More Stories

Informist, Friday, Feb. 13, 2026

By Aaryan Khanna

MUMBAI – Government bond prices ended on a mixed note. The most-traded 6.48%, 2035 gilt was little changed after a choppy day of trade where it jumped in the first half and then erased most gains. Long-term bonds were also volatile after the result of the weekly gilt auction showed less demand than expected for the 7.43%, 2076 bond at auction, dealers said.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.59, up from INR 98.56 Thursday. The bond's yield closed at 6.6799%, down from 6.6833% the previous day.

Its price had risen to a high of INR 98.87 early in the day after the government and the Reserve Bank of India bilaterally switched four gilts worth INR 755.04 billion maturing in 2026-27 (Apr-Mar) Thursday. This will effectively bring down the government's record gross borrowing target of INR 17.20 trillion in FY27 down to INR 16.44 trillion, since the government's scheduled bond redemptions in the financial year will fall. Traders had been speculating since last month that the government could opt for such an operation to reduce its gross borrowing figure for FY27.

However, a wave of profit booking from traders--including state-owned banks--destroyed the momentum as the 10-year yield approached 6.64%, dealers said. Moreover, traders short sold gilts both before the weekly gilt auction worth INR 310 billion at 1030-1130 IST and on the view that the 10-year benchmark yield is unlikely to fall below the psychologically crucial 6.60% mark.

"Honestly, I can't even tell you what is the headline for the day," a dealer at a foreign bank said. "We were just digesting CPI data (from Thursday) and then this came into the market, which was a great sign. But from the market movement, it doesn't look like people have the conviction that yields are going lower."

India's CPI data for January under the new series with base year 2024 was released during market hours Thursday. CPI inflation was 2.75% in the first reading in the new series, returning to the RBI's target band of 2-6% for the first time since August. Though core CPI inflation was lower than expected, considerations of monetary policy took a backseat with the Monetary Policy Committee widely expected to keep the repo rate on hold at the current 5.25% through FY27.

Traders were unsure whether the switch would benefit short-term or long-term bonds more. A reduction in the gross borrowing is usually expected to help bonds maturing in 10 years and above, which have made up a bulk of the government's issuances in the last few years, dealers said. However, with the government issuing INR 694.36 billion of the 8.30%, 2040 bond to the RBI in lieu of the gilts maturing in FY27, some traders were of the view that the share of short-term bonds in the borrowing calendars for the two halves of FY27 would increase while the 15-year segment may see a decline in share.

While caution prevailed until the auction results, it failed to lend direction to the market. The RBI set the coupon on the new five-year, 2031 bond at 6.36%, slightly higher than the 6.35% median of Informist Poll. Asset-liability managers from banks, both state owned and private sector, as well as mutual funds lapped up the INR 180 billion supply of the gilt. However, bidding was not aggressive in the face of the large supply and because banks preferred to add higher-yielding state bonds of similar tenures to their held-to-maturity portfolios, dealers said. The new five-year gilt was largely being parked in available for sale holdings, they said.

However, the 40-year benchmark 6.90%, 2065 gilt fell sharply after the auction result as the cut-off price of the 7.43%, 2076 gilt at auction, at INR 99.31, was slightly lower than INR 99.34 seen in an Informist poll. Some traders had bet on a higher cut-off price due to firm investor demand from pension and provident funds, in line with purchases of state bonds and corporate bonds seen earlier this week, dealers said.

They had placed their bets in the more liquid 2065 gilt rather than the thinly-traded 50-year bond, which was barely traded despite its auction. A large state-owned life insurance company bought a large chunk of the 2076 paper to match its 50-year liabilities as the paper will not be auctioned again in the financial year ending March, with states only offering paper maturing in up to 30 years, dealers said. The 6.90%, 2065 gilt recovered most losses by the end of trade.

"The 50-year (bond) was a surprise to me since we had seen strong demand in the secondary (market) for the (6.90%) 2065 bond," a dealer at a private-sector bank said. "We had heard both PFs (provident funds) and insurers during the bidding, so unless people didn't have enough cash or they have already deployed it – well, both are bad signs for the long-end."

Turnover in the government securities market Friday was INR 478.15 billion, down from INR 721.10 billion Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were two trades using the RBI's wholesale e-rupee pilot Friday, against no trades in the previous session.

OUTLOOK

Gilts are not traded Saturday. On Monday, bond prices may open higher due to a fall in US Treasury yields after US CPI inflation in January fell more than expected, dealers said. Traders may avoid large bets due to a lack of significant domestic cues.

The 10-year US Treasury yield fell to 4.06%, its lowest in over three months, after data showed US CPI inflation fell to 2.4% on year in January, from 2.7% in December and 2.5% expected. Core CPI inflation--which excludes volatile items like food and fuel--was 2.5% on year, in line with estimates.

The state bond auction announced after market hours for next week was in line with the indicated amount of INR 390 billion and may not have a significant impact on bond prices Monday, dealers said. Fourteen states will raise INR 379 billion through bonds at auction Tuesday, with four bonds having greenshoe options of up to INR 15.50 billion. 

The RBI'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 last week. This is likely to keep the 10-year gilt yield in a band of 6.55-6.85% 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 last week 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 6.62-6.74% Monday.

India Gilts: In thin band after auction result; erase most early gains

MUMBAI--1445 IST--Government bond prices were in a thin band, erasing earlier gains after the result of the INR-310-billion weekly gilt auction showed demand for bonds was slightly weaker than expected, dealers said. Long-term bonds were worst hit as investor demand for the 7.43%, 2076 bond was modest, with prices in this segment having risen over the last two days.

The Reserve Bank of India set the coupon on the new five-year, 2031 bond at 6.36%, slightly higher than the 6.35% median of Informist Poll. Asset-liability managers from banks, both state owned and private sector, as well as mutual funds lapped up the INR 180 billion supply of the gilt. However, bidding was not aggressive in the face of the large supply and because banks preferred to add higher-yielding state bonds of similar tenures to their held-to-maturity portfolios, dealers said. The new five-year gilt was largely being parked in available for sale holdings, they said.

"The cut-offs were slightly higher (in yield terms), but the market doesn't seem to be taking it too badly and the benchmarks are doing well," a dealer at a state-owned bank said. "The (2031) paper appealed to ALMs (asset liability managers) but for traders, I wouldn't say it is a great level to enter."

However, the 40-year benchmark 6.90%, 2065 gilt fell sharply after the auction result as the cut-off price of the 7.43%, 2076 gilt at auction, at INR 99.31, was slightly lower than INR 99.34 seen in an Informist poll. Some traders had bet on a higher cut-off price due to firm investor demand from pension and provident funds, in line with purchases of state bonds and corporate bonds seen earlier this week, dealers said. They had placed their bets in the more liquid 2065 gilt rather than the thinly-traded 50-year bond, which was barely traded despite its auction. A large state-owned life insurance company bought a large chunk of the 2076 paper to match its 50-year liabilities as the paper will not be auctioned again in the financial year ending March, with states only offering paper maturing in up to 30 years, dealers said. 

"The bidding was not aggressive. We also picked up some stock of the 2031 bond," a dealer said a private-sector bank said. "The long-end was a basis point or so higher than some traders had expected, but 7.48% is also not a bad level for the market to hold."

Gilt prices had risen sharply earlier after the government and the RBI conducted a bilateral switch of four bonds maturing in 2026-27 (Apr-Mar) worth INR 755.04 billion, effectively seen bringing down the gross borrowing in FY27 by the same amount. A wave of profit booking around 6.64% yield on the 10-year benchmark 6.48%, 2035 bond from traders, including those from state-owned banks, erased some gains even before the auction result. Traders still do not see the 10-year benchmark yield sustaining below 6.60% after the effective borrowing cut, dealers said. 

At 1445 IST, the turnover in the gilt market was INR 301.25 billion, similar to INR 292.40 billion at 1430 IST Thursday, 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 6.64-6.72% for the rest of the day. (Cassandra Carvalho)

India Gilts: Give up some gains; demand at gilt auction seen largely firm

MUMBAI--1235 IST--Prices of government bonds gave up some gains on short bets before the gilt auction result but remained up after the Centre switched INR 755.04 billion of four gilts maturing in 2026-27 (Apr-Mar) with the Reserve Bank of India Thursday, effectively bringing down its gross borrowing for FY27. Traders await the result of the INR-310-billion gilt auction, demand for which was largely seen firm, dealers said.

Bond prices had slumped early February after the Centre unveiled a record gross market borrowing of INR 17.2 trillion through dated securities in FY27. Traders had speculated that a gilt switch between the Centre and the RBI could reduce the gross supply in the upcoming fiscal year. A few traders expect another such switch to be conducted between both the entities, but of a smaller size, dealers said. The RBI likely held INR 700 billion to INR 900 billion of bonds maturing in FY27 before Thursday's switch, with some market participants estimating holdings over INR 1 trillion. However, gains due to bets of lower gilt supply in FY27 were tempered by short sales ahead of the gilt auction, along with fears of heavy state bond supply in the coming months, dealers said. 

At the weekly gilt auction, strong demand is seen for the new 2031 bond, especially due to the lucrative spread of gilts of these tenures over the repo rate of 5.25%, dealers said. An Informist poll estimated the coupon on the new 2031 bond at 6.35%. However, short-term bond yields are not seen falling much further after a sharp rise in these bond prices due to a rise in systemic liquidity this month. Traders have been unwinding their bond swap trades since the spread between the five-year benchmark 6.01%, 2030 bond and the five-year overnight indexed swap rate is no longer lucrative, dealers said.  

Demand for the 7.43%, 2076 bond at the auction is seen mixed. Some dealers expect strong demand for the gilt, since it is the last auction of the bond for the financial year, and a large state-owned insurance company is seen purchasing the gilt, dealers said. An Informist poll estimated the cut-off on the bond at INR 99.34 or 7.48% yield. Others said that heavy supply of long-term state bonds—which offer higher yields than gilts of similar maturity—at the auction Tuesday deterred appetite of some long-term investors for the 2076 gilt Friday. The RBI set an underwriting fee of 1.40 paise on the 2076 gilt against an Informist poll estimate of 0.85 paisa. Traders estimate around INR 20 billion of the bond to be purchased for bond forward rate agreements.  

"This is the last auction of this bond (7.43%, 2076 in FY26) so demand is looking good, but I think there will be at least a 4-5 basis point difference from market (last traded) level," a dealer at a state-owned bank said. "If your 40-year paper (6.90%, 2065 bond) cut-off yield (at auction) was 7.49% last week then this 50-year cut-off (yield) should be higher." The 2076 bond last traded at a yield of 7.45%. 

At 1235 IST, the turnover in the gilt market was INR 216.95 billion, similar to INR 215.25 billion at 1230 IST Thursday, 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 6.63-6.72% for the rest of the day. (Cassandra Carvalho)

India Gilts: Off highs on profit booking, short sales before gilt auction 

MUMBAI--1004 IST--Prices of most government bonds were off the day's highs Friday due to profit booking as the yield on the 10-year benchmark 6.48%, 2035 bond hit the day's low of 6.6391%--the lowest in a week, dealers said. Short sales before the weekly gilt auction also weighed on prices, they said. The 6.68%, 2040 bond remained sharply up and was the second most-traded paper on the Reserve Bank of India's Negotiated Dealing System-Order Matching platform as traders expect lower supply of this tenure in 2026-27 (Apr-Mar) after the government issued INR 694.36 billion of the 8.30%, 2040 bond to the RBI as it switched INR 755.04 billion of four gilts maturing in FY27 Thursday. Bond prices were up as this switch is seen reducing the Centre's gross borrowing in FY27.

After the switch between the government and the RBI, some traders expect larger supply of short-term bonds in FY27. This, coupled with supply of a new 2031 bond at the auction Friday, limited the rise in prices of short-term gilts. In the 'WhenIssued (NewIssues)' segment of the RBI's NDS-OM, the new 2031 bond last traded at a yield of 6.34%. The 6.01%, 2030 bond last traded at INR 98.85 or 6.31% in the secondary market. The government will sell INR 180 billion of he new 2031 bond and INR 130 billion of the 7.43%, 2076 bond at the auction Friday. Some traders speculated that after large supply of long-term state bonds was lapped up by insurance companies and pension funds at the auction Tuesday, demand for the long-term gilt may be weak, especially after a poor cut-off price on the 2065 bond at last week's gilt auction. Other traders expect robust demand for the long-term gilt. 

In the secondary market, the 10-year benchmark bond yield failed to sustain a fall below the 6.64% level, and is unlikely to do so even if the gilt auction sails through. However, prices could rise further depending on the gilt auction result, dealers said. The recovery in the five-year overnight indexed swap rate to 6.06% from the day's low of 6.03% weighed. 

"If prices keep falling like this then I doubt the auction result will be strong, and not strong enough to cause a sharp rise in secondary market (prices)," a dealer at a small finance bank said. 

At 1004 IST, the turnover in the gilt market was INR 109.50 billion, higher than INR 36.05 billion at 0930 IST Thursday, 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 6.62-6.72% for the rest of the day. (Cassandra Carvalho)

India Gilts: Seen surging as govt switches FY27 bonds with RBI, US ylds fall

MUMBAI – Prices of government bonds are seen surging Friday after the government switched INR 755.04 billion of four gilts maturing in 2026-27 (Apr-Mar) with the Reserve Bank of India Thursday. In their place, the government issued INR 694.36 billion of the 8.30%, 2040 bond, the central bank said in a release after market hours.

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.60-6.72% yield Friday after ending at INR 98.56, or 6.68% yield Thursday. Bond prices had risen nearing the end of trade Thursday tracking a fall in overnight indexed swap rates after India's CPI inflation based on the new series for January was in line with expectations, and core CPI is estimated much lower than intially expected, dealers said. 

The switch conducted Thursday is the first bilateral switch between the government and the RBI since May. It will effectively bring down the government's record gross borrowing target of INR 17.20 trillion down to INR 16.44 trillion, since the government's scheduled bond redemptions in the financial year will fall. Traders had been speculating since last month that the government could opt for such an operation to reduce its gross borrowing figure for FY27. Traders were expecting a lower amount of INR 500 billion to be switched. The RBI likely held INR 700 billion to INR 900 billion of bonds maturing in FY27, as per market participants' estimates. 

Later in the day, traders will track the result of the INR-310-billion gilt auction. The government will sell INR 180 billion of a new 2031 bond and INR 130 billion of the 7.43%, 2076 bond. Demand at the auction is seen robust, especially after the government's switch with the central bank. The 10-year benchmark yield is seen falling towards 6.60%, but may settle at around 6.65% Friday, dealers said. 

Nearing the end of trade, dealers may avoid aggressive bets ahead of the release of US CPI inflation data for January, due at 1900 IST. An overnight fall in US Treasury yields after weak housing data may aid the rise in bond prices, dealers said. (Cassandra Carvalho)

End

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

Edited by Akul Nishant Akhoury

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.