More Stories

Informist, Thursday, Jan. 1, 2026

By Aaryan Khanna

NEW DELHI – Prices of most government bonds recovered early losses and ended near the previous day's close. The 10-year benchmark 6.48%, 2035 bond ended slightly higher as traders covered some short bets near the close after state-owned banks persistently bought the gilt at over 6.60% yield, dealers said. The erstwhile 10-year benchmark 6.33%, 2035 bond ended lower due to a build-up of short bets and because it was not considered lucrative against the current benchmark gilt.

The 6.48%, 2035 gilt closed at INR 99.26 or 6.58% yield Thursday, against INR 99.22 or 6.59% yield Wednesday. The 10-year benchmark had fallen to as low as INR 99.02 early in the day ahead of its INR 320-billion supply at auction Friday, caution before the release of states' indicative borrowing calendar for Jan-Mar and an overnight rise in US Treasury yields.

Traders had begun short selling the bond, hoping to cover their bets at a cheaper price at the auction. However, the persistent purchases from state-owned banks capped the 10-year benchmark yield at 6.62%. This was seen as the top of the current trading range, which also led to some traders buying the bond on the view that the cut-off price at auction would be in line with these levels.

While the initial action only limited losses, a spurt of over-the-counter trades in the middle of the day helped the 10-year benchmark to recover all losses as it led to speculation a large domestic or foreign investor was piling into the bond, dealers said. The 6.48%, 2035 bond was traded 28 times for a total traded amount of INR 57 billion in the "Reported Deals" segment of the Reserve Bank of India's Negotiated Dealing System–Order Matching platform. The traded prices ranged from INR 99.02 to INR 99.20, or 6.59-6.62% yield on the 10-year benchmark gilt. There were only a scant number of reported deals in other bonds.

"There was buying presence since the morning in every bond but especially in the 10-year (benchmark)," a dealer at a private-sector bank said. "Eventually if the market is not going your way you will wind up your positions by end-of-day, which is why I think it eventually ended on a slightly better note."

Bond prices had opened lower after an overnight rise in US Treasury yields. The yield on the 10-year US Treasury note rose to 4.17% from 4.13% at 1700 IST Wednesday after an unexpected dip in US unemployment applications. With traders making room for the supply of the 10-year bond at auction Friday, most dealers expected gilts to close lower before the surge of investor demand.

Traders refrained from taking aggressive bets ahead of the release of the state bond calendar for Jan-Mar, with is seen in the range of INR 4.25 trillion to INR 4.75 trillion. Some market participants expect the keenly awaited borrowing calendar by states to be higher than the actual issuance, which may spook traders. The 10-year benchmark gilt yield may rise to around 6.65% from 6.60% on an adverse calendar near INR 5 trillion, with a rise to 6.70% yield seen if the calendar tops INR 5 trillion. The actual state bond supply during the March quarter is unanimously seen around INR 4.5 trillion, slightly higher than INR 4.34 trillion a year ago.

"On the contrary, I think they will announce a smaller calendar and then borrow more if needed," a dealer at a primary dealership said. "The RBI has already had a word with state finance secretaries about bond issuances and this will also allow states to avail of lower borrowing costs in the first half of the quarter before the excess supply hits in March."

The 6.01%, 2030 gilt remained in favour with banks and mutual funds due to its spread over the repo rate of 5.25%. Losses in the bond were limited through the day despite the fall in the 10-year benchmark gilt. Dealers said the bond's price is unlikely to slide even if some releases including the state bond calendar are adverse for the market. Moreover, the RBI has bought INR 4.5 trillion of its INR 6.4 trillion purchases at OMO auction in 2025 in bonds maturing between 2028 and 2034, driving replacement demand in securities of these tenures.

However, the 6.33%, 2035 bond was a laggard through the day, ending lower. Hefty purchases from state-owned banks Wednesday to increase the bond's valuation at the quarter-end led to its spread over the 10-year benchmark 6.48%, 2035 gilt declining from 3 bps to flat during the course of the day. The off-the-run gilt became unattractive for traders and was being short sold as a proxy to the current 10-year benchmark featured at the weekly gilt auction Friday, 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 showed trades worth INR 138.46 billion in the 6.33%, 2035 gilt, up from INR 88.66 billion Wednesday.

Turnover in the gilt market was INR 369.15 billion Thursday, sharply higher than INR 526.60 billion Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There was no trade using the RBI's wholesale e-rupee pilot for at least the third straight session Thursday.

OUTLOOK

Gilt prices may open steady Friday before the INR-320-billion auction of the 10-year benchmark 6.48%, 2035 gilt at 1030-1130 IST. Short sales to make room for the fresh supply before the auction may weigh on gilts, dealers said.

Demand for the benchmark gilt is seen firm from across the market, with traders of the view that bond prices will rise next week as foreign banks and portfolio investors add to their Indian bond portfolios after a year-end lull. Some banks were also looking to replace gilts sold to the RBI at the OMO auction Monday with the 10-year benchmark, after bidding aggressively for state bonds at Tuesday's auction as well, dealers said.

The RBI's weekly bond purchases through open market operation auctions until Jan. 22 will also limit the impact of fresh supply this month. The central bank will buy the 7.10%, 2029, the 7.95%, 2032, the 7.73%, 2034, the 7.40%, 2035, the 7.41%, 2036, the 8.30%, 2040, and the 7.09%, 2054 bonds at Monday's OMO auction, it said in a release Tuesday.

Traders keenly await states' indicative borrowing calendar for the March quarter, expecting a calendar of around INR 4.5 trillion. The announcement was expected earlier this week and may finally come on Friday, along with the notification for next week's state bond auction, dealers said. If the borrowing calendar surprises on the higher side, the yield on the 10-year benchmark 6.48%, 2035 gilt may rise to as high as 6.70%, the highest so far in the current financial year started April, dealers said.

The rupee's movement against the dollar in early trade will also provide cues for bond prices, as will the overnight movement in US Treasury yields and crude oil prices. Foreign banks are likely to frontrun the likely announcement of India bonds' inclusion in the Bloomberg Global Aggregate Index in January. The government's first advance estimate of FY26 GDP on Jan. 7 may also lend cues on rates, dealers said.

Developments on the India-US trade deal front and crude oil prices moves may also influence bond prices. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.53-6.65% Friday.

India Gilts: Mixed; 6.48%, 2035 erases gains before fresh supply

MUMBAI--1615 IST--Prices of government bonds were mixed. The benchmark 10-year 6.48%, 2035 gilt gave up gains ahead of INR 320 billion of its fresh supply Friday. Some traders also refrained from aggressive purchases due to caution ahead of the release of states' borrowing plan for Jan-Mar, which is expected post market hours Thursday or Friday. State-owned banks likely bought the gilt in large quantums earlier in the day, along with mutual funds, dealers said. Some traders covered short bets in the 6.48%, 2035 gilt and instead placed short sales in the erstwhile 10-year benchmark 6.33%, 2035 gilt, dealers said. In a thin trade, the 6.33%, 2035 gilt last traded at INR 98.10, down 12 paise from Wednesday's close.

The government will sell INR 320 billion of the 10-year benchmark bond Friday. State-owned banks are expected to bid in large quantum after profit sales to the Reserve Bank of India at open market operation auctions in December. Several traders are uncomfortable bidding aggressively at current market prices. Traders expect the cut-off yield on the benchmark 10-year gilt to be around 6.60% at the auction, they said. At the bond's previous auctions, traders had bid aggressively, but later got stuck with stock of the gilt when bond prices fell, and traders wished to avoid that risk this time, they said. 

"I see no aggression to buy 6.48% (2035 gilt) at these current levels, at 6.58%. We need at least a 6.60% or a 6.6150% to bid aggressively," a dealer at a state-owned bank said. "The problem is earlier whenever the cut-offs (prices) were at market or higher then we'd be stuck and not able to sell. There's no incentive in pushing yields down further after that."

At 1615 IST, the turnover in the gilts market was INR 319.75 billion, slightly lower than INR 361.40 billion at 1630 IST Wednesday, according to data on the NDS-OM platform. The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.56-6.62% for the rest of the day.  (Cassandra Carvalho)

India Gilts: Recover; demand firm for 6.48%, 2035 bond above 6.60% yield

NEW DELHI--1440 IST--Prices of government bonds across tenures recovered on firm demand for the 10-year benchmark 6.48%, 2035 gilt above the key 6.60% yield mark from state-owned banks, dealers said. An unusually high quantum of over-the-counter trades in the bond, which resulted in a rise in the benchmark gilt, led to speculation of large investor purchases in the new year.

The 2035 bond was traded 28 times for a total traded amount of INR 57 billion in the "Reported Deals" segment of the Reserve Bank of India's Negotiated Dealing System–Order Matching platform. The traded prices ranged from INR 99.02 to INR 99.20, or 6.59-6.62% yield on the 10-year benchmark gilt. There were only a scant number of reported deals in other bonds.

"Such an amount of trade in a single bond is really unusual. Considering the buying is happening at every level it looks to be some large investment flow coming in," a dealer at a primary dealership said. Speculation persisted whether the demand was driven by domestic or offshore investors.

Prices had fallen earlier on short sales before the INR 320-billion supply of the bond at auction Friday and on caution before the release of the indicative calendar for state borrowing for Jan-Mar. Traders expect the calendar to be around INR 4.5 trillion but are unsure whether it will be released after market hours Thursday and before the auction. Provided there are no surprises from the calendar, traders do not expect the 6.48%, 2035 bond's cut-off yield at the auction to rise above 6.62%, dealers said.

"There is definitely demand above 6.60%, but the auction is coming up so the (10-year benchmark) yield's range has shifted to 6.59-6.62%," a dealer at a state-owned bank said. "A lot of the short-selling still remains on the old paper (erstwhile 10-year benchmark 6.33%, 2035 bond) because its spread over the new bond (6.48%, 2035 gilt) came down from 3 basis points to par yesterday (Wednesday)."

At 1440 IST, the turnover in the gilts market was INR 265.25 billion, similar to INR 253.55 billion at 1435 IST Wednesday, according to data on the NDS-OM platform. The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.55-6.62% for the rest of the day.  (Aaryan Khanna)

India Gilts: Down ahead of weekly gilts auction, short sales weigh

MUMBAI--1059 IST--Government bond prices were down ahead of the weekly gilt auction as traders likely made space in their portfolios for fresh supply of the 10-year benchmark, 6.48%, 2035 bond, dealers said. A rise in the 10-year US Treasury yield to 4.17% from 4.13% at 1700 IST Wednesday after an unexpected dip in unemployment applications also weighed on gilts.

"Opening took cue from UST (US Treasury yields), and then we were down because of auction," a dealer at a primary dealership said. "It is a 10-year (6.48%, 2035 bond) auction, everybody will be there today in the market. Some people will place some shorts also." 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 0945 IST showed trades worth INR 138.46 billion in the 6.33%, 2035 gilt, up from INR 88.66 billion Wednesday.

Traders said they would prefer to pick up the 10-year benchmark gilt at the auction instead of the secondary market as they expect to get it cheaper. The government will sell INR 320 billion of the 6.48%, 2035 bond Friday. Bond prices are expected to rise next week after the next open market purchase of gilts worth INR 500 billion from the Reserve Bank of India Monday, as well as expected purchases by foreign banks for their trading books. State-owned banks also likely stepped up purchases on Thursday after the 10-year benchmark yield rose about the key 6.60% mark, similar to Wednesday.

Traders were cautious ahead of the announcement of the state borrowing calendar for the Jan-Mar quarter as they expect a large borrowing quantum will likely drag down bond prices sharply, dealers said. Economists and market participants expect states to borrow around INR 4.5 trillion through bond issuances in the March quarter but some traders see slighlty lower issuances. If the borrowing calendar surprises on the higher side, the yield on the 10-year benchmark 6.48%, 2035 gilt may rise to as high as 6.70%, dealers said. Some traders had expected the announcement by Wednesday but now expect it after market hours on Thursday or Friday. The RBI might  delay the announcement till after the result of the weekly gilt auction if the calendar is negative for gilt prices, dealers said.

At 1059 IST, the turnover in the gilt market was INR 85.10 billion, lower than INR 94.60 billion at 1030 IST Wednesday, 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 6.55-6.62% for the rest of the day.  (Janwee Prajapati)

India Gilts: Seen steady; caution ahead of gilts auction, state bond calendar

MUMBAI – Government bond prices are seen opening steady on the first day of 2026 amid lack of fresh cues as most global markets will be closed for New Year's holiday. Traders are likely to refrain from placing aggressive bets ahead of the announcement of the state borrowing calendar and the weekly gilt auction Friday, dealers said.

 
Traders expect states' borrowing calendar for the March quarter between INR 4.5 trillion and INR 5.0 trillion. The announcement is expected on Thursday or Friday after market hours. If the borrowing calendar surprises on the higher side, the yield on the 10-year benchmark 6.48%, 2035 gilt may rise to as high as 6.70%, dealers said.

 
The 10-year benchmark 6.48%, 2035 bond yield is seen in the range of 6.53-6.62% after ending at INR 99.29, or 6.58% yield Wednesday. The 10-year benchmark bond is likely to remain under pressure ahead of the auction as traders are expected to place short bets, hoping to cover them at the auction at cheaper prices.

Bond prices recovered losses Wednesday, after public sector banks aggressively bought the 6.48%,2035 gilt at the attractive 6.60% level. While the 10-year benchmark may be under pressure this week, foreign banks are expected to return to the market and are likely to pick up both short-term and long-term bonds. Liquidity is also likely to improve due to the government's spending, dealers said. Traders are also positioning ahead of the anticipated announcement that India will be added to Bloomberg's Global Aggregate Index in January.

The 10-year US Treasury yield was little changed overnight at 4.12% at 0806 IST Thursday. Fed funds futures were pricing in an 85.1% chance that the US Federal Open Market Committee will hold rates at its next meeting in late January, according to CME's FedWatch tool.  (Janwee Prajapati)  End

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

Edited by Akul Nishant Akhoury

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. 2026. All rights reserved.