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Informist, Tuesday, Jan. 13, 2026

By Janwee Prajapati

MUMBAI – Government bond prices ended sharply lower after Bloomberg Index Services Ltd. Tuesday said it was still reviewing India's inclusion in its flagship Global Aggregate Index, disappointing traders who had expected an inclusion to be announced this week, dealers said. Losses were limited through the day likely due to firm demand from banks at the key 6.63% yield level on the 10-year benchmark gilt, with the Reserve Bank of India also speculated to be buying in the secondary market since the last week.

Traders had been counting on a confirmation this week, expecting the move to trigger foreign inflows of around $20 billion–$25 billion into gilts in 2026, dealers said. The index provider said the feedback on India's eventual inclusion on the global investment grade benchmark was largely positive but respondents to the proposal flagged issues with operations and market infrastructure. Bloomberg Index Services said it would provide the next update by mid-2026. Benchmark gilts eligible for index inclusion under the fully accessible route were the worst hit, while other bonds fell relatively less.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.94, down from INR 99.10 Monday. The bond's yield ended at 6.63%, up from 6.61% Monday. The rise in the 10-year US Treasury yield to 4.20% at 1700 IST, up from 4.18% at the same time Monday, also weighed on bond prices, dealers said. 

"We had expected it (the 10-year yield) to fall (rise) till 6.65%...I don't think public-sector banks will buy at these levels," a dealer at a state-owned bank said. "If you see others figure is seen buying since some days…seems like some support from him (the RBI), otherwise prices would have fallen further." The 'others' segment -- which includes the RBI -- has net purchased INR 127.53 billion worth of gilts since Jan. 5 in the secondary market, according to data from the Clearing Corp. of India.

Of the stated figure, some buys could be attributed to insurance companies and pension funds, which are also part of the 'Others' segment. Confirmation of the central bank's purchases would come from weekly statistical data from the RBI. Any purchases made by the central bank last week will show in Friday's data. This week's purchases, if any, will show in data published on Jan. 23. Data for Monday showed 'Others' net bought INR 48.01 billion of gilts, which had led to gilt prices rising before Bloomberg's announcement around 1000 IST. 

Most traders speculated that the RBI bought gilts as a replacement for the 7.59%, 2026 bond that matured Sunday, of which the RBI held between INR 350 billion and INR 400 billion, dealers said. The RBI had purchased gilts worth INR 273 billion on screen in early November, around the time of maturity of the 5.15%, 2025 bond. A few traders still said the RBI's speculated bond purchases may not match the drawdown in its gilt portfolio as it was likely trying to influence bond yields lower. Traders speculated the central bank bought the 10-year benchmark 6.48%, 2035 gilt and the 15-year benchmark 6.68%, 2040 gilt in the secondary market.

The result of the state bond auction had little to no impact on gilt prices in the latter half of trade. The cut-off yield on the long-term papers were slightly lower than expected due to firm demand from insurers and pension funds, dealers said. State bonds having a maturity of over 20 years were swept in single digit bids, similar to previous auctions.

The short-term paper with maturity between six and 10 years were likely picked up by the banks after they sold bonds to the RBI at the INR-500-billion open market operation auction Monday, dealers said. The RBI set cut-off yields of 7.50-7.54% on states' 10-year bonds at the auction, the same as estimated in an Informist poll, while the cut-off yield of 7.61% on Telangana's 26-year bond, was lower than the poll estimate of 7.65%.

With FPI inflows unlikely in the near-term after the disappointment from the Bloomberg announcement, traders expect bond prices to slump the moment that the market does not have RBI support. With the RBI's replacement demand in the secondary market expected to last until the end of the week and another INR 500-billion OMO auction to purchase bonds scheduled Jan. 22, dealers expect bond yields to rise in the run-up to the Union Budget on Feb. 1. Traders widely expect the government to peg its gross borrowing aim for 2026-27 (Apr-Mar) at INR 16 trillion or more, compared with INR 14.72 trillion in the current fiscal. Bets on rate cuts at the Monetary Policy Committee's February meeting also remain tepid, dealers said. 

"I don't think he (RBI) will cut rates...he will let people expect a cut, but he will not use it until there is a dire situation," a dealer at another state-owned bank said. "I think the shorter end will see more pain now as we do not see any rate cut in the next meeting. Yields are only going to make new highs as the range will move up from 6.60-6.70% now to 6.70-6.80% (on the 6.48%, 2035 bond)."

The 6.33%, 2035 bond's yield remained less than the 10-year benchmark gilt at close, an unusual occurrence that has replicated itself in the last two weeks as traders kept up their expectation of the former being chosen by RBI for its next OMO auction. Some traders had expected the bonds for the auction to be announced after market hours Tuesday, while others expect the announcement by Friday. Dealers also cited the lack of volume in the erstwhile benchmark, which was merely around 10% of the total volume in 10-year benchmark 6.48%, 2035 gilt, as a reason for the unusual activity.

Turnover in the gilts market Tuesday was INR 522.20 billion, down from INR 587.25 billion Monday, 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 Tuesday for at least the third straight day.

OUTLOOK

On Wednesday, gilt prices may open steady due to a lack of firm domestic cues. The RBI's likely purchases to replace the 7.59%, 2026 bond that matured last week may lead to a rise in prices if its speculated buys in the secondary market continue, dealers said.

The overnight movement in US Treasury yields following the release of US CPI data may lend cues. US CPI inflation for December printed at 2.7% on year, in line with a Wall Street Journal estimate. With the 10-year US yield in the 4.10-4.20% range it has stuck to since early December, the overseas trigger may have a limited impact on gilt prices. Some traders are also eyeing the US Supreme Court's ruling on the legality of the tariffs levied by US President Donald Trump, a decision which is likely to be made Wednesday.

The rupee's movement against the dollar will also provide cues to bond prices, as will movement of 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 6.58-6.66% Wednesday.

India Gilts: Remain down; US Dec CPI, RBI Malhotra's interview awaited

MUMBAI--1609 IST--Prices of government bonds remained sharply down due to disappointment over Bloomberg Index Services delaying the inclusion of India's fully accessible route bonds into its flagship Global Aggregate Index. Caution ahead of US CPI inflation data for December limited aggressive trade, dealers said. Traders will also track the comments of Reserve Bank of India Governor Sanjay Malhotra in an interview with news channel NDTV Profit later in the day.

Traders avoided major positions nearing the end of trade ahead of US CPI inflation data for December, due post market hours Tuesday, dealers said. CPI is seen rising 2.7% on year in December, as per a poll by The Wall Street Journal. The yield on the benchmark 10-year US Treasury note inched higher to the psychologically crucial level of 4.20% ahead of the data print, from 4.18% at 0900 IST. 

The result of the INR-268.15-billion state bond auction was in line with consensus estimates, with longer-term bond cut-off yields lower than expected, on firm demand from investors such as pension funds and insurers, dealers said. The within-view cut-off yields came inspite of traders fearing that the announcement of the delay in index inclusion just before the auction would push state bond cut-off yields higher.

The RBI set cut-off yields of 7.50-7.54% on states' 10-year bonds at the auction, the same as estimated in an Informist poll. The central bank set a cut-off yield of 7.61% on Telangana's 26-year bond, lower than a poll estimate of 7.65%. Investor demand likely prevented the cut-off yields from being set higher, dealers said. Several state-owned banks are nearing their internal limits on holding state bonds and did not bid aggressively at the auction. 

After hopes of the index inclusion being announced this month faded, traders now expect the yield on the 10-year benchmark 6.48%, 2035 gilt to hit 6.65% in the near term and speculate that it could climb to about 6.80% by mid-2026. However, caution ahead of US CPI data limited a further fall in bond prices, along with firm purchases at the key 6.63% yield level, dealers said. Hopes of further open market operations, and on-screen purchases by the RBI deterred traders from selling gilts and short-selling bonds aggressively, dealers said. Traders who had covered short bets when prices rose earlier in the day also did not wish to sell bonds at current prices, and held on to their positions, dealers said. Several traders had also bought bonds at current yield levels earlier this month, some which is in investment books, they said.  

"There's no point in carrying short bets because at 6.70% (yield on the 10-year benchmark gilt), RBI will intervene, but there's also no point going long (buying gilts) also cause the one thing people were expecting to bring down yields was the Bloomberg inclusion," a dealer at a private sector bank said. "Only thing possible is play intraday but that too is risky, people are getting whipsawed."   

At 1530 IST, the turnover in the gilt market was INR 438.80 billion, higher than INR 396.25 billion at the same time Monday, 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 6.58-6.65% for the rest of the day. (Cassandra Carvalho) 

India Gilts: Remain dn; state bond cut-off yld seen higher as sentiment sours

MUMBAI--1353 IST--Prices of government bonds remained sharply down after Bloomberg Index Services delayed the inclusion of India's fully accessible route bonds into its flagship Global Aggregate Index. Traders were hoping for the inclusion to be confirmed this week, as the development was expected to bring foreign inflows of around $20 billion to $25 billion into gilts, dealers said. The delay in inclusion also impacted bidding at the state bond auction as traders now expect higher cut-off yields, dealers said.

"We had expected good demand from PSUs (public sector banks) at the auction," a dealer at a private sector bank said. "...Bloomberg news changed the outlook. Now I think everybody readjusted their bids accordingly." 

Demand for INR-268.15-billion supply of state bonds reduced after the delay in inclusion, and several traders revised their cut-off estimates. Banks bids for state bonds maturing in up to 10 years, while insurers and pension funds bid for papers maturing in more than 20 years at the auction, dealers said. Bidding for long-term bonds is seen firm, despite the delay in the index inclusion, dealers said. There was a sharp variation in estimates for shorter-tenure state bonds, with traders expecting at least a spread of 80 basis points over gilts of similar maturity and with some traders estimating an even higher cut-off yield, dealers said.

In the secondary gilts market, losses were limited as traders bought bonds when the 10-year benchmark 6.48%, 2035 gilt yield hit the psychlogically crucial level of 6.63%. Some traders preferred the 15-year 6.68%, 2040 bond due to a lucrative yield spread over the 10-year benchmark 6.48%, 2035 bond, dealers said. The spread between the erstwhile 10-year benchmark 6.33%, 2035 bond and the 6.48%, 2035 bond narrowed again as traders revived expectations of the former being chosen by the Reserve Bank of India for the next and last tranche of the INR-2.00-trillion open market operation auctions announced on Dec. 23, which will be conducted on Jan. 22, dealers said.

Nearing the end of trade, traders may refrain from placing aggressive bets ahead of US CPI inflation data for December, scheduled to be released post market hours Tuesday, dealers said. CPI is seen rising 2.7% on year in December, as per a poll by The Wall Street Journal.   

At 1330 IST, the turnover in the gilt market was INR 364.65 billion, higher than INR 186.50 billion at the same time Monday, 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 6.58-6.65% for the rest of the day. (Janwee Prajapati)

India Gilts: Reverse gains; Bloomberg delays India inclusion in flagship index

MUMBAI--1017 IST--Prices of government bonds reversed early gains after Bloomberg Index Services delayed the inclusion of India's fully accessible route bonds in its flagship Global Aggregate Index, dealers said. The index service provider said that it would continue to review Indian bonds, and that the next update on the inclusion of Indian bonds in the index would be in mid-2026. Bond traders were expecting the inclusion to be confirmed this week itself. 

"Fall (in bond prices) is because Bloomberg has delayed the inclusion. I think prices will fall further, but let's see if RBI comes to support the market," a dealer at a private sector bank said. 

Bond prices were sharply up in early trade Tuesday as traders picked up bonds on speculation that the Reserve Bank of India purchased gilts on-screen Monday, and may continue to do Tuesday, dealers said. This also limited losses when bond prices fell. The lower-than-estimated supply of state bonds at auction Tuesday had also aided bond prices. Some traders had likely covered short bets when bond prices rose.  

Some traders speculated that the central bank purchased gilts on-screen to replace the 7.59%, 2026 bond which matured Sunday. The RBI had purchased gilts on-screen in early November, around the time of maturity of the 5.15%, 2025 bond. Some speculated the on-screen buys were a yield management move. The 'others' segment of gilt market participants has net purchased INR 127.53 billion worth of gilts since Jan. 5. Of this figure, some buys could be attributed to insurance companies and pension funds, and confirmation of the central bank's purchases would come from weekly statistical data from the RBI. Any purchases made by the central bank last week will show in Friday's data. Monday's purchases, if any, will show in data published on Jan. 23. 

At the state bond auction Tuesday, 11 states aim to raise INR 268.15 billion Tuesday, lower than INR 361.90 billion indicated in states' borrowing calendar for Jan-Mar. Traders expect demand to be firm from banks after they sold gilts to the RBI at the OMO auction Monday, dealers said. Most banks will likely favour state bonds maturing from 6-10 years as they look to replenish their held-to-maturity books with high-yielding state bonds, dealers said. However, several banks are already reaching their internal limits on holding state bonds, which may deter aggressive bidding, dealers said.

At 1017 IST, the turnover in the gilt market was INR 237.55 billion, higher than INR 41.75 billion at 1030 IST Monday, 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 6.56-6.67% for the rest of the day. (Janwee Prajapati)

India Gilts: Seen up on speculation of RBI onscreen buys, likely FPI flows

MUMBAI – Prices of government bonds are seen opening higher Tuesday after the 'others' category of bond market participants, which consists of the Reserve Bank of India, insurance companies and provident funds, was the largest net buyers of gilts Monday, with net purchases worth INR 48.01 billion. Traders speculate that the central bank was purchasing gilts on-screen. Traders also expect foreign portfolio investors to buy gilts ahead of the possible inclusion of Indian gilts in Bloomberg's flagship Global Aggregate Index, dealers said.

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.55-6.63% after ending at INR 99.10, or 6.61% yield Monday. Traders will watch out for indications of purchases by the RBI on-screen, after speculation that the central bank bought the 10-year benchmark gilt Monday. The 'others' segment of gilt market participants has net purchased INR 127.53 billion worth of gilts since Jan. 5. Initially, traders had speculated that these were purchases by insurance companies. However, with the redemption of the 7.59%, 2026 gilt on Sunday, some speculate that the RBI could've bought gilts to replenish its book, even as the central bank is buying gilts through open market operation auctions. The central bank owned around INR 350 billion to INR 400 billion of the bond, according to market participants. Data released Friday showed that the RBI bought gilts worth INR 500 million in the secondary market in the week ended Jan. 2.

Optimism on prospects of the inclusion of India's fully accessible route bonds in Bloomberg's flagship Global Aggregate Index may buoy prices, as the announcement is expected this week. Foreign portfolio investors pumped in INR 11.64 billion into gilts via the fully accessible route Monday, according to data from Clearing Corp. of India. Additionally, Bloomberg Monday reported that the Singapore Exchange is considering the introduction of bond futures tied to some Asian government bond markets, including that of India, a move seen raising foreign inflows into gilts, dealers said. 

Traders have mixed views on the impact of a possible US-India bilateral trade deal on gilts, but the subsequent rise in the rupee against the dollar in case such a deal is struck would be positive for bond prices in the near term, and traders await an announcement of the same, dealers said. A commerce ministry official Monday told Informist that there are no trade talks scheduled with the US this week, even as US Ambassador to India Sergio Gor claimed that the next call on the India-US Bilateral Trade Agreement will be held on Tuesday.

Traders will also track the result of the INR 268.15-billion state bond auction Tuesday, which is seen sailing through due to its lower-than-estimated size. Banks that have sold gilts from their held-to-maturity books to the RBI at open market operation auctions since last month are seen purchasing higher-yielding state bonds to replenish their books, dealers said. However, several banks are already reaching their internal limits on holding state bonds, which may deter aggressive bidding, dealers said. (Cassandra Carvalho)

End

US$1 = INR 90.19

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

Edited by Deepshikha Bhardwaj

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