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Informist, Thursday, Jan. 8, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended lower Thursday as traders placed short bets on gilts to make room for the INR 290 billion of fresh supply at the weekly gilt auction Friday, dealers said. A fall in the rupee past the psychological 90 per dollar mark also weighed on bond prices. However, purchases by state-owned banks at the 6.63% yield level on the benchmark 10-year 6.48%, 2035 gilt, limited losses. 

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.93, down from INR 99.06 Wednesday. The bond's yield ended at 6.63%, up from 6.61% Wednesday. The 15-year benchmark 6.68%, 2040 gilt, which will be auctioned Friday, ended at INR 96.45, down 19 paise from Wednesday's close. 

 

The government will sell INR 160 billion of the 6.68%, 2040 gilt and INR 130 billion of the 6.90%, 2065 gilt Friday. Demand for both bonds is seen as robust, driven by attractive yields and strong long-term investor appetite for the 2065 bond, dealers said. 

 

"15-year (6.68%, 2040) yield is attractive, it can be bought for 'carry' also, some of it can be put in HTM (held-to-maturity books)," a dealer at a state-owned bank said. "FPIs are also selling the 2055 bond over the past few days and purchasing the 15-year paper." 

 

As of 1700 IST, foreign portfolio investors net purchased gilts worth INR 2.62 billion through the fully accessible route, according to data from Clearing Corp. of India. Dealers speculated that FPIs purchased the 15-year gilt Wednesday and Thursday, and shed positions in ultra-long-term gilts. Domestic traders, especially from state-owned banks, also bought the 15-year bond due to its attractive yield level. 

 

State-owned banks bought gilts when the yield on the 10-year benchmark gilt hit 6.63%, limiting a further rise in the yield to 6.65%, dealers said. State-owned banks have been aggressively buying gilts maturing in around 10 years, especially the 6.48%, 2035 gilt, dealers said.

 

The Reserve Bank of India has chosen to buy the 7.10%, 2034 gilt, the 6.64%, 2035 and the 7.18%, 2037 gilts, along with four other bonds at the open market operation auction scheduled for Monday, and banks were front-running their replacement demand in the 2034-2037 tenures, dealers said. Some traders also played on the spread between the 15-year benchmark bond and the erstwhile 15-year benchmark 6.92%, 2039 bond, as it was at its highest Thursday, dealers said. The yield spread between the papers was 11 basis points on Thursday.

 

"I think the 2039 paper has a good spread over the 15-year paper, and it has decent 200 crore volume also today (Thursday)," a dealer at a state-owned bank said. "The spread between the two papers is the highest today. And now the tenure of these papers is also decreasing, as 2039 is now a 13-year paper."

 

Traders placed short bets on gilts ahead of the gilt auction. 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 showed trades worth INR 76.23 billion in the 6.48%, 2035 gilt Thursday, up from INR 56.34 billion Wednesday. The data showed trades worth INR 39.83 billion in the 15-year 6.68%, 2040 gilt, up from INR 32.38 billion in the previous session. 

 

Intraday trading was limited due to risk amid uncertainty about the trajectory of bond prices, though traders tracked the 10-year US Treasury yield and the rupee. The rupee ended at 90.0175 per dollar on Thursday, falling below the psychologically crucial 90 mark to a day's low of 90.1300, which weighed on bond prices. Traders expect the 10-year benchmark yield to rise past 6.65% if the rupee falls to the next key level of 90.50 per dollar.    

 

Turnover in the gilts market was INR 328.40 billion Thursday, lower than INR 454.00 billion Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There was one trade worth INR 250 million conducted in the 6.48%, 2035 gilt using the RBI's wholesale e-rupee pilot Thursday. There were no trades using this method Wednesday.

 

OUTLOOK

On Friday, gilt prices will track the results of the weekly gilt auction, in which 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 in 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. However, some dealers expect investor demand to be tepid, as long-term investors have already met their requirements at the state bond auction this week. Demand for bond forward rate agreements is expected to be around INR 10 billion to INR 15 billion for the bond at auction, dealers said.  

 

Demand for the 15-year 6.68 40 paper is expected to be firm as some banks may buy it for their investment books after profit sales from these books to the RBI at OMO auctions. The bond's current yield is seen as attractive, dealers said. 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.

 

Gilts may also track the overnight movement in US Treasury yields at the open. 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 weekly unemployment data in the US due after Indian market hours Thursday, while US non-farm payrolls data for December is scheduled for release after Indian market hours Friday. The data comes ahead of the US Federal Open Market Committee's meeting scheduled for the end of this month.  

 

Market participants await the announcement of the possible 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 crude oil prices. Any development on the India-US trade deal may also influence bond prices. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.57-6.67% Friday.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.9300	6.6290%	99.0600	6.6105%
6.33%, 2035	97.9125	6.6321%	98.0150	6.6169%
6.01%, 2030	98.6600	6.3541%	98.7200	6.3383%
6.68%, 2040	96.4500	7.0755%	96.6375	7.0541%
6.90%, 2065	93.5500	7.4056%	93.8000	7.3848%

 

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India Gilts: Stay down in thin trade ahead of Fri auction; rupee fall weighs

 

	1535 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.94	99.08	98.90	99.06	99.06
YTM (%)	6.6283	6.6081	6.6329	6.6106	6.6105

 

MUMBAI--1535 IST--Prices of government bonds remained down in thin trade as traders placed short bets on gilts ahead of the fresh supply of INR 290 billion Friday, dealers said. A fall in the rupee below the psychologically crucial 90 per-dollar mark weighed on the bond market. Activity by foreign portfolio investors was muted, dealers said, unlike Wednesday when they net purchased gilts worth INR 15.06 billion through the fully accessible route.

 

"Some pressure in rupee so our market is also seeing some sell-off from higher levels, but it's stable now," a dealer at a state-owned bank said. "The 6.63% (yield on the 10-year benchmark 6.48%, 2035 gilt) level is holding. If that breaks, then we can see 6.65%." The rupee ended at 90.0175 per dollar at 1530 IST, from 89.8800 per dollar at the same time Wednesday.

 

The government will sell INR 160 billion of the 6.68%, 2040 gilt and INR 130 billion of the 6.90%, 2065 gilt Friday. The 6.68%, 2040 gilt was down 18 paise at INR 96.46 as traders placed short bets to make room for fresh supply, dealers said. Demand for the bond will depend mostly on state-owned banks, which were likely to have been buying the bond in the secondary market Wednesday and Thursday, dealers said. State-owned banks were likely buyers at the key 6.63% yield on the 10-year benchmark 6.48%, 2035 gilt as well, dealers said. In the "Reported Deals T+1" segment of the Reserve Bank of India's Negotiated Dealing System-Order Matching platform, trades worth INR 17.50 billion were reported in the 6.48%, 2035 bond, which were likely purchases from state-owned banks.  

 

Due to uncertainty on the price trajectory during the day, traders avoided heavy intraday positions and preferred to make trading calls based on a longer-term view, dealers said. Traders favoured spread trades, such as those between the former 10-year benchmark 6.33%, 2035 gilt and the 6.48%, 2035 gilt. Tight surplus liquidity deterred traders from aggressive bets, dealers said. The net liquidity absorbed from the banking system by the RBI--a proxy for the liquidity surplus--was INR 353.84 billion Wednesday, down from INR 801.34 billion Tuesday.

 

At 1530 IST, the turnover in the gilts market was INR 266.30 billion, lower than INR 363.75 billion at 1535 IST Wednesday, according to NDS-OM data. The yield on the 10-year benchmark gilt is seen at 6.60-6.65% for the rest of the day.  (Cassandra Carvalho)

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India Gilts: Fall on short sales before INR 290-bln weekly auction Fri

 

	1250 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.99	99.08	98.95	99.06	99.06
YTM (%)	6.6212	6.6081	6.6258	6.6106	6.6105

 

MUMBAI--1250 IST--Government bond prices fell as traders made room in their portfolios for the INR 290-billion weekly gilt auction Friday. Dealers said there were no view-based sales as they expect firm investor demand at the auction and the outlook for bond prices next week was positive ahead of India's expected inclusion on the Bloomberg's Global Aggregate Index. Trade volumes remained lacklustre due to a lack of fresh triggers.

 

The government will sell INR 160 billion of the 6.68%, 2040 bond and INR 130 billion of the 6.90%, 2065 gilt at the auction to be held between 1030-1130 IST, Friday. While traders are not keen to pile into long-term bonds, demand from life insurers has been persistent for the 40-year gilt near the 7.40% yield and with its spread over the 10-year benchmark yield at over 70 basis points. Pension funds are also seen investing in long-term bonds in large quantums in the March quarter after muted net purchases since August. Foreign portfolio investors are also taking view-based calls on the 2040 paper and are expected to buy the gilt at Friday's auction, dealers said.

 

Meanwhile, short sales in the 6.33%, 2035 bond continue to remain large as traders are avoiding covering those bets, though net additions were also not being made due to its lower liquidity. The bond's yield has slipped below that of the 10-year benchmark 6.48%, 2035 bond or has been at the same level for the past few days. Typically, the yield on the 10-year benchmark gilt – in this case the 6.48%, 2035 bond – is lower by 3-4 bps than the next most-traded security of a similar tenure due to its liquidity.

 

"The curve will be upward sloping or flattish between the 6.33%, 2035 paper and the benchmark until the OMOs (open market operations to buy bonds) are done," a dealer at a private-sector bank said. "There is constant hope that the old 10-year will be announced in the last OMO auction, and since traders don't have a large stock of it, it will be stuck right next to the new one (6.48%, 2035 paper)." The Reserve Bank of India will buy INR 500 billion worth of gilts at an OMO auction Monday, which does not include the 6.33%, 2035 bond, before another INR 500-billion auction is conducted on Jan. 22.

 

At 1250 IST, the turnover in the gilt market was INR 160.60 billion, lower than INR 221.90 billion at 1230 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 6.58-6.64% for the rest of the day.  (Aaryan Khanna)

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India Gilts: Steady in thin trade; view of firm investor demand aids

 

	0950 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	99.07	99.08	99.01	99.06	99.06
YTM (%)	6.6088	6.6081	6.6173	6.6106	6.6105

 

MUMBAI--0950 IST--Government bond prices were steady in thin trade. Some primary dealers' short sales before the INR 290-billion weekly gilt auction Friday weighed on gilt prices, but activity wasn't aggressive as demand from investors is seen firm at the auction, dealers said. 

 

"If US yields continue to fall before the labour market data, we would see some positive momentum and 6.60% (yield on the 10-year benchmark) being tested," a dealer at a private sector bank said. "Otherwise, that level looks tough to break and primary dealers will be shorting before the auction."

 

The 10-year US Treasury yield inched down to 4.14% from 4.15% at 1700 IST Wednesday, after falling 4 basis points the previous day. The US will release weekly unemployment data after Indian market hours Thursday, while non-farm payrolls data for December is scheduled for release after Indian market hours Friday. Both readings are seen key in moving US rate expectations, with nearly 90% of traders expecting the US Federal Open Market Committee to hold rates, according to the CME FedWatch tool.

 

Firm demand from investors in recent sessions have caused traders to limit their short sales with the view that bond prices would not fall from current levels, especially as the Reserve Bank of India is scheduled to conduct two INR 500-billion open market operation auctions until Jan. 22. Moreover, traders have begun betting on the inclusion of India's bonds on the Bloomberg Global Aggregate Index. The decision is expected to be announced next month. Goldman Sachs expects India's fully accessible bonds to have a 0.7% weightage on Bloomberg's flagship debt if it is included, leading to inflows of $10 billion-$20 billion, it said a note late Tuesday.

 

At 0950 IST, the turnover in the gilt market was INR 22.10 billion, lower than INR 33.80 billion at 0930 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 6.58-6.64% for the rest of the day.  (Aaryan Khanna)

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India Gilts: Seen steady on lack of fresh cues; traders look to auction Fri

 

MUMBAI – Government bond prices are seen opening steady due to lack of significant fresh cues. While some traders expect bond prices to rise after firm investor demand in previous sessions, others said they would trim their holdings Thursday to make room for the INR 290-billion weekly gilt auction Friday, dealers said.

 

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.58-6.64?ter ending at INR 99.06, or 6.61% yield Wednesday. Bonds ended on a mixed note Wednesday with the benchmark little changed, long-term bonds up in relatively thin trade, and the 6.33%, 2035 gilt down as it was not selected by the Reserve Bank of India for its next open market operation auction to buy bonds on Monday.

 

The 6.48%, 2035 bond may rise until its yield falls to the psychologically crucial 6.60% mark, around which traders may begin short selling bonds ahead of the auction for INR 160 billion of the 6.68%, 2040 gilt and INR 130 billion of the 6.90%, 2065 gilt, dealers said. 'Others' were the top net buyers of gilts Wednesday, a sign that life insurers and provident funds were adding to their portfolios rather than the RBI, dealers said. Some traders had speculated the central bank would buy gilts this week in the secondary market this week to replace the maturing 7.59%, 2026 bond, of which it owns around INR 400 billion.

 

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 robust at Friday's auction, and its cut-off price could be near secondary market levels, dealers said. Demand for the 2040 paper would hinge on banks' appetite. Dealers said if foreign portfolio investors are buying the 15-year gilt in the secondary market, as speculated Wednesday, they could also bid for the bond at auction through foreign banks.

 

US Treasury yields also did not move much overnight ahead of key labour market data on Thursday and Friday, with the 10-year US yield flat at 4.15% at 0800 IST from the level at the close of Indian market hours Wednesday. Traders await the US employment report for December for further cues ahead of the US Federal Open Market Committee's meeting scheduled for the end of the month.

 

The US will release the weekly unemployment data after Indian market hours Thursday, while non-farm payrolls data for December is scheduled for release after Indian market hours Friday. Market participants also 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 and bond prices already reflect optimism that India will be included. 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.  (Aaryan Khanna)

 

End

US$1 = INR 90.0175

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

 

Edited by Saji George Titus

 

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