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Informist, Monday, Feb. 16, 2026

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended higher, tracking a fall in the five-year overnight indexed swap rate due to a sharp decline in US Treasury yields, dealers said. Gains were limited due to persistent sales by traders to book profits ahead of the new bond supply.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.70, up from INR 98.59 Friday. The bond's yield closed at 6.6642%, down from 6.6799% the previous session.

 

State-owned banks and primary dealers were likely sellers, while foreign and private-sector banks bought gilts as US Treasury yields fell, dealers said. The five-year OIS rate dipped to 6.01%, hitting its lowest level since Jan. 16, though it ended the day at 6.03% against 6.07% Friday. Some traders were paying fixed rates in the OIS market while picking up bonds, dealers said.

 

The fall was led by offshore traders receiving fixed rates, as the 10-year US Treasury yield fell to 4.05% by settlement Friday, for the first time in over two months, after US CPI inflation for January was lower than expected. Data released after Indian market hours Friday showed CPI inflation in the US fell to 2.4% on an annual basis from 2.7?cember and 2.5% expected. At 1700 IST Friday, the benchmark US yield traded at 4.12%.

 

"Since morning, US yields coming down has had some impact on the market," a dealer at a state-owned bank said. "Other than that, it doesn't look like traders are in a mood to buy a lot, this 6.65% level (yield on 10-year benchmark) looks difficult to break because investors know that there is supply coming up."

 

States will raise INR 379 billion through bonds Tuesday, against INR 390 billion indicated in the borrowing calendar for Jan-Mar. Gujarat and Maharashtra have provided greenshoe options totalling up to INR 15.5 billion. Traders are pricing in state bond auction sizes of around INR 400 billion each for the rest of the March quarter, and the large supply is limiting a rise in bond prices, dealers said.

 

Long-term investors such as insurance companies and pension funds are preferring higher-yielding state bonds over gilts of similar maturity, indicating that state bond supply would sail through while putting pressure on gilts, dealers said. At the auction Friday, the RBI set a cut-off price of INR 99.31 on the 7.43%, 2076 gilt, lower than an Informist Poll estimate of INR 99.34 – even as a state-owned insurance company likely bid for the bond – since pension funds had already deployed funds at the state bond auction held earlier in the week, dealers said. 

 

Some foreign portfolio investors and mutual funds likely bought gilts maturing in under five years as the liquidity surplus in the banking system persisted and money market funding rates remained low, dealers said. Mutual funds had been wary of a reversal in liquidity conditions over the past few sessions, but have started to pick up both gilts and corporate bonds, they said. Latest Reserve Bank of India data showed the central bank net absorbed INR 3.18 trillion from the banking system Sunday, a proxy for the liquidity surplus. The weighted average triparty repo rate remained below the Standing Deposit Facility rate of 5.00% Monday.

 

Regardless, the five-year benchmark 6.01%, 2030 gilt did not rise much as asset-liability managers preferred spread instruments. Traders were not convinced that the bond's yield would fall much below the crucial 6.30% level, where it ended Monday, and were wary of a rise in money market rates should the RBI conduct a variable rate reverse repo auction, dealers said. 

 

"It doesn't feel like the market had a lot of direction today. There was also no significant buying pattern being formed," a dealer at a primary dealership said. "We heard some FPIs were interested in short-tenure bonds, around 2028, but there wasn't any follow-up action in the liquid papers."

 

Turnover in the government securities market Monday was INR 559.95 billion, up from INR 478.15 billion Friday, 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 Monday, against two trades in the previous session.

 

OUTLOOK

On Tuesday, bond prices may open steady due to a lack of significant domestic cues. The result of the state bond auction may lend direction in the second half of the day, dealers said.

 

The state bond auction announced after market hours Friday was in line with the indicated amount of INR 390 billion and is likely to sail through, 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 in total.

 

The RBI's Monetary Policy Committee is expected to keep 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 monetary policy earlier this month. This is likely to keep the 10-year gilt yield in a band of 6.55-6.85% till March, dealers said.

 

Traders expect banking system liquidity to remain in surplus. 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 6.62-6.72% Tuesday.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.6950	6.6642%	98.5850	6.6799%
6.33%, 2035	97.8225	6.6479%	97.7000	6.6661%
6.01%, 2030	98.8925	6.2990%	98.8500	6.3101%
6.68%, 2040	96.5275	7.0673%	96.3300	7.0899%
6.90%, 2065	93.0600	7.4470%	92.7000	7.4774%

 

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	1625 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.68	98.72	98.57	98.65	98.59
YTM (%)	6.6667	6.6603	6.6821	6.6707	6.6799

 

India Gilts: Remain up as 5-yr OIS sinks to 1-mo low; profit booking persists

 

NEW DELHI--1625 IST--Government bond prices rose further as the five-year overnight indexed swap rate fell to a one-month low. However, aggressive profit booking from state-owned banks likely prevented the 10-year benchmark 6.48%, 2035 bond's yield from falling below the psychologically crucial 6.66% mark, dealers said.

 

"The market lacks risk appetite and so it is very difficult to bring gilt yields down from current levels," a dealer at a private-sector bank said. "Considering the size of supply that market is absorbing weekly, even staying at these levels is a positive." Fourteen states will raise INR 379 billion through bonds at Tuesday's auction, in line with expectations but a sizeable supply nonetheless, traders said. 

 

State-owned banks and primary dealers were likely on the selling side, while foreign banks and private-sector banks bought gilts as US Treasury yields fell, dealers said. The five-year OIS dipped to 6.01%, hitting its lowest level since Jan. 16, and was at 6.02%. The fall was led by offshore traders receiving fixed rates as the 10-year US Treasury yield fell to 4.05% Friday for the first time in over two months. US yields were not traded Monday on account of President's Day holiday. 

 

Some mutual funds and foreign portfolio investors were also buying short-term bonds amid low money market rates over the past two weeks, making the spreads of bonds maturing in up to three years attractive, dealers said. Mutual funds had been wary of a reversal in liquidity conditions over the past few sessions but have started to pick up both gilts and corporate bonds, they said. Latest Reserve Bank of India data showed the central bank net absorbed INR 3.18 trillion from the banking system Sunday, a proxy for the liquidity surplus in the banking system. The weighted average triparty repo rate remained below the Standing Deposit Facility rate of 5.00% Monday.

 

At 1620 IST, the turnover in the gilt market was INR 518.60 billion, higher than INR 407.15 billion at 1630 IST Friday, 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 6.63-6.70% for the rest of the day. (Cassandra Carvalho)

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India Gilts: Inch up tracking fall in 5-yr OIS; focus on state bond supply

 

	1236 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.63	98.70	98.57	98.65	98.59
YTM (%)	6.6735	6.6635	6.6821	6.6707	6.6799

 

MUMBAI--1236 IST--Prices of government bonds were slightly higher Monday tracking a fall in the five-year overnight indexed swap rate, dealers said. Trade was lacklustre due to a lack of significant domestic cues, they said. Offshore traders were likely receiving fixed rate contracts in swaps tracking a fall in US Treasury yields, and the five-year OIS rate hit a day's low of 6.03%.

In the near term, the five-year OIS rate could fall to 6.00% or below, and subsequently, the 10-year benchmark 6.48%, 2035 bond yield could fall below the key 6.65% level, nearing 6.60%, dealers said. However, bond traders do not see any significant trigger for such a move, they said. Domestic traders largely dismissed the sharp fall in US yields. A lack of scheduled open market operation auctions for the Reserve Bank of India to buy gilts weighed on bond prices, dealers said.

 

Traders focussed on upcoming supply of gilts and state bonds. With only three gilt auctions scheduled for the rest of the March quarter, appetite for gilts is seen rising, as heavy supply of state bonds deters interest in those securities, dealers said. States will raise INR 379 billion through bond issuances Tuesday, against INR 390 billion indicated in states' borrowing calendar for Jan-Mar. Some traders hope that states will undershoot their borrowing target of INR 5.00 trillion, but bond traders are largely pricing in a borrowing figure in line with that indicated.

 

Long-term state bond yield spreads over gilts of similar maturity have reduced, which may lure long-term investors such as insurance companies to gilts over state bonds, dealers said. At the auction held Feb. 10, the cut-off yield on Tamil Nadu's 30-year bond was 7.73%, a yield spread of 25 basis points over a gilt of comparable maturity. This is down from a yield spread of around 38 basis points on Tamil Nadu's 30-year bond in mid-January. 

 

"SDL (state borrowing) has come in line with expectations, that's why market is holding (current prices are sustaining)," a dealer at a state-owned bank said. "We're not doing anything right now, just waiting to see what state bond supply is in March."

 

The 15-year benchmark 6.68%, 2040 gilt outperformed gilts of similar maturity and was the second-most traded paper on the RBI's Negotiated Dealing System-Order Matching platform. Some traders bought the bond on hopes of its yield spread over the 10-year benchmark bond contracting, they said. 

 

At 1236 IST, the turnover in the gilt market was INR 210.40 billion, slightly higher than INR 195.10 billion at 1230 IST Friday, 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 6.63-6.70% for the rest of the day. (Cassandra Carvalho)

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India Gilts: Up tracking fall in US ylds, profit sales cap gains

 

	0930 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.62	98.70	98.61	98.65	98.59
YTM (%)	6.6750	6.6635	6.6764	6.6707	6.6799

 

India Gilts: Up tracking fall in US ylds, profit sales cap gains

 

MUMBAI--0930 IST--Prices of government bonds were off highs Monday due to profit sales at the 6.66-6.67% yield level on the benchmark 10-year 6.48%, 2035 gilt, dealers said. Bond prices were up tracking a fall in the 10-year benchmark US Treasury yield to its lowest since early December, after US CPI inflation for January was a tad below expectations, dealers said. 

The yield on the benchmark 10-year US Treasury note was 4.05% at 0930 IST, down from 4.12% at 1700 IST Friday after "tame" inflation in the US last month bolstered hopes of two rate cuts of 25 basis points each by the US Federal Open Market Committee in the rest of 2026. Foreign banks had built positions in Indian government bonds before the data print, and were the largest net buyers of gilts Friday, with net purchases worth INR 18.72 billion, according to data from Clearing Corp. of India. A fall in US yields widens the interest rate differential between safe-haven assets and emerging market debt, making the latter more appealing to foreign investors. Most domestic traders had not built large positions ahead of the data, they said.

 

"I think it'll (bond prices) be range-bound today (Monday) because there is nothing to track," a dealer at a private sector bank said. "State borrowing is also in line with the expectations, if that was lower than expected then maybe we would've seen lower yields."

 

States will raise INR 379 billion through bond issuances Tuesday, against INR 390 billion indicated in states' borrowing calendar for Jan-Mar. Gujarat and Maharashtra have provided for a greenshoe option. Traders are pricing in state bond auction sizes of around INR 400 billion each for the rest of the March quarter, and the large supply is limiting a rise in bond prices, dealers said. Further, long-term investors such as insurance companies and pension funds are preferring higher-yielding state bonds over gilts of similar maturity, leading to weaker-than-expected demand for long-term gilts in the primary gilt market, dealers said. At the gilt auction Friday, the Reserve Bank of India set a cut-off price of INR 99.31 on the 7.43%, 2076 gilt, lower than an Informist Poll estimate of INR 99.34--even as a state-owned insurance company likely bid for the bond--since pension funds had already deployed funds at the state bond auction held earlier in the week, dealers said. 

 

At 0930 IST, the turnover in the gilt market was INR 41.05 billion, lower than INR 58.00 billion at the same time Friday, 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 6.63-6.70% for the rest of the day. (Cassandra Carvalho)

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India Gilts: Seen tad up on fall in US yld; states' borrowing Tue within view

 

MUMBAI – Prices of government bonds are seen opening a tad higher Monday, tracking a fall in US Treasury yields after US CPI inflation for January was lower than expectations, dealers said. States' borrowing through the issuance of bonds Tuesday is largely in line with expectations, they said.

 

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.63-6.74% yield Monday after ending at INR 98.59, or 6.68% yield Friday. Gilts are not traded Saturdays.

 

The yield on the benchmark 10-year US Treasury note was 4.05% at 0810 IST--the lowest since early December--down from 4.12% at 1700 IST Friday. Data showed US CPI annual inflation eased to 2.4% in January from 2.7% in December, and below the forecast of 2.5% in a poll by The Wall Street Journal. Core CPI inflation--which excludes volatile items like food and fuel--was 2.5% on year, in line with estimates.  

 

On the domestic front, states will raise INR 379 billion through bond issuances Tuesday, against INR 390 billion indicated in states' borrowing calendar for Jan-Mar. Gujarat and Maharashtra have provided for a greenshoe option. The borrowing in largely in line with expectations, but still on the heavier side, dealers said. Any rise in bond prices is unlikely to sustain due to profit-booking at the 6.66-6.68% yield on the benchmark 10-year bond, dealers said. Bonds may also track the movement of the five-year overnight indexed swap rate and the rupee against the dollar during the day, dealers said. (Cassandra Carvalho)

 

End

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

 

Edited by Saji George Titus

 

 

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