More Stories

Informist, Tuesday, Feb. 10, 2026

 

MUMBAI – Calculation of purchases and sales of government bonds by institutions as derived from Clearing Corp. of India Ltd. data is as follows:

 

Participants	Percentage of volume		Net buy/sell*@  (INR billion)
	Buy %	Sell %
Foreign banks	21.43	20.04	7.92
Public sector banks	14.57	13.83	4.19
Private sector banks	27.29	27.60	(-)1.74
Mutual funds	2.07	6.20	(-)23.37
Others#	14.32	17.57	(-)18.42
Primary dealers	20.31	14.76	31.42

 

* = Calculated according to percentage buy/sell. Minus (-) sign indicates net sell.

@ = For central government securities, including special bonds.

# = Others include insurance companies, provident funds, and the Reserve Bank of India.

 

Note: The daily net buy/sell amount is calculated by multiplying the total secondary market volume of government bonds by the net buy/sell percentage for each category.  (Shaheed Shaikh and Vaishali Tyagi)

---

India Gilts Review: Sharply up as investors absorb large state bond supply

 

MUMBAI – Government bond prices ended sharply higher after investors absorbed the huge supply of state bonds at lower-than-expected cut-off yields at the auction Tuesday, dealers said. Traders who had built up short bets since Monday covered them aggressively with banks and long-term investors both showcasing their appetite for state bonds.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.27, sharply up from INR 98.06 Monday. The bond's yield closed at 6.7246% from 6.7559% the previous day. The 10-year and the 15-year benchmark 6.68%, 2040 bond were among the biggest gainers Tuesday as traders covered their intraday short positions after the auction results, dealers said. 

The cut-off yields on states' 10-year bonds were set at 7.54-7.59%, against the 7.57-7.62% median in an Informist poll. Gilt prices had been under pressure since the state bond auction ended, a sign that traders were betting on poor results. States accepted bids for only INR 476.20 billion worth of bonds, lower than the notifed INR 486.15 billion. Traders saw the results as a sign of healthy investor appetite, with the slightly lower supply aiding gilt prices, dealers said. 

 

"After what happened to the 40-year (benchmark) gilt on Friday, people were worried that we may see a repeat of it for states," a dealer at a foreign bank said. "While that didn't happen, yields on most of these 10-20-year bonds are a bit higher than last week, so I don't think it is that good a result where the market should have rallied." On Friday, the RBI had set the cut-off on the 6.90%, 2065 gilt at INR 92.53, or 7.49% yield, against INR 92.85, or 7.47% yield in an Informist poll.

 

The increase in supply led opportunistic investors to demand higher returns to mop it up. The Reserve Bank of India set the cut-off on Telangana's 27-year bond at 7.75%, compared with 7.61% for Tamil Nadu's 30-year issuance last week. Assam's 20-year bond drew a cut-off of 7.87%, 20 basis points above the cut-off for West Bengal's paper of similar maturity last week.

 

Banks were keen to replenish their held-to-maturity portfolios with state bonds after selling gilts to the Reserve Bank of India at open-market operation auctions, which totalled INR 4 trillion between December and Thursday. Most banks have removed or increased internal limits on buying state bonds to maximise interest income from higher-yielding securities, dealers said. For this, banks favour bonds maturing up to seven years, but with a paucity of supply in that segment at this week's auction, they picked up state bonds maturing up to 20 years. 

 

However, the five-year benchmark 6.01%, 2030 gilt underperformed other bonds throughout the day. Some traders received the five-year overnight indexed swap rate and sold the gilt, while others placed short bets to make room for the supply of the new 2031 gilt, which will be auctioned Friday, they said. In the "WhenIssued (NewIssues)" segment of the RBI's Negotiated Dealing System-Order Matching platform, the new 2031 bond – which is likely to take over as the benchmark five-year gilt by April – was traded at 6.37%.

 

Dealers were also worried that the RBI would conduct a variable-rate reverse repo to push up the weighted average call rate, which has remained near the lower end of the Liquidity Adjustment Corridor at 5.00%, towards the policy repo rate of 5.25%. Others speculated an Operation Twist – an open market operation to buy long-term bonds while selling short-term gilts. Banks have discussed such an action with the RBI to flatten the yield curve, bringing down term premia and aiding transmission of rate cuts to long-term rates, dealers said. However, several traders said such an action – last conducted in 2021 in the aftermath of the COVID-19 pandemic – was unlikely.

 

"I don't think term spreads are at an alarming level. Moreover, the RBI has already done a lot for bonds and liquidity," a dealer at a primary dealership said. "I don't think it is required and more discussion will be needed before an Operation Twist will see the light of day."

 

This was discussed in the run-up to the Monetary Policy Committee's rate decision last week, but was seen as rebuffed by the RBI's lack of action on liquidity in its policy statement. These talks have gained steam this week after the demand for the 40-year gilt at auction Friday was worse than expected, dealers said. 

 

Bond prices had opened higher due to ample liquidity in the banking system and a fall in US Treasury yields, which aided gilts, though caution ahead of the state bond auction result dragged down prices of all bonds after bidding ended at 1130 IST. The yield on the 10-year US Treasury note was 4.18% at 1700 IST Tuesday, down from 4.24% at the same time Monday. The 10-year US yield fell below the key 4.20% level ahead of US CPI data and the January employment report later this week. Meanwhile, the net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – rose to INR 3.11 trillion Monday from INR 2.97 trillion Sunday, according to the latest data.

 

Turnover in the gilts market Tuesday rose to INR 522.10 billion from INR 433.05 billion Monday, 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 Tuesday, as against six trades worth INR 350 million in the previous session.

 

OUTLOOK

On Wednesday, bond prices may open steady due to a lack of significant domestic cues. Some traders are likely to continue to pick up gilts after the rise in prices Tuesday, while others may make room for the fresh supply at the weekly gilt auction Friday, dealers said. The government will sell INR 180 billion of a new five-year, 2031 gilt and INR 130 billion of the 7.43%, 2076 bond at the auction.

 

Traders do not expect further liquidity infusion from the RBI and open market operation auctions to buy bonds after the comments of central bank officials following the MPC decision Friday. No further rate cuts are likely to be forthcoming from the rate-setting panel in the remainder of 2026, dealers said. This is likely to keep the 10-year gilt yield in a band of 6.60-6.85% till March, they said.

 

The RBI is expected to continue buying gilts sporadically in the secondary market to signal a cap on yields, dealers said.  Traders will also track the liquidity conditions in the banking system, which rose to a six-month high of INR 3.62 trillion on Friday and has remained in hefty surplus since.

 

Significant movement in US Treasury yields, the rupee and crude oil prices may also lend cues, dealers said. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.67-6.77% Wednesday. (Aaryan Khanna)

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.2725	6.7246%	98.0550	6.7559%
6.33%, 2035	97.4400	6.7044%	97.1900	6.7417%
6.01%, 2030	98.7150	6.3451%	98.6625	6.3588%
6.68%, 2040	95.8000	7.1508%	95.4650	7.1896%
6.90%, 2065	92.1600	7.5232%	91.9700	7.5395%

 

---

India Gilts: Hit day's high on short covering post state bond auction result

 

	1620 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.22	98.28	97.99	98.10	98.06
YTM (%)	6.7321	6.7235	6.7657	6.7494	6.7559

 

MUMBAI--1620 IST--Government bond prices reversed losses from earlier in the day and hit the day's high after traders reacted to the result of the state bond auction. Investors picked up the largest bond supply in 10 months at lower-than-expected cut-off yields on most bonds, prompting traders to cover their short sales on gilts, dealers said.

 

The cut-off yields on states' 10-year bonds were set at 7.54-7.59%, against the 7.57-7.62% median in an Informist poll of nine bond dealers. Gilt prices had been under pressure since the bidding for the state bond auction ended, a sign that traders were betting on a poor result. However, traders saw the result as a sign of healthy investor appetite, though states accepted bids for only INR 476.20 billion worth of bonds, lower than the notifed INR 486.15 billion.

 

"The movement in the market is not broad-based, it is concentrated in the 10- and 15-year papers," a dealer at a primary dealership said. "Since there is no further negative after the state bond auction, the (10-year gilt) yield looks like it will settle down, so traders are covering (short sales)."

 

Cut-off yields on the 14-18 year state bonds were especially encouraging due to the supply concentrated in those segments and typically with no natural demand, dealers said. Some provident funds were also speculated to be picking up long-term bonds after having avoided buying the 40-year benchmark gilt at auction the previous week. Banks had bid for state bonds maturing under five years, but the five-year benchmark 6.01%, 2030 gilt has underperformed through the day ahead of its auction Friday, dealers said.

 

Trade volumes also spiked following the result. At 1620 IST, the turnover in the gilt market was INR 445.20 billion, higher than INR 392.15 billion at 1630 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 6.70-6.80% for the rest of the day. (Aaryan Khanna)

---

India Gilts: Most inch lower in thin trade; state bond auction result awaited

 

	1301 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.03	98.14	98.00	98.10	98.06
YTM (%)	6.7599	6.7444	6.7639	6.7494	6.7559

 

	1301 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.01%, 2030
PRICE (INR)	98.61	98.72	98.58	98.72	98.66
YTM (%)	6.3728	6.3438	6.3808	6.3438	6.3588

 

MUMBAI--1301 IST--Prices of most government bonds, including the 10-year benchmark 6.48%, 2035 bond, inched lower after largely trading in a thin band as traders awaited the result of the INR-486.15-billion state bond auction. Traders will closely track the quantum states will raise at the auction, with the notified size already higher than indicated in the Jan-Mar state borrowing calendar and the largest since March, and some states providing for a greenshoe option, dealers said. 

 

At the state bond auction, state-owned banks and some mutual funds bid for bonds maturing in up to seven years, dealers said. Such papers provided high yields for investment books while reducing the tenure of portfolios, they said. Long-term investors such as insurance companies and pension funds bid for ultra-long term state bonds, albeit at higher yields. Long-term investors preferred state bonds over gilts due to higher yields, and were not as aggressive in bidding for the 6.90%, 2065 bond at last week's gilt auction, dealers said. A few banks were interested in purchasing high-yielding bonds of states viewed as having lower fiscal strength, in tenures of nine to 20 years. However, most traders said there was tepid demand for such tenures.

 

"Punjab 12-year (bond) will definitely come above 7.80% (cut-off yield)," a dealer at a state-owned bank said. "That would be a good addition for investment book."

 

In the secondary market, some state-owned banks purchased gilts at the key 6.75% yield level on the benchmark 10-year bond, dealers said. The 6.33%, 2035 bond was up in thin trade as traders covered short bets in the bond--unwinding spread trades placed in the bond--and continued to favour the bond after the Reserve Bank of India set a cut-off price sharply higher than expectations on the bond at the last open market operation auction, dealers said.

 

The five-year benchmark 6.01%, 2030 bond was down inspite of ample liquidity in the banking system. Some traders received fixed rate contracts in the five-year overnight indexed swap rate and sold the gilt, while some placed short bets to make room for the new 2031 gilt which will be auctioned Friday, they said. In the "WhenIssued (NewIssues)" segment of the RBI's Negotiated Dealing System-Order Matching platform, the new 2031 bond was last traded at 6.39%.

 

"We've already seen the impact of the heavy supply (of state bonds) on Monday, so today (Tuesday) people are just waiting for the result," a dealer at another state-owned bank said. "I think there's no concrete trade until that comes, that (state bond result) will probably lend direction (to bond prices) for the rest of the week."

 

At 1301 IST, the turnover in the gilt market was INR 190.60 billion, lower than INR 209.05 billion at 1230 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 6.70-6.80% for the rest of the day. (Cassandra Carvalho)

---

India Gilts: Up on ample liquidity, OIS, US yld fall; state bond sale eyed

 

	0930 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.10	98.12	98.04	98.10	98.06
YTM (%)	6.7494	6.7469	6.7581	6.7494	6.7559

 

MUMBAI--0930 IST--Prices of most government bonds were slightly higher Tuesday due to ample liquidity surplus in the banking system, coupled with an overnight fall in the 10-year US Treasury yield to below the key 4.20% level, dealers said. A fall in the five-year overnight indexed swap rate also aided the rise, dealers said. Gains were tempered ahead of the INR-486.15-billion state bond auction, the largest since March, dealers said.

 

The five-year overnight indexed swap rate fell to 6.15% from 6.18% Monday. Swap rates fell due to a fall in US yields and ample liquidity in the banking system, aiding bond prices, dealers said. The yield on the 10-year US Treasury note was 4.19% at 0930 IST, down from 4.24% at 1700 IST Monday ahead of the release of a slew of economic data in the world's largest economy. On the domestic front, the net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 3.11 trillion Monday, up from INR 2.97 trillion Sunday.

 

"The liquidity is the main driver for OIS and G-sec yields," a dealer at a state-owned bank said. "There is comfortable liquidity and the call and TREPS rates are very low. And then the 10-year US yield is also coming down below the 4.20% level which is helping the receiving in OIS and buying in G-sec. But I don't see this receiving sustaining if RBI announces a VRRR (variable rate reverse repo) operation, then everything will get paid." The weighted average call money rate--which is the Reserve Bank of India's operating target--was 5.10% Tuesday, lower than the repo rate of 5.25%, while the weighted average in the broader triparty repo market was 4.32%, sharply below the Standing Deposit Facility rate of 5.00%.

 

However, gains were capped as traders placed short bets to make room for fresh state bond supply Tuesday. Demand for state bonds is seen poor for the rest of the March quarter as states are seen borrowing the entire indicated amount of INR 5 trillion for the quarter, dealers said. Earlier, traders were expecting states to undershoot the INR-5-trillion target, as states have undershot the Jan-Mar calendar by nearly INR 500 billion through the first five weeks of the quarter.

 

At 0930 IST, the turnover in the gilt market was INR 21.10 billion, lower than INR 34.60 billion at 0930 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 6.70-6.82% for the rest of the day. (Cassandra Carvalho)

---

India Gilts: Seen tad higher on US yld fall; large state bond supply to weigh

 

MUMBAI – Prices of government bonds are seen opening slightly higher Tuesday, tracking an overnight fall in the 10-year US Treasury yield to below the key 4.20% level, but the gains are seen short-lived ahead of the largest supply of state bonds since March, dealers said. Fourteen states will raise INR 486.15 billion on Tuesday, higher than INR 427.50 billion in the indicative calendar for Jan-Mar. Traders now expect states to borrow the full indicated amount of INR 5 trillion in the March quarter, with supply expected to ramp up in the coming weeks to make up for the lower supply so far, dealers said. Through the first five weeks of the quarter before Tuesday's auction, states have undershot the calendar by nearly INR 500 billion.

 

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.70-6.82% yield Tuesday after ending at INR 98.06, or 6.76% yield Monday. The yield on the benchmark 10-year US Treasury note was 4.20% at 0800 IST, down from 4.24% at 1700 IST Monday. The 10-year US yield fell below the key 4.20% level ahead of US CPI data and the employment report for January, due this week. 

 

At the state bond auction, banks are likely to demand yields much higher than those set at last week's auction, and demand for these bonds is seen poor. Subsequent state bond auctions are likely to be of similar sizes if not higher, weighing on appetite, dealers said. The tenures of the state bonds Tuesday are largely concentrated between eight to 20 years, which are not looked upon favourably by traders, they said. Cut-off yields on longer-term state bonds will hinge on appetite from insurance companies and pension funds, which is seen tepid after a poor cut-off on the long-term bond at Friday's gilt auction, they said. However, some traders said long-term investors were not aggressive at the gilt auction due to preference for higher-yielding state bonds. 

 

Traders will closely track the liquidity surplus in the banking system, after the weighted average call money rate ended near the Reserve Bank of India's Standing Deposit Facility rate of 5.00% Monday. Surplus liquidity in the banking system has increased the appetite for gilts, and the lack of an announcement of a variable rate reverse repo operation by the RBI so far is seen as a signal that the central bank is comfortable with lower overnight borrowing rates, dealers said. Significant movement in the rupee against the dollar and the five-year overnight indexed swap rate may also lend cues to bond prices, dealers said. (Cassandra Carvalho)

 

End

 

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

 

Filed by Aaryan Khanna

 

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.