billion through the issuance of bonds on Tuesday, more than double the indicated quantum of INR 153.21 billion in the Oct-Dec borrowing calendar.    

 

Traders will monitor developments on the India-US trade deal and will keep an eye on crude oil prices. Some traders are also hopeful that the likely inclusion of Indian government bonds in Bloomberg's Global Aggregate Index in January will push bond prices higher, dealers said.

 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.55-6.62%.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.1950	6.5912%	99.3900	6.5637%
6.33%, 2035	97.9500	6.6261%	98.2125	6.5875%
6.01%, 2030	98.7000	6.3416%	98.7400	6.3311%
6.68%, 2040	96.9900	7.0136%	97.0300	7.0090%
6.90%, 2065	94.3200	7.3419%	94.1500	7.3559%

 

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India Gilts: Mixed after OMO result largely within view; 10-year bonds down

 

	1600 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.27	99.41	99.24	99.37	99.39
YTM (%)	6.5814	6.5609	6.5849	6.5666	6.5637

 

MUMBAI--1600 IST--Prices of government bonds were mixed after the result of the Reserve Bank of India's open market operations auction was largely along expected lines. Bonds maturing in around 10 years were under pressure after the cut-off price on the 6.67%, 2035 bond was lower than estimated at the OMO auction. In addition, Tuesday's supply of state bonds being of largely similar maturity, along with a fresh supply of a 10-year gilt at the weekly gilts auction Friday, weighed on prices of 10-year bonds. Some traders feared that after a strong IIP growth print, GDP data for the December quarter may be on the higher side. India's IIP growth in November was 6.7%, highest in 2 years, against an Informist poll estimate of 3.2%.

 

Short-term bonds were up after the RBI bought them in large quantities at the OMO auction, in line with expectations. However, interest to purchase bonds was subdued as traders focused on taking profits nearing the end of the December quarter and made room for the upcoming supply of state bonds, dealers said. 

 

At the OMO auction, the cut-off price of INR 99.71 on the 6.67%, 2035 bond was lower than the forecast of INR 99.95 in an Informist poll. The lower-than-expected cut-off weighed on the 10-year benchmark gilt's price, dealers said. The cut-offs on the erstwhile 10-year benchmark 6.79%, 2034 bond and on the long-term 7.30%, 2053 bond were better than expectations. Long-term bond prices remained up after the auction result.

 

The RBI accepted the 7.61%, 2030 gilt in the largest quantum amongst the seven bonds it had offered to buy, at INR 137.33 billion. It bought INR 103.20 billion of the 6.79%, 2029 gilt, and INR 94.43 billion of the other short-term security--the 7.26%, 2033 gilt--at the auction. The cut-off prices on these gilts were 10-15 paise lower than estimated, but traders had expected this.

 

The 6.79%, 2029 and the 7.61%, 2030 bonds have not been frequently offered by the RBI at previous OMOs in 2025, dealers said. Moreover, traders who have been unable to take sizeable profits this quarter took the auction as the last chance to do so and aggressively tendered bonds from their available-for-sale and held-to-maturity books, dealers said. Traders do not expect the lower-than-view cut-off prices on these bonds to continue at the next three OMO tranches scheduled in January, since they are unlikely to be as aggressive in taking profits, dealers said.

 

"The next OMOs will see tendering at higher (price) levels," a trader at a private-sector bank said. "I think the worst cut-offs are done today (Monday) because people were desperate (to show profits) for quarter-end."

 

Traders expect the yield on the 10-year benchmark gilt to hit 6.50-6.51?rly next month, and 6.55% in the near term, owing to further OMO auctions and expected foreign inflows in the new year. However, the 6.57% yield level was psychologically crucial, as traders who had bought gilts when the 10-year yield neared 6.70% last week took profits, dealers said. Losses were limited on likely purchases from state-owned banks, they said.

 

At 1600 IST, the turnover in the gilts market was INR 196.45 billion, down from INR 259.85 billion at 1535 IST Friday, 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 6.55-6.60% for the rest of the day.  (Cassandra Carvalho)

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India Gilts: Benchmark recovers most losses; short-, long-term bonds in favour

 

	1315 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.36	99.38	99.24	99.37	99.39
YTM (%)	6.5680	6.5652	6.5849	6.5666	6.5637

 

NEW DELHI--1315 IST--The 10-year benchmark 6.48%, 2035 bond recovered most early losses as traders stepped up their activity, picking up gilts at levels seen lucrative after an early fall. The benchmark was also influenced by a rise in the price of short-term and long-term bonds, which were in favour with traders, dealers said. Overall trade volumes remained thin before the result of the Reserve Bank of India's INR-500-billion open market operation to buy gilts.

 

Dealers were of the view that the RBI would set cut-off prices on most of the bonds at the OMO auction at or above indicative prices published by Financial Benchmarks India Ltd., which is expected to boost market sentiment. Traders were looking to frontrun some replacement demand from state-owned banks in bonds maturing up to 2033 by picking up liquid gilts in these tenures in the secondary market, dealers said. 

 

"He (RBI) should give the five-to-seven year bonds with a positive cut-off and accept a large quantum of the papers," a dealer at a primary dealership said. "Just like the previous auctions, cut-offs on the long-term bond may be high but he (the RBI) won't accept a lot – I think market has tendered accordingly." The result of the OMO auction will lend cues to prices for the rest of the day, dealers said.

 

In addition to the short-term bonds, traders were also keen to pick up some stock of gilts maturing in 15 years or more while trimming their stock of the 10-year benchmark gilt. Investor demand for long-term gilts has improved in December, seen both in the auction and the secondary market, dealers said. After spiking to as high as 7.48?rlier in the month, the yield on the 40-year benchmark 6.90%, 2065 bond eased to 7.34% Monday. Moreover, only INR 40 billion of bonds at the state bond auction Tuesday mature in 20 years or more, against the INR 354.50-billion notified amount. Traders' bets in short-term bonds were likely only until the end of the day as replacement demand from banks will be focused on state bonds Tuesday while bets on long-term gilts may last until the quarter-end on Wednesday, dealers said.

 

"Though trading activity is limited, I think long-term bonds could be the way to go, we have seen some traction there," a dealer at a private-sector bank said. "The state bond supply has completely turned into the belly while the long-term segment has nothing."

 

Trade volume in the secondary market remains subdued ahead of the OMO auction result. At 1315 IST, the turnover in the gilt market was INR 78.50 billion, lower than INR 102.50 billion at 1330 IST Friday, 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 6.52-6.59% for the rest of the day.  (Aaryan Khanna)

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India Gilts: Down on state bond auction notice; OMO auction result awaited

 

	1035 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.30	99.37	99.30	99.37	99.39
YTM (%)	6.5761	6.5666	6.5771	6.5666	6.5637

 

MUMBAI--1035 IST--Government bond prices were down in thin trade due to the larger-than-indicated state bond auction announced for Tuesday and ahead of the INR-500-billion open market operation auction result, dealers said. Traders were focused on the OMO auction as they intend to offer their securities at a profit to the Reserve Bank of India. 

 

Trade in the secondary market began only at 0908 IST, as traders were unsure of the levels to bid at ahead of the OMO auction, dealers said. The RBI has offered to buy the 6.79%, 2029; the 7.61%, 2030; the 7.26%, 2033; the 6.79%, 2034; the 6.67%, 2035; the 7.18%, 2037, and the 7.30%, 2053 gilts at the OMO auction. If the RBI buys the notified amount of bonds, its purchases across primary and secondary markets in 2025 will reach INR 7 trillion. Some traders said the papers selected for the auction were more in favour with traders compared to the papers selected at the last two OMO auctions in December.

 

Banks wanted to offer the papers at a profit from its held-to-maturity books ahead of the quarter-end. Emboldened by the RBI accepting bids above indicative levels published by Financial Benchmarks India Ltd. in prior auctions, most traders said they would offer securities to the RBI at higher-than-indicated prices as on Friday, with the central bank likely to accept those offers as it would aim to infuse the full INR 500-billion of liquidity, dealers said. 

 

Some traders said that the 6.79%, 2029, 7.61%, 2030 and 7.26%, 2033 gilt may be offered below FBIL levels as these bonds may see the most competition among banks to offload stock. Meanwhile, the RBI is expected to accept only a few bids for the erstwhile 30-year benchmark 7.30%, 2053 gilt, similar to the fate of long-term bonds in prior auctions, dealers said. 

 

"Auction should be positive today (Friday), as the last two OMOs were higher (saw higher cut-off prices than FBIL levels)," a dealer at a private sector bank said. "I think people will bid 5-6 paise higher than market levels, but I don't think they will bid aggressively because I am not sure how many of them are at office."

 

Even after selling bonds to the RBI, traders expect demand to be modest in the face of the larger-than-expected supply of state bonds, which is driving down gilt prices as well, dealers said. Fifteen states will sell INR 354.50 billion of bonds Tuesday, the RBI said Friday, sharply higher than INR 153.21 billion indicated for this week in the Oct-Dec state borrowing calendar.

 

Trade volume in the secondary market remains subdued ahead of the OMO auction result. At 1030 IST, the turnover in the gilt market was INR 13.10 billion, less than half of INR 33.55 billion at the same time Friday, 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 6.52-6.59% for the rest of the day.  (Janwee Prajapati)

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India Gilts: Seen steady before OMO buy; jumbo state bond auction may weigh

 

NEW DELHI – Government bond prices may open steady ahead of the INR-500-billion open market operation by the Reserve Bank of India to buy gilts at 0930-1030 IST. Banks are expected to be aggressive in offering bonds to sell to the central bank to maximise profits near the quarter-end. A larger-than-indicated state bond auction notified for Tuesday may weigh on bond prices as it is among the largest in the current financial year that began April, dealers said.

 

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.52-6.60% yield after ending at INR 99.39, or 6.56% yield Friday. A slight increase in the US rate cut bets may aid, but trade volumes may be muted at the end of the calendar year, when several traders are on leave and foreign banks and portfolio investors avoid aggressive bets as they close their accounts for 2025.

 

The RBI has offered to buy the 6.79%, 2029; the 7.61%, 2030; the 7.26%, 2033; the 6.79%, 2034; the 6.67%, 2035; the 7.18%, 2037, and the 7.30%, 2053 gilts at the OMO auction. If the RBI buys the notified amount of bonds, its purchases in 2025 will reach INR 7 trillion.

 

Banks are looking to book profits near the quarter-end and may tender gilts aggressively from their held-to-maturity books, dealers said. The bonds that the RBI has offered to buy at the auction are widely held, especially by state-owned banks. Traders expect these banks to tender bonds – especially those maturing up to 2037 – at a significant discount to their indicative levels for Friday published by Financial Benchmarks India Ltd. 

 

At the same time, replacement demand is seen muted as traders would want to avoid adding risk to their portfolios before the quarter-end on Wednesday, dealers said. Moreover, banks said they would prefer replacing the gilts to the RBI at auction with state government securities as much as internal limits allow. The RBI Friday said 15 states will raise INR 354.50 billion through the sale of bonds Tuesday, against the INR-153.21-billion indicated in the borrowing calendar by states for Oct-Dec. An INR 4.5-trillion calendar is expected to be announced for Jan-Mar this week, dealers said.  (Aaryan Khanna)  End

 

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

 

Edited by Saji George Titus

 

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