More Stories

Informist, Thursday, Feb. 12, 2026

 

By Aaryan Khanna

 

MUMBAI – Government bond prices ended sharply higher, tracking a sharp decline in overnight indexed swap rates after the release of CPI data under the new series with a base year of 2024 at 1600 IST. After a surge in the last hour of trade, bonds gave up some gains near the close amid profit-taking by state-owned banks, as the 10-year benchmark yield fell to the psychologically crucial 6.68% level.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.56, up from INR 98.38 Wednesday. The bond's yield closed at 6.6833%, down from 6.7088% the previous day. The one-year OIS rate fell to 5.49?ter the CPI release, down from 5.52% Wednesday. The five-year OIS rate dipped below the 6.08% level after opening at 6.16% Thursday, from 6.14% Wednesday.

 

"The (gilt) market has been tracking OIS through the day," a dealer at a state-owned bank said. "Since OIS reacted to CPI, it looks like bond prices followed. You can track it almost exactly, where OIS was going down, and bonds were rising."

 

Offshore traders had been receiving fixed rates in the domestic OIS market, in line with other Asian emerging markets, even though US Treasury yields rose overnight. Traders widely expected the Reserve Bank of India's Monetary Policy Committee to keep rates on hold for the remainder of 2026, and this expectation has not changed following the print. However, some traders were worried that a higher inflation print could prompt the central bank to raise overnight money market rates by draining liquidity through a variable-rate reverse repo auction.

 

CPI inflation in January was 2.75%, against 2.8% in an Informist poll. Though the reading was in line with expectations, some traders unwound short sales taken before the reading expecting a headline reading as high as 3.0%. Before the CPI print, traders placed short sales on the 10-year gilt as its yield fell to 6.70%, limiting gains at the time. These were unwound as the price rise triggered stop losses, with primary dealers likely placing fresh short sales near the end of the day, dealers said.

 

Some dealers also bought bonds as early calculations of core CPI inflation in the new series, which does not include volatile items like food and fuel, suggested a sharp fall from the old reading. Traders estimate January core CPI inflation at around 3.5%, compared with a 28-month high of 4.6% in December under the old series. Union Bank's Chief Economic Adviser Kanika Pasricha estimated January core CPI inflation at 3.46%.

 

"While details are still awaited, the core inflation looks significantly lower than our expectations," said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. "While inflation trajectory remains fairly benign, we believe RBI's rate-cutting cycle has come to an end, with the RBI likely to continue to hold rates on pause for an extended period through CY26 (calendar year 2026) at least." 

 

Traders had feared that core inflation might rise in the new series, as the share of non-food items in the revised CPI rose to around 64% of the basket. Reserve Bank of India Governor Sanjay Malhotra had said last week that core inflation, barring precious metals, would be "range-bound" over the next few months.

 

With core inflation unexpectedly easing sharply, dealers said that discussions and positioning on rate hikes would be delayed for the next two months. An Informist poll before the CPI data pegged interest rates unchanged throughout 2026, with inflation set to rise and growth projected to remain robust this year. The rate-setting panel may tinker with the repo rate only in 2027-28 (Apr-Mar), when some economists expect it to raise the key policy rate, the poll said.

 

Before the data release, prices of securities maturing within 10 years were volatile. These bonds opened lower, tracking an overnight rise in US Treasury yields after the world's largest economy added a sharply higher-than-expected 135,000 jobs in January, with the unemployment rate falling to 4.3% from 4.4% in December. Bets on a rate cut by the Federal Open Market Committee in June, widely expected earlier, weakened to below 60%, according to the CME FedWatch tool. The 10-year US Treasury yield was at around 4.18% through Indian market hours, from 4.14% at 1700 IST Wednesday.

 

The offshore cue only had a limited impact, with foreign portfolio investors buying gilts in the secondary markets and traders also receiving OIS rates, dealers said. State-owned and foreign banks were speculated to be on the buying side, with mutual funds also picking up short-term gilts amid consistent heavy liquidity surplus and low funding costs, dealers said. The benchmark money market rate, the overnight Mumbai Interbank Outright Rate, has been set below the repo rate of 5.25% since Feb. 3 due to the liquidity surplus in the banking system. The Reserve Bank of India has also made no effort to push up overnight rates, as it has avoided a variable-rate reverse repo auction despite the daily systemic liquidity surplus topping INR 3 trillion on three occasions over the past week.

 

"There is no significant build-up of short selling since the liquidity is in such a good surplus," a dealer at a private-sector bank said. "We also think the market recovered because mutual funds have been on the buying side since morning, especially in Treasury bills and short-term bonds."

 

Meanwhile, bonds maturing in 30 and 40 years had outperformed those of shorter duration earlier in the day and remained up even by the close, though the CPI reading had little impact on their prices. Investors, including life insurers, provident and pension funds, were seen deploying inflows accrued over the past few days. The 6.68%, 2040 gilt outperformed the 6.48%, 2035 bond for the second straight day as traders bet that the spread of the 15-year benchmark over the 10-year gilt would fall, due to continued demand for long-term bonds, dealers said. 'Others' – a category that includes the RBI, provident funds and life insurers – were the top net buyers of gilts on Wednesday, picking up a net INR 25.13 billion, according to Clearing Corp. of India data.

 

Even as the five-year OIS rate fell, the five-year benchmark 6.01%, 2030 bond did not see sharp gains. Traders short-sold the 2030 bond to make room for the INR 180-billion supply of a new 2031 gilt at the weekly gilt auction Friday, similar to earlier in the week, dealers 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 five-year benchmark gilt by April, was last traded at 6.34%. The government will also sell INR 130 billion of the 7.43%, 2076 gilt Friday, which was not traded Thursday. 

 

Turnover in the government securities market Thursday was INR 721.10 billion, sharply up from INR 530.35 billion Wednesday, according to data on the RBI's NDS-OM platform. There were no trades using the RBI's wholesale e-rupee pilot Thursday, against two trades worth INR 100 million in the previous session.

 

OUTLOOK

On Friday, bond prices may open steady ahead of the INR 310-billion supply of gilts at the weekly auction 1030-1130 IST. Demand at the auction is seen as buoyant after January CPI core inflation came in below traders' expectations, dealers said.

 

The government will sell INR 180 billion of a new 2031 bond and INR 130 billion of the 7.43%, 2076 gilt at auction. The short-term bond will see firm demand from banks, while pension and provident funds will likely pick up the supply of the 50-year gilt, dealers said. Some investors may also place bond forward-rate agreements in the 30- and 40-year benchmark gilts as the five-year OIS rate has fallen, they said. 

 

Data released Thursday showed headline CPI inflation in the new series was in line with expectations, at 2.75%, while core CPI inflation was estimated by economists to be 3.5% or lower. Retail inflation returned to the RBI's 2-6% target band for the first time since August. The central bank's Monetary Policy Committee is now seen holding the policy repo rate at 5.25% through FY27, dealers said.

 

Traders do not expect further liquidity infusions or open market operations auctions to buy bonds from the RBI following comments by central bank officials after the MPC's decision last week. This is likely to keep the 10-year gilt yield in a band of 6.60-6.85% till March, dealers 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 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 6.64-6.73% Friday.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.5600	6.6833%	98.3825	6.7088%
6.33%, 2035	97.7000	6.6658%	97.5800	6.6836%
6.01%, 2030	98.7950	6.3243%	98.7275	6.3420%
6.68%, 2040	96.2900	7.0944%	96.0100	7.1266%
6.90%, 2065	92.7200	7.4756%	92.5000	7.4943%

 

---

India Gilts: Sharply up as OIS tumbles; Jan CPI in line with view

 

	1635 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.60	98.63	98.25	98.30	98.38
YTM (%)	6.6776	6.6733	6.7287	6.7207	6.7088

 

MUMBAI--1635 IST--Government bond prices rose as overnight indexed swap fell further to the day's low. India's CPI inflation in the new series for January was 2.75%, against 2.8% seen in an Informist poll. Some traders unwound their short bets taken before the release at 1600 IST with the print in line with view, dealers said.

 

"Domestic traders have been paid heavily, so there is a risk they get stopped out (hit stop-losses in the five-year OIS)," a dealer at a private-sector bank said. "State-owned banks are not selling at any levels, so there is a chance that the rally may continue. The CPI itself doesn't make too much difference."

 

The five-year OIS rate fell to 6.08% from 6.16% at open and around 6.12?fore the release. The one-year OIS rate also tumbled to 5.49% from 5.53% at 1600 IST, with traders trimming bets on a rate hike in the March quarter of 2027, dealers said.

 

Traders were widely expecting that the Reserve Bank of India's Monetary Policy Committee to keep rates on hold in the remainder of 2026, which had not changed after the print. However, some traders were worried that a higher inflation print may push the central bank to pull up overnight money market rates by draining liquidity through a variable rate reverse repo auction, 

 

Some dealers also bought bonds as early calculations of core CPI inflation in the new series, which does not include volatile items like food and fuel, suggested a sharp fall from the old reading. A dealer at another private bank estimated core CPI inflation below 3.5% in January, against a 28-month high of 4.6% in December under the old series.

 

At 1635 IST, the turnover in the gilt market was INR 662.65 billion, sharply higher than INR 482.15 billion at 1635 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 6.65-6.72% for the rest of the day. (Aaryan Khanna)

---

India Gilts: Rise on fall in 5-year OIS, surplus liquidity; CPI data awaited

 

	1540 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.44	98.47	98.25	98.30	98.38
YTM (%)	6.7013	6.6963	6.7287	6.7207	6.7088

 

MUMBAI--1540 IST--Government bond prices reversed early losses and rose due to a fall in the five-year overnight indexed swap rate. The 10-year benchmark 6.48%, 2035 gilt's yield dipped below the psychologically crucial 6.70% yield, where traders were booking profits ahead of the release of India's CPI data for January at 1600 IST, dealers said.

 

State-owned and foreign banks were speculated to be on the buying side, with mutual funds also picking up short-term gilts due to the consistent heavy liquidity surplus and low funding costs, dealers said. The benchmark money market rate, the overnight Mumbai Interbank Outright Rate, has been set below the repo rate of 5.25% since Feb. 3 due to the liquidity surplus in the banking system. The Reserve Bank of India has also made no effort to push up overnight rates as it has avoided a variable rate reverse repo auction despite the daily systemic liquidity surplus topping INR 3 trillion thrice over the past week.

 

"Since there are no sellers, the prices are constantly going up because the system is flush with liquidity. We have gone from one extreme to another," a dealer at a primary dealership said. "OIS is being received by foreign traders since rates are low across Asia." The five-year OIS rate fell to a low of 6.11% due to the receiving interest from offshore traders, after opening at 6.16%.

 

Meanwhile, traders were prepared for CPI inflation to rise to up to 3% in January, according to the new data series which will be published for the first time Thursday. In the old series, CPI inflation in December was 1.33%. A rise beyond that mark may trigger sales as traders may fear the RBI would mop-up excess liquidity if price pressures begin to rise, dealers said. 

 

At 1540 IST, the turnover in the gilt market was INR 482.65 billion, higher than INR 361.20 billion at 1535 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 6.66-6.78% for the rest of the day. (Aaryan Khanna)

---

India Gilts: Mixed; bonds up to 10 yrs recover losses, long-term bonds rise

 

	1255 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.38	98.40	98.25	98.30	98.38
YTM (%)	6.7092	6.7071	6.7287	6.7207	6.7088

 

MUMBAI--1255 IST--Government bond prices traded on a mixed note. Bonds maturing up to 10 years recovered most losses due to an intraday fall in the five-year overnight indexed swap rate. Prices of gilts maturing in 15 years and more were up, likely due to demand from pension and provident funds, dealers said.

 

The five-year OIS rate eased to 6.13% from 6.16% at open as both onshore and offshore traders were betting on the OIS curve to steepen. Traders were paying fixed rates in the one-year tenure and receiving the five-year swap rate, capping the rise after US Treasury yields rose, dealers said. The 4-basis-point overnight rise in the 10-year US Treasury yield to 4.18% continued to weigh on gilt prices, dealers said. 

 

Moreover, long-term investors were seen picking up gilts maturing in 30 years or more, likely to deploy inflows accrued over the past few days. The 6.68%, 2040 gilt outperformed the 6.48%, 2035 bond over the last two days as traders bet that the spread of the 15-year benchmark over the 10-year gilt would fall, due to continued demand for long-term bonds, dealers said. 'Others' – a category that includes the Reserve Bank of India, provident funds and life insurers – were the top net buyers of gilts on Wednesday, picking up a net INR 25.13 billion.

 

"It looks like the long-term investors are out again in force today (Thursday), that is helping the rest of the curve as well," a dealer at a private-sector bank said. "Since we expect CPI to be on the higher side, we are not participating in the rally."

 

An Informist poll of economists estimated the inflation print based on the new CPI series at 2.8%, returning to the RBI's 2-6% target band for the first time since August. Most traders expected a reading near the median, with a range of 2.5-3.0%. A reading above 3.0% may pull down bond prices, though a lower-than-expected reading is not seen driving rate cut bets in India. 

 

At 1255 IST, the turnover in the gilt market was INR 253.45 billion, higher than INR 150.85 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 6.68-6.75% for the rest of the day. (Aaryan Khanna)

---

India Gilts: Down on rise in US yields; India CPI data for Jan awaited

 

	0935 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.26	98.33	98.25	98.30	98.38
YTM (%)	6.7265	6.7171	6.7287	6.7207	6.7088

 

MUMBAI--0935 IST--Government bond prices fell due to an overnight rise in US Treasury yields after the release of jobs data for January weakened the case for further monetary policy easing in the world's largest economy. Losses were limited due to caution ahead of India's CPI data for January at 1600 IST, dealers said.

 

The US added 130,000 jobs in January, double the expectation, while the unemployment rate fell to 4.3% from 4.4% in December. Bets of a rate cut by the Federal Open Market Committee in June, widely expected earlier, weakened to less than 60%, according to the CME FedWatch tool. The 10-year US Treasury yield rose to 4.18% at 0935 IST from 4.14% at the end of Indian market hours Wednesday. 

 

"There is that (US yields), but also because yesterday (Wednesday) the market rose without any trigger. So, that is also correcting," a dealer at a state-owned bank said. The 10-year benchmark 6.48%, 2035 gilt had risen 11 paise on Wednesday ahead of the US data.

 

Traders expect bond prices to trade in a narrow band before the release of India's CPI data at 1600 IST. India's CPI inflation for January will be released for the first time in the new series with base year 2024. An Informist poll of economists estimated the inflation print at 2.8%, rising to the Reserve Bank of India's 2-6% target band for the first time since August. Dealers expect a reading above 2.5% but said a strong market reaction would only happen with an upside surpise in inflation, dealers said.

 

Some traders had expected losses would be limited by data showing 'Others' - a category that includes the Reserve Bank of India - being top net buyers of gilts Wednesday. However, most traders dismissed the purchases to be unlikely from the RBI as the 10-year gilt had been within its recent trading range. Moreover, the sharp rise in bonds maturing in 30 years or more suggested end-investors had stepped up purchases at levels seen lucrative, even ahead of the 7.43%, 2076 bond's auction on Friday. Bond prices may recover if insurers and pension funds continue to pick up long-term bonds in the secondary market Thursday, dealers said.

 

At 0935 IST, the turnover in the gilt market was INR 46.30 billion, higher than INR 26.30 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 6.69-6.75% for the rest of the day. (Aaryan Khanna)

---

India Gilts: Seen down on overnight rise in US yields after key jobs data

 

MUMBAI – Government bond prices may open slightly lower Thursday after US Treasury yields rose overnight, dealers said. Data showing purchases from the 'Others' segment – which includes the Reserve Bank of India – may limit losses. Traders may avoid large bets before the release of India's CPI data for January at 1600 IST.

 

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.68-6.77% yield Thursday after ending at INR 98.38, or 6.71% yield Wednesday. Gilt prices rose Wednesday in the run-up to the US employment data after market hours, which was expected to show weakness in the US economy and make a case for rate cuts by the US Federal Open Market Committee before June, dealers said. 

 

The US added 130,000 jobs in January against 55,000 expected in a Dow Jones poll, with traders having bet on an even lower reading after comments from US officials earlier this week. The unemployment rate fell to 4.28%, the lowest since July, from 4.4% in December. However, the annual revision for labour market data showed the US added 181,000 jobs in 2025, around 400,000 lower than initially reported.

 

After the data was released, the yield on the 10-year US Treasury note rose to 4.18% at 0815 IST from 4.14% at the end of Indian market hours Wednesday. The likelihood of US rates remaining unchanged in June rose to 42.4% from 24.8%, with a majority of futures traders still betting on a rate cut, CME Group's FedWatch tool showed. US yields had risen further but cooled after US President Donald Trump called for lower borrowing costs. 

 

On the domestic front, data from the Clearing Corp. of India showed 'Others' – a category which includes the RBI, provident funds and life insurers – were the top net gilt buyers on Wednesday, stoking hopes of continued central bank purchases in the secondary market. Traders expect sporadic purchases from the RBI to signal lower gilt yields since it is not expected to have room to conduct open market operation auctions, with banking system liquidity in heavy surplus due to the impact of the central bank's liquidity infusion operations. Data showing the RBI's on-screen purchases and sales this week will only be released Feb. 20. At the same time, some traders said the purchases were from long-term investors for bonds maturing in 30 years or more, which rose sharply on Wednesday. 

 

"Rally on 'Others' buy is a negative these days, because people use the 'Others' buy rally to exit," a dealer at a private-sector bank said. "We need market participants to get bullish and buy for a larger and meaningful rally." Private-sector banks were top net sellers Wednesday, dumping INR 52.84 billion worth of gilts in the secondary market, the Clearing Corp. data showed.

 

Such a rise a prices is unlikely to materialise on caution before the release of domestic CPI data at 1600 IST, which will be published using a new base year of 2024 from 2012 earlier. Retail inflation in India likely rose in January mainly because of higher gold prices, with the new CPI on the base year 2024 expected to show inflation at 2.8%, according to an Informist Poll. In the old series with base year 2012, retail inflation likely rose to an eight-month high of 2.5% in January from 1.33% in December, a separate Informist Poll showed.

 

This would be the first time since August that consumer inflation returns to the RBI's 2-6% target band. Traders are pricing in retail inflation in line with the Informist polls, though there is no consensus on estimates due to the new series. Gilts are only likely to react if CPI surprises on the upside, with a marginally lower inflation reading not seen enough to move the Monetary Policy Committee to cut the repo rate from the current 5.25%, dealers said.  (Aaryan Khanna)

 

End

 

US$1 = INR 90.59

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

 

Edited by Saji George Titus

 

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.