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Informist, Thursday, Jan. 22, 2026

By Janwee Prajapati

MUMBAI – Government bond prices ended higher on hopes that the Reserve Bank of India would this week announce more open market operation auctions to buy bonds, dealers said. Traders also speculated that the RBI was buying bonds on-screen for the fourth day running, propping up gilt prices.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.89, up from INR 98.76 Wednesday. The bond's yield ended at 6.64%, against 6.65% Wednesday. The result of Thursday's INR 500-billion OMO auction did not have a significant impact on bond prices, though the delay in the announcement led to an extension of the trading period to 1730 IST for Thursday. The result itself elicited mixed views from dealers.

The RBI bought INR 199.60 billion of the 6.67%, 2035 bond at the OMO auction, in line with market expectations. This is expected to boost replacement demand for the most-traded 10-year benchmark 6.48%, 2035 gilt. The RBI also bought INR 136.20 billion of the 7.10%, 2029 paper and INR 107.17 billion of the 7.57%, 2033 paper, close to market expectations. The three gilts together accounted for about 89% of the total accepted amount, which was the same as the notified amount. However, the cut-off prices on most bonds were lower than expected, compared with the median of an Informist poll. Only the cut-off prices set on the 7.54%, 2036 and the 7.09%, 2054 gilts were higher than expected, as in earlier OMO purchases, dealers said.

"Cut-offs are lower than the expected levels in price terms," said a dealer at a private-sector bank. "(Cut-off) prices are lower than the FBIL (Financial Benchmarks India Ltd.) levels. Some selling only because of the result. Prices are supported only because the 'Others' segment buys, otherwise it would have slipped further."

Data from the Clearing Corp. of India showed that "Others", a category that includes the central bank, net bought INR 33.19 billion in Wednesday's session after buys worth over a cumulative INR 50 billion across Monday and Tuesday. The purchases likely continued across bonds Thursday, dealers said. Despite the rise in prices, traders avoided short-selling bonds or taking profits aggressively as speculation of an imminent announcement of further OMO auctions was rife. Some traders expected it Thursday while others said the central bank may make the announcement after market hours Friday.

The expected quantum of such an announcement is between INR 1 trillion and INR 2 trillion, spanning February. If the announcement in not made this week, then the RBI may delay further durable liquidity infusions until the Monetary Policy Committee meets in the first week of February, dealers said.

Some traders also stocked up on state bonds on the expectation that these securities will be included in the RBI's next OMO announcement, a longstanding demand of the market. Most banks, including public-sector lenders, are looking to lighten their portfolios of these securities after stocking up because of the robust supply this year, dealers said. The RBI had last bought state bonds through OMO auction during the COVID-19 pandemic in Oct-Dec 2020.

"Prices are up because they (traders) are expecting the announcement (of another OMO) today, after this OMO is done," a dealer at a state-owned bank said. "If it (another OMO) is announced today, it could be somewhere between (INR 1 trillion-INR 2 trillion) in February alone. Some traders are also expecting SDL (state bonds) in the next OMO."

The spread of state bonds over gilts may fall if the RBI takes such a step. The central bank could also buy a mix of state bonds and gilts, dealers said. However, RBI Governor Sanjay Malhotra had said after the December monetary policy review that the central bank would not buy state bonds through OMOs.

The erstwhile 10-year benchmark 6.33%, 2035 bond rose slightly more than the current benchmark as traders reinstated their hopes of the paper being chosen for the next OMO auction, dealers said. Some traders also expect the RBI to buy the erstwhile 15-year benchmark 6.92%, 2039 bond. The current 15-year benchmark 6.68%, 2040 bond outperformed other gilts as, in addition to that speculation, some traders bet on its spread over the 10-year benchmark gilt--at 46 basis points Wednesday--contracting.

The central bank was not focusing on purchases of the 6.48%, 2035 gilt alone but also on the five-year and 15-year benchmark bonds, dealers said. Both bonds have seen an increase in trading volumes this week. Foreign portfolio investors and corporate entities likely bought gilts, and some traders covered short bets, on expectations of prices rising further if OMOs are announced.

"I think the yields will remain between 6.58-6.68% now on the 10-year 6.48%, 2035 bond," a dealer at a primary dealership said. "Market has already tested 6.70% levels and it did not sustain... everything was bad, UST (yield on the benchmark 10-year US Treasury) rose past 4.30%, rupee fell to a new low, still the 6.70% was protected."

Turnover in the gilts market Thursday was INR 430.95 billion, down from INR 522.20 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 ninth successive session.

OUTLOOK

On Friday, gilt prices may open steady ahead of the INR 330 billion weekly gilts auction. A reduction in the "Others" net buys Thursday may weigh on gilt prices, dealers said. Gilts may also be influenced by the overnight movement in US Treasury yields.

The government will sell INR 90 billion of a new 2029 bond, INR 110 billion of a new 2033 bond, and INR 130 billion of the 7.24%, 2055 bond Friday. The seven-year bond will likely remain in focus after the yield on the 6.28%, 2032 paper ended 1 bp higher than the 10-year benchmark paper, making it lucrative for asset-liability managers. The 30-year paper is likely to attract firm demand from life insurers and pension funds, dealers said.

"Others"--a category that includes the RBI--net purchased gilts worth INR 19.62 billion in the secondary market Thursday, according to Clearing Corp. of India data released after market hours. The pace was slower than the INR 83 billion that this segment net bought Mon-Wed, which bond traders largely attribute to the central bank.

Meanwhile, 15 states will raise INR 398 billion through bonds Tuesday, the RBI said in a release Thursday. While the amount is lower than the amount of INR 473 billion indicated for the week in the Jan-Mar calendar, the large supply may lead investors to delay their purchases of gilts, dealers said. 

Traders are also keenly tracking the Union Budget for the financial year 2026-27 (Apr-Mar), which will be presented Feb. 1. The Centre's gross borrowing aim is expected to be between INR 16 trillion and INR 17 trillion, compared with INR 14.72 trillion for FY26. A number higher than expected may weigh on bond prices while an increase in funding through Treasury bills or small savings and a gross borrowing number below INR 16 trillion would boost bond prices, dealers said. Bets on rate cuts at the Monetary Policy Committee's February meeting remain muted.

Any development on the India-US trade deal may also influence bond prices. Significant movements in the five-year OIS rate, the rupee, and in crude oil prices may also lend cues, dealers said. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.60-6.70% Friday.

India Gilts: Mkt hours extended to 1730 IST on delay in OMO auction result

NEW DELHI--1719 IST--Trading hours in the order matching and reporting segments for government bonds were extended to 1730 IST on Thursday, according to a notification from the Clearing Corp. of India. The extension was likely due to the delay in the result of the Reserve Bank of India's open market operations auction, dealers said. 

"There was a lot of confusion. First OMO result came so late then we are able to trade (beyond 1700 IST) without any notification," a dealer at a state-owned bank said. Gilt market timings are usually 0900-1700 IST, but traders were able to put bids and offers past the official close, despite the lack of notification, which came after the usual market hours. 

The OMO auction result was released at 1650 IST. It did not have a significant impact on gilt prices, which remained higher on expectations of further RBI OMOs in the primary and secondary market, dealers said.  (Aaryan Khanna)

India Gilts: Remain up on speculation of RBI buys, hope of OMO notice

MUMBAI--1625 IST--Government bond prices remained higher on speculation that the Reserve Bank of India was buying gilts on-screen and would announce another open market operation auction to buy bonds after market hours. Gilts hit fresh intraday highs after traders speculated the central bank bought bonds across tenures, dealers said. Gains were limited because some traders took profits as the yield on the 10-year benchmark 6.48%, 2035 bond approached 6.63% and before the result of the INR 500-billion OMO auction conducted Thursday.

"People are more focused on the next OMO announcement now, I don't think the result (of Thursday's OMO auction) will have any significant impact," a dealer at a primary dealership said. "...the 2029, 2035, and 2033 paper could come better than market levels."

The RBI had offered to buy seven gilts--the 7.10%, 2029; the 6.10%, 2031; the 7.57%, 2033; the 6.19%, 2034; the 6.67%, 2035; the 7.54%, 2036; and the 7.09%, 2054 gilts--at auction 0930-1030 IST. This was the final tranche of the INR 2-trillion worth of OMO auctions announced on Dec. 23.

Traders expect another series of OMO auctions worth INR 1.00 trillion to INR 2.00 trillion by the end of February, with scope for more in March. Some traders are also expecting the central bank to buy state bonds at future auctions, a longstanding market demand. After the December policy meeting, RBI Governor Sanjay Malhotra had said the central bank would not buy state bonds through OMOs.

"This time the price action doesn't show RBI but 'Others' daily data is showing buys," a dealer at a state-owned bank said. "Earlier when RBI bought it showed in the price action. Now it's not showing. If weekly data doesn't show (RBI buys) there will be a huge sell-off."

Traders attributed this to the central bank not focusing on purchases of the 6.48%, 2035 gilt alone but also on the five-year and 15-year benchmark bonds. Both bonds have seen an increase in trading volumes this week. "Others", a category that includes the RBI, net purchased gilts worth over INR 80 billion in the secondary market Mon-Wed, Clearing Corp. of India data showed. The erstwhile 10-year benchmark 6.33%, 2035 bond outperformed the current 10-year benchmark 6.48%, 2035 bond as traders reinstated their hopes of the paper being chosen for the next OMO, dealers said.

At 1625 IST, turnover in the gilts market was INR 375.30 billion, lower than INR 438.60 billion at 1630 IST Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.60-6.68%.  (Janwee Prajapati)

India Gilts: At day's high on expectation of INR-1-tln OMO announcement

MUMBAI--1329 IST--Government bond prices rose to the day's high on expectations of the Reserve Bank of India announcing liquidity infusions through further open market operation auctions of at least INR 1.00 trillion, dealers said. They expect the central bank to make the announcement post market hours Thursday or Friday.

Several investors such as foreign portfolio investors and corporate entities were buying gilts, and some traders covered short bets, on expectations of prices rising further if OMOs are announced, they said. Some traders speculated that the central bank was purchasing the benchmark 10-year 6.48%, 2035 gilt Thursday.

Traders expect more OMO auctions, anywhere between INR 1.00 trillion to INR 2.00 trillion, till the end of February, with scope for more in March. Some traders also expect the RBI to announce liquidity infusions through dollar-rupee buy-sell swap auctions, though this could be negative for bond prices since traders expect reduced bond supply because of OMO auctions. However, any liquidity infusion is viewed as a positive as system-wide liquidity remains tight. The net liquidity injected in the banking system by the RBI--a proxy for the liquidity deficit--was INR 61.21 billion Wednesday, against INR 721.31 billion net absorbed on Tuesday.

"Today is the last OMO right, today (Thursday) or tomorrow (Friday) RBI will announce something (liquidity measures)," a dealer at a state-owned bank said. "People are riding on this optimism that OMO will come, because these are good levels to buy if you expect OMOs."

Traders were front-running any such announcement of liquidity infusion measures by the RBI, dealers said. Some picked up the erstwhile 10-year benchmark 6.33%, 2035 gilt on hopes that the RBI would include it in further OMOs. Some traders speculated that the central bank bought gilts on-screen Thursday as well, even as the 10-year benchmark yield was much lower than the key 6.70% level which the RBI seems to have targetted earlier, dealers said. Traders said the central bank is nudging bond yields lower, instead of just preventing them from hitting one specific level. The central bank was most likely uncomfortable with the heavy amount of short sales traders had placed on gilts, they said. Gains were capped as traders booked profit near the 6.63% yield on the 10-year benchmark gilt, the lowest yield in little more than a week.

Traders await the result of the last scheduled OMO auction Thursday, wherein cut-off prices are seen near prices indicated by Financial Benchmarks India Pvt. Ltd. At 1329 IST, turnover in the gilt market was INR 235.40 billion, similar to INR 293.15 billion at 1330 IST Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.60-6.68%.  (Cassandra Carvalho)

India Gilts: Up, some gains erased on profit-booking; OMO tenders seen mixed

MUMBAI--0938 IST--Prices of government bonds were up on optimism about support from the Reserve Bank of India through on-screen purchases and further open market operation auctions, after the market segment including the central bank net bought gilts worth nearly INR 80 billion in the secondary market from Monday to Wednesday. 

However, some gains were erased as traders booked profits with the yield on the benchmark 10-year 6.48%, 2035 gilt hitting the key 6.65% level, the lower end of the recent trading range. At the INR-500-billion open market operation auction on Thursday, tendering is seen largely at prices indicated by Financial Benchmarks India Pvt. Ltd. Wednesday. Some traders will tender at prices 5 to 10 paise below those indicated, in an attempt to clear their held-to-maturity books at a profit and replenish them with higher-yielding securities, dealers said. However, most of the papers the RBI has chosen to buy at this auction are not 'in-the-money' or profitable for several traders, and dealers do not expect tendering to be sharply below indicative prices. Tendering is seen in the largest size for the 7.10%, 2029 and 6.67%, 2035 papers. The cut-off price could be much lower than estimated on the 2029 paper, and above indicated on the 7.09%, 2054 gilt, dealers said.

"There won't be that much tendering because people don't have most of these bonds," a dealer at a state-owned bank said. "The 7.10%, 2029 is the most popular, so that might see some under-cutting, but whoever has these bonds also, don't have it in profit."

Bond prices may rise later in the day after tendering at the OMO auction ends, and after the result is published, dealers said. Traders will track the movement of the rupee, after the local currency appreciated slightly against the dollar in early trade. 

At 0938 IST, the turnover in the gilt market was INR 26.25 billion, similar to INR 27.90 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 6.60-6.70% for the rest of the day.  (Cassandra Carvalho)

India Gilts:Seen up on view of continued RBI buys on-screen, via OMO auctions

MUMBAI – Prices of government bonds are seen higher at open Thursday due to continued speculation of support from the Reserve Bank of India to deter a further rise in bond yields through gilt purchases both on-screen and through open market operation auctions, dealers said. The 'others' segment of bond market participants, which includes the central bank, net purchased gilts worth INR 33.19 billion Wednesday, taking the segment's total purchases so far this week to nearly INR 80 billion, as per data from Clearing Corp. of India. 

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.60-6.70% after ending at INR 98.76, or 6.65% yield on Wednesday. The 10-year US Treasury yield eased to 4.26% at 0820 IST, from 4.28% at 1700 IST Wednesday, hitting a low of 4.24% overnight after US President Donald Trump walked back on his threats to impose tariffs over his wish to purchase Greenland. 

Traders speculate that the RBI has been buying gilts on-screen since Monday, and likely did so last week as well. Weekly data to be released by the central bank Friday will confirm any such purchases made on-screen last week. Traders speculate that amid a depreciating rupee and elevated global bond yields, the RBI is trying to prevent a rise in the 10-year benchmark 6.48%, 2035 bond yield to the psychological 6.70% level. 

Traders will also take cues from the result of the INR-500-billion open market operation auction Thursday. The RBI has chosen to buy seven gilts – the 7.10%, 2029; the 6.10%, 2031; the 7.57%, 2033; the 6.19%, 2034; the 6.67%, 2035; the 7.54%, 2036; and the 7.09%, 2054 gilts. This is the final tranche of the INR 2 trillion worth of OMO auctions announced on Dec. 23, and traders expect an announcement of at least INR 1 trillion more of OMOs Thursday or Friday. 

Traders will watch out for purchases by foreign portfolio investors and foreign banks after FPIs net purchased gilts worth INR 3.50 billion through the fully accessible route Wednesday. Significant movements in the rupee against the dollar and the five-year overnight indexed swap rate will also lend cues, dealers said.  (Cassandra Carvalho)

End

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

Edited by Rajeev Pai

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