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Informist, Wednesday, Jan. 7, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended mixed Wednesday in a choppy trading session. Disappointment over the exclusion of the 6.33%, 2035 bond from Monday's open market operation auction was offset by large purchases of the 10-year benchmark 6.48%, 2035 gilt and the 6.68%, 2040 bond, likely by foreign investors, dealers said. Bond prices were little changed after the first advance estimate of India's GDP growth for 2025-26 (Apr-Mar), published during market hours, came at 7.4%, in line with expectations.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 99.06, slightly higher than INR 99.04 Tuesday. The bond's yield ended at 6.61%, unchanged from Tuesday. The 15-year benchmark 6.68%, 2040 gilt, of which INR-160-billion supply will be auctioned Friday, ended at INR 96.64, up 6 paise from Tuesday's close, after hitting the day's high of INR 96.74. 

 

"It's been a volatile day today (Wednesday), we've seen a lot of ups and downs. There seems to be some investor demand in the benchmark 10-year (6.48%, 2035 gilt). It's probably a private sector bank because we saw good buying from them yesterday (Tuesday), it could be FPIs also, since we've been seeing some receiving in OIS (overnight indexed swap rates) throughout the day. The 6.68%, 2040 paper has a shut-day tomorrow (Thursday), so we saw some short-covering there."

 

Traders speculated that foreign banks and portfolio investors bought the 15-year benchmark and the 6.68%, 2040 bond Wednesday. In the 'Reported Deals T+1' segment of the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, trades worth INR 44.05 billion were reported in the 6.68%, 2040 gilt and INR 37.40 billion in the 6.48%, 2035 bond. As of 1700 IST, foreign portfolio investors net sold gilts worth INR 1.46 billion through the fully accessible route Wednesday, according to data from Clearing Corp. of India. Some traders also covered short bets in the 15-year benchmark bond, ahead of its coupon payment due Wednesday, dealers said.

 

Traders speculated that foreign banks were likely purchasing gilts to frontrun the expected announcement on the inclusion of India's fully accessible route bonds in Bloomberg's flagship Global Aggregate Index. The announcement is expected next week, dealers said. Foreign banks and portfolio investors were likely purchasing bonds and receiving fixed-rate contracts in swaps, dealers said. The five-year OIS rate ended at 5.92%, down from 5.95% Tuesday. 

 

Bond prices opened lower after the RBI did not include the erstwhile 10-year benchmark 6.33%, 2035 bond in the INR 500 billion open market operation auction scheduled for Monday. The bond ended at INR 98.02, down 11 paise from INR 98.13 Tuesday. The bond rose 18 paise on Tuesday on optimism that the central bank would include it in next week's OMO auction. However, the central bank announced Tuesday after market hours that it would buy the 7.04%, 2029; the 6.79%, 2031; the 8.32%, 2032; the 7.10%, 2034; the 6.64%, 2035; the 7.18%, 2037; and the 7.30%, 2053 gilts. The inclusion of the 6.33%, 2035 bond would've resulted in bond prices rising, since the bond was not profitable or 'in the money' for most traders, unlike the bonds chosen for the OMO auction, dealers said. 

 

"The 6.33%, 2035 bond is not in profit in any books, you see its current price is the lowest. If the RBI had included the bond (at OMO), then some buying would come in the market and prices would rise. Now (for), all the bonds chosen, people are sitting on profits, and they will sell directly at auction. Secondary market prices are unchanged," a dealer at another private sector bank said.  

 

After opening lower, state-owned banks likely bought bonds after the yield level on the 10-year benchmark bond neared 6.64%, the upper end of the recent trading range, dealers said. Later in the day, bond prices briefly reversed losses on likely FPI buying, dealers said. An intraday fall in US Treasury yields also aided the price rise, dealers said. The yield on the benchmark 10-year US Treasury note was 4.15% at 1700 IST, down from 4.19% at the same time Tuesday. Private sector banks also may have purchased gilts Wednesday after net buying gilts worth INR 46.83 billion Tuesday, dealers said. 

 

However, bond prices gave up gains after cut-off yields at the INR-290-billion Treasury bill auction were higher than expectations, dealers said. The RBI set a cut-off yield of 5.31% on the 91-day T-bill, 5.54% on the 182-day T-bill and 5.58% on the 364-day T-bill, higher than the 5.28%, 5.49% and 5.55% cut-offs expected on the 91-day, 182-day and 364-day T-bills, respectively, according to an Informist poll. Traders said that the high cut-off yields reflected tight liquidity in the banking system and poor bidding from mutual funds – investors who usually pile onto T-bills to meet their investment requirements. 

 

"We approached some mutual funds to ask for bids (for the T-bill auction). They generally give us, but today (Wednesday) they did not give many," a dealer at a state-owned bank said. 

 

Bond prices were unaffected by the first advance GDP estimates for FY26, released during market hours, despite nominal GDP being on the lower side at 8.0%. Traders were focused on supply concerns in both state and central government bonds, dealers said. 

 

Turnover in the gilts market was INR 454.00 billion Wednesday, similar to INR 446.80 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.

 

OUTLOOK

On Thursday, gilt prices are expected to track overnight movements in US Treasury yields at the open, given the lack of significant domestic cues. However, bond prices are likely to react to US yield movements only if the 10-year US yield falls below 4.10% or rises above 4.20%, the current trading range, dealers said. Traders await the US employment report for December due Friday, for further cues ahead of the US Federal Open Market Committee's meeting scheduled for the end of this month.  

 

Traders will position for the weekly gilt auction Friday, where the government will sell INR 160 billion of the 6.68%, 2040 bond and INR 130 billion of the 6.90%, 2065 bond. After strong demand from long-term bond investors such as insurance companies and pension funds at the past two state bond auctions and recent gilt auctions, demand for the 6.90%, 2065 bond is seen as robust, and its cut-off price could be at secondary-market levels, dealers said. Demand for the 15-year 6.68 40 paper would hinge on banks' appetite. Dealers said if FPIs are buying the 15-year gilt in the secondary market, they could also bid for the bond at auction through foreign banks. Market participants await the announcement of the inclusion of India's fully accessible route bonds in Bloomberg's flagship Global Aggregate Index. The announcement is expected this month. 

 

The rupee's movement against the dollar in early trade will also provide cues for bond prices, as will the movement in crude oil prices. Any development on the India-US trade deal negotiations may also influence bond prices. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.57-6.65% Thursday.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	99.0600	6.6105%	99.0375	6.6137%
6.33%, 2035	98.0150	6.6169%	98.1250	6.6007%
6.01%, 2030	98.7200	6.3383%	98.6975	6.3439%
6.68%, 2040	96.6375	7.0541%	96.5825	7.0604%
6.90%, 2065	93.8000	7.3848%	93.8500	7.3807%

 

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India Gilts: Little changed after FY26 GDP first estimate in line with view

 

	1606 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.02	99.08	98.88	98.99	99.04
YTM (%)	6.6169	6.6077	6.6360	6.6204	6.6137

 

MUMBAI--1606 IST--Prices of government bonds were little changed, with most continuing to trade in a thin band after the statistics ministry said that India's GDP growth in 2025-26 (Apr-Mar) is seen rising to 7.4% as per the first advance estimate released at 1600 IST. An Informist poll had estimated India's GDP growth to rise to 7.5% in the current financial year ending March. Nominal GDP growth in FY26 was 8.0%, against an estimate of 10.1% estimated by the Centre in the FY26 Union Budget. Nominal GDP was 9.8% in FY25.

 

Traders' views on the interest rate trajectory were little changed after the data was published. Positioning before the data print was light for most traders, dealers said. The broad view is that GDP growth could be slightly on the lower side due to the impact of US tariffs on Indian exports, unless a trade deal is struck with the US, dealers said. Traders were more focused on supply concerns in both state and central government bonds and were only tracking the data for cues on the Centre's target for GDP growth in FY27, dealers said. Some traders also disregarded the figure as they felt the data would be revised in the next two sets of GDP figures to be released. The government will also introduce a new series of GDP in February, with the base year of 2022-23, against the current 2011-12, which may present an entirely different reading of the data, dealers said. 

 

"GDP was on expected lines, this had already been accounted for. The rate view is unchanged," a dealer at a private-sector bank said. "We'll have to see what the final fiscal deficit for FY26 is because due to low nominal GDP, the base gets smaller so the fiscal deficit could get revised upwards, but we'll have to see." 

 

Earlier in the day, some foreign banks and foreign portfolio investors were purchasing gilts in the secondary market, which lifted bond prices off the day's lows, dealers said. As of 1606 IST, FPIs net sold gilts worth INR 331.30 million through the fully accessible route, as per data from Clearing Corp. of India.    

 

At 1606 IST, the turnover in the gilt market was INR 384.20 billion, just a tad up from INR 363.75 billion at 1535 IST Tuesday, 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 6.59-6.65% for the rest of the day.  (Cassandra Carvalho)

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India Gilts: Swing between gains and losses; poor demand for T-bills weighs

 

	1415 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.00	99.08	98.88	98.99	99.04
YTM (%)	6.6190	6.6077	6.6360	6.6204	6.6137

 

MUMBAI--1415 IST--Government bond prices fell slightly after Treasury bill cut-off yields at an auction were higher than expected, dealers said. The price of the 10-year benchmark 6.48%, 2035 gilt swung between gains and losses after recovering from an early fall, as traders were likely to have bought the gilt at levels seen lucrative.

 

The Reserve Bank of India set a cut-off of 5.31% on the 91-day T-bill, 5.54% on the 182-day T-bill and 5.58% on the 364-day T-bill, higher than the 5.28%, 5.49% and 5.55% cut-offs expected on the 91-day, 182-day and 364-day T-bill, respectively, according to an Informist poll. Dealers said short-term bonds would have to reprice to higher yields as their spread over the one-year T-bill shrank. Mutual funds likely bid poorly for T-bills at the auction and some traders speculated that they also sold gilts.

 

Traders covered short bets placed on the 10-year benchmark 6.48%, 2035 paper as they remain uncertain of the direction of price movement and because purchases by state-owned and private sector banks were seen firm near the psychologically crucial 6.65% yield, dealers said. After falling sharply in early trade, the 6.33%, 2035 bond recovered some losses as short sellers covered their bets. Traders were disappointed that the erstwhile 10-year benchmark was not among the papers selected for the INR-500-billion OMO auction on Monday, leading to bond prices falling earlier in the day.

 

At the weekly gilt auction Friday, the government will sell INR 160 billion of the 6.68%, 2040 gilt and INR 130 billion of the 6.90%, 2065 bond. Traders expect demand for the 2040 paper to be firm at the auction as the spread of the 15-year benchmark over the 10-year benchmark gilt is seen lucrative at over 40 basis points, dealers said. Moreover, the 6.68%, 2040 bond's price may react more to positive news rather than the 6.48%, 2035 gilt as traders expect a wave of profit booking if the 10-year benchmark yield falls below 6.60%.

 

The 40-year benchmark paper will also see firm bids from long-term investors such as life insurers as its spread over the 10-year benchmark gilt is over 70 bps, considered lucrative, dealers said. Both the bonds at the auction were outperforming peers and their prices were up Wednesday.

 

Some traders were cautious before the release of the advance GDP estimate for 2025-26 (Apr-Mar) at 1600 IST but did not expect a sharp reaction in gilt prices after the release. India's GDP growth is expected to rise to 7.5% in the current financial year ending March from a four-year low of 6.5% in FY25, according to an Informist poll.

 

"I don't think there will be any major impact of the GDP number today, market will be fairly range-bound," a dealer at a primary dealership said. "People have already priced in a higher number around 7.4-7.5%...I don't think that there is any room for a lower number as this is the last quarter. Also, it is just a forecast not the actual number, so I don't think there will be much reaction to it."   

 

At 1415 IST, the turnover in the gilt market was INR 333.10 billion, higher than INR 236.00 billion at 1430 IST Tuesday, 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 6.59-6.65% for the rest of the day.  (Janwee Prajapati)

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India Gilts: Down on disappointment over OMO bonds; 6.48%, 2035 gilt off lows

 

	0935 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.98	98.99	98.88	98.99	99.04
YTM (%)	6.6219	6.6204	6.6360	6.6204	6.6137

 

NEW DELHI--0935 IST--Government bond prices fell as traders were disappointed at lack of the 6.33%, 2035 bond at the Reserve Bank of India's next open market operation auction to buy gilts on Monday, dealers said. Trade volumes were muted as traders awaited fresh triggers to move bond prices, including the advance GDP estimate for 2025-26 (Apr-Mar) at 1600 IST Wednesday.

 

Traders had on Tuesday bet on the inclusion of the erstwhile 10-year bond in the next round of the RBI's INR 500-billion bond purchase. The 6.33%, 2035 bond's yield ended lower than the 6.48%, 2035 bond Tuesday, but rose to flat in early trade as it was the biggest loser on the day. Some traders also placed short bets on the 6.68%, 2040 bond ahead of the government's debt sale Friday, which includes the 15-year benchmark and the 6.90%, 2065 gilt, dealers said.

 

The 6.48%, 2035 bond was off lows as traders did not expect the bond's prices to tumble as its yield was seen near the the higher end of its recent trading range. Losses were also limited after firm demand at the INR 301-billion state bond auction on Tuesday, especially for long-term gilts. Moreover, traders were hopeful foreign portfolio investors and banks will ramp up their gilt purchases on expectations that India's fully accessible route bonds will be announced for inclusion in Bloomberg flagship Global Aggregate index as early as next week, dealers said. 

 

"I don't think there is really a case for 6.65% breaking (on the 10-year gilt yield) after yesterday's solid demand for state bonds," a dealer at a foreign bank said. "So traders are not going to make a strong push on shorting 10-year right now as a lot of bad news is already priced in."

 

The sudden sharp rise in the rupee also aided gilt prices, dealers said. The rupee rose to as much as 89.81 a dollar in early trade Wednesday from 90.17 a dollar on Tuesday.

 

At 0935 IST, the turnover in the gilt market was INR 59.50 billion, higher than INR 14.35 billion at 0930 IST Tuesday, 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 6.59-6.65% for the rest of the day.  (Aaryan Khanna)

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India Gilts: Seen down on lack of 6.33%, 2035 bond at next OMO auction

 

MUMBAI – Government bond prices are seen opening lower as traders were disappointed by lack of the erstwhile 10-year benchmark 6.33%, 2035 bond at the Reserve Bank of India's next open market operation Monday. The inversion of the spread of the old benchmark over the current 10-year 6.48%, 2035 gilt should also correct, dealers said.

 

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.60-6.66?ter ending at INR 99.04, or 6.61% yield Tuesday. Bond prices rose after firm demand for long-term state bonds in the first auction of these securities in the March quarter, with an indicated issuance of INR 5 trillion. Moreover, prices had risen hoping the RBI would pick favourable bonds for traders to sell at a profit at the auction.

 

The 6.33%, 2035 bond was the biggest gainer Tuesday and ended at 6.60%, 1 basis point lower than the 6.48%, 2035 bond. Typically, off-the-run papers increasingly become illiquid and yield higher than the benchmark. While the 6.33%, 2035 bond's trade volumes have shrunk over the past two months, its spread over the newer bond had not widened significantly and it is expected to underperform the rest of the market Wednesday. Though the expectation of its inclusion in the OMO auction had led to the spread tightening further and inverting over the past few days, this had led traders to short-sell the bond to bet on the spread returning to 2-3 bps, 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 1700 IST Tuesday showed trades worth INR 153.38 billion in the 6.33%, 2035 gilt, some of which are likely to get covered later in the day.

The RBI has offered to buy the 7.04%, 2029; the 6.79%, 2031; the 8.32%, 2032; the 7.10%, 2034; the 6.64%, 2035; the 7.18%, 2037; and the 7.30%, 2053 gilts Monday at the third INR 500-billion tranche of the OMO auctions announced Dec. 23. Traders who had bet on the RBI choosing the 6.33%, 2035 bond, 7.18%, 2033 bond or the 6.79%, 2034 gilt at the auction would trim those holdings, while those that had bet on the 7.10%, 2034 bond's inclusion would be able to book profits, dealers said. The bonds at the auction have been in favour with traders until recently and their prices would rise heading into the auction.

 

The government's first advance estimate of GDP for 2025-26 (Apr-Mar), to be released at 1600 IST, may also provide cues on interest rates, dealers said. According to an Informist poll of 11 economists, India's GDP is expected to rise 7.5% in FY26. However, positioning before the data print was light for most traders, dealers said. Traders were more focused on supply concerns in the government bond market and would likely only track the data for cues on the Centre's target for GDP growth in FY27, dealers said.

 

Foreign banks, primary dealers, and offshore traders are expected to buy gilts and receive swap rates this month, dealers said. Market participants await the announcement of the inclusion of India's fully accessible route bonds in Bloomberg's flagship Global Aggregate Index. The announcement is expected next week. The rupee's movement against the dollar in early trade will also provide cues for bond prices, as will the movement in US Treasury yields. The 10-year US Treasury yield eased to 4.17% at 0830 IST from 4.19% at 1700 IST Tuesday.  (Aaryan Khanna)

 

End

 

US$1 = INR 89.88

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

 

Edited by Saji George Titus

 

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