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Informist, Wednesday, Feb. 18, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended down Wednesday as traders placed short bets on gilts to make room for fresh supply at the INR 330-billion weekly gilts auction Friday and more supply of bonds maturing in six years and more at the INR 250-billion gilt switch auction Monday, dealers said. A rise in US Treasury yields also weighed on gilt prices, they said. 

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.60, down from INR 98.73 Tuesday. The bond's yield closed at 6.6780%, up from 6.6600% at the end of the previous session. The yield on the benchmark 10-year US Treasury note was 4.07% at 1700 IST, up from 4.03% at the same time Tuesday, ahead of the release of the minutes of the US Federal Open Market Committee's January meeting, due 0030 IST Thursday. Financial markets administered by the Reserve Bank of India are shut Thursday for Shivaji Jayanti.

 

"Now this is a truncated week, tomorrow (Thursday) is a holiday, then we have the regular G-sec (government securities) auction supply coming in, and then we have the switch auction coming in, but it's not like G-sec yields are going to move up very sharply, it's going to be in a tight band only," a trader at a primary dealership said.

 

A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 1800 IST showed trades worth INR 105.07 billion in the 6.48%, 2035 gilt.

 

On Friday, the government will sell INR 90 billion of the 6.03%, 2029 bond, INR 110 billion of the 6.68%, 2033 bond, and INR 130 billion of the 7.24%, 2055 bond. Demand for the 6.03%, 2029 bond is seen firm from banks' asset and liability managers, albeit at higher yields, as they look to lock in better returns, dealers said. Demand for the 2055 paper is also seen firm from long-term investors since it is the last auction of the bond in the financial year 2025-26 (Apr-Mar). Some traders paid fixed rate contracts in overnight indexed swap rates, possibly to hedge their underwriting of bond forward rate agreements in long-term gilts, dealers said.

 

However, demand for the 2033 bond is seen to be tepid, especially since the government will add to the supply of bonds maturing in six years and more at the switch auction Monday, dealers said. The 6.68%, 2033 bond ended at INR 100.14--down 9 paise from its previous close--or 6.65% yield. Traders also expect the Centre to concentrate its bond supply in FY27 in the seven- and five-year tenures. At the auction Friday, banks are seen demanding a cut-off yield on a par with that of the 10-year benchmark gilt at around 6.67%.

 

Most bond prices fell Wednesday even after the Reserve Bank of India, after market hours Tuesday, said the Centre will switch four gilts worth INR 250 billion maturing in FY27 with five longer-term bonds Monday, effectively bringing down the Centre's record gross borrowing in FY27. Several traders had already priced in the switch auction notice and seized the opportunity to take profits Wednesday, they said. Informist had reported exclusively during market hours Tuesday that some banks had received calls from the central bank, seeking feedback on a possible switch auction.

 

While the auction is likely to bring down the Centre's gross borrowing in FY27, the destination securities mature in six years or more, adding to the supply of "duration" papers or tenures which traders already do not have the risk appetite for, dealers said. Traders would have preferred it if the Centre and the RBI had conducted a bilateral switch, they said. The central bank last week bilaterally switched with the government four gilts worth INR 755.04 billion maturing in FY27, which fuelled speculation that one more such operation of INR 250 billion could be conducted in FY26. 

 

Several traders also placed short bets on gilts after the yield on the 10-year benchmark bond failed to sustain a fall below the key 6.65% level, after hitting 6.6456% Tuesday. "Sentiment has finally improved, but to breach levels we need one strong trigger for yields to fall, and we're not getting that," a dealer at a state-owned bank said. "We have hit 6.65% (yield on the 10-year benchmark) and rebounded from there. But again 6.68% is a resistance and it should hold here."

 

Some traders also began placing short bets in the 6.48%, 2035 gilt ahead of fresh INR 320-billion supply of a 10-year bond at the gilt auction next week, dealers said. Some speculate that the government could issue a new 2036 gilt since the outstanding amount of the current 10-year benchmark is INR 1.60 trillion, close to INR 2.00 trillion--at which level the Centre usually issues a new bond.

 

Foreign portfolio investors continued to purchase gilts through the fully accessible route for the fifth consecutive session, net purchasing gilts worth INR 1.44 billion Wednesday, as per data from Clearing Corp. of India. FPIs were purchasing bonds maturing in 14 and 15 years, dealers said. 

 

Turnover in the government securities market Wednesday was INR 389.15 billion, down from INR 509.80 billion Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There was one trade for INR 250 million in the 10-year benchmark gilt using the RBI's wholesale e-rupee pilot after two consecutive days of no trade through this method.

 

OUTLOOK

RBI-administered markets are shut Thursday for Shivaji Jayanti. Friday, bond prices may track the movement of US Treasury yields after the release of the minutes of the US Federal Open Market Committee's January meeting, due 0030 IST Thursday, though domestic traders have not built significant positions ahead of the release, dealers said. The focus will be on the weekly gilts auction. Next week, traders will track the result of the gilt switch auction. Later in the week, India's GDP for Oct-Dec based on the new series and second advance estimate for FY26 will be released by the statistics ministry Feb. 27.

 

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 operation 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.

 

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 the range of 6.63-6.72% Friday.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.6000	6.6780%	98.7250	6.6600%
6.33%, 2035	97.8800	6.6396%	97.9500	6.6290%
6.01%, 2030	98.9700	6.2789%	98.9900	6.2734%
6.68%, 2040	96.5250	7.0676%	96.5700	7.0624%
6.90%, 2065	92.7800	7.4707%	93.0250	7.4500%

 

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India Gilts: Down as traders take short positions before weekly auction Fri

 

	1600 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.60	98.72	98.55	98.72	98.73
YTM (%)	6.6780	6.6608	6.6852	6.6608	6.6600

MUMBAI--1600 IST--Prices of government bonds were down Wednesday as traders took short positions ahead of the weekly auction Friday, where the government will sell INR 330 billion worth of securities, dealers said. A rise in US yields also weighed on gilt prices, dealers said. 

 

"Today's price movement is similar to what happens on Thursdays before the auction," a dealer at a state-owned bank said. Money markets are shut Thursday on account of Chhatrapati Shivaji Maharaj Jayanti.

 

At the auction, traders expect firm demand for the 6.03%, 2029 bond while insurers and pension funds are seen picking up the 7.24%, 2055 bond. "We are looking at the 3-year bond at the auction, nothing beyond that. Demand for the 2055 bond depends on the insurance companies and EPFO (Employees' Provident Fund Organisation) being present at auction," the dealer said. 

 

Traders also await the release of the US Federal Open Market Committee's January meeting minutes, due at 0030 IST Thursday, for cues on the interest rate trajectory in the US. Ahead of the release of the minutes, the yield on the benchmark 10-year US Treasury note was 4.07% at 1600 IST, up from 4.03% at 1700 IST Tuesday.

 

A trader at a primary dealership said that the impact of INR 250 billion switch auction Monday is seen neutral for the market. "It would have been a positive only if the government was swtiching with RBI, not with the market," the dealer said. 

 

At 1600 IST, the turnover in the gilt market was INR 350.65 billion, lower than INR 462.50 billion at 1622 IST Tuesday, 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.  (Shubham Rana)

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India Gilts: Remain down on short sales ahead of weekly auction Friday

 

	1210 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.61	98.72	98.58	98.72	98.73
YTM (%)	6.6773	6.6608	6.6816	6.6608	6.6600

 

MUMBAI--1210 IST--Prices of most government bonds remained down as traders likely placed short bets ahead of the weekly gilt auction Friday, dealers said. Prices of bonds maturing in up to 10 years and above were under pressure after the Reserve Bank of India said that the Centre would switch four bonds maturing in 2026-27 (Apr-Mar) with five longer-term bonds Monday.

 

Traders likely placed short bets ahead of the weekly gilt auction Friday to make room in their portfolio for the fresh gilts supply, dealers said. At the auction Friday, where the government will sell INR 90 billion of 6.03%, 2029 bond, INR 110 billion of 6.68%, 2033 bond and INR 130 billion of 7.24%, 2055 bond, the demand is likely to be firm from all market participants.

 

Traders are expected to pick up the 3-year bond while insurers and pension funds will likely buy the 29-year bond at the auction. However, the 6.68%, 2033 bond is likely to receive bids at a higher yield due to a large upcoming supply in the said tenor, dealers said. Some traders also positioned for the market holiday Thursday on account of a local festival.

 

Traders likely preferred bonds maturing in up to five years as the spread between the 10-year benchmark 6.48%, 2035 bond and the said tenor seemed lucrative, dealers said. Moreover, following the switch auction Monday, the supply of short-term bonds will reduce, which will also drive up the prices of these bonds. 

 

"Market is not taking switch (auction) as negative, since it will reduce government borrowing in FY26," a dealer at a private sector bank said. "Currently, pressure is only seen in the belly portion of the curve (bonds maturing between 7 years to 15 years). Long-term bonds may not rally due to higher SDL supply expectations...any significant movement in the longer term may only be seen in April."

A rise in five-year overnight indexed swap rates and the US treasury yield on 10-year benchmark note also weighed on bond prices, dealers said. The five-year OIS rose to 6.06% during the day. At 1154 IST, the US treasury yield on 10-year benchmark note rose to 4.07% from 4.05% Tuesday.

 

At 1210 IST, the turnover in the gilt market was INR 141.70 billion, lower than INR 168.15 billion at 1230 IST Tuesday, 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.  (Janwee Prajapati)

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India Gilts: Most down post switch notice on more supply in 6 yrs and above

 

	0951 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.67	98.72	98.64	98.72	98.73
YTM (%)	6.6680	6.6608	6.6723	6.6608	6.6600

 

	0951 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.01%, 2030
PRICE (INR)	98.99	98.99	98.99	98.99	98.99
YTM (%)	6.2742	6.2742	6.2742	6.2742	6.2734

 

MUMBAI--0951 IST--Prices of government bonds were mixed Wednesday, with most liquid papers down due to expectations of more longer-term gilt supply after the Reserve Bank of India said that the Centre would switch four bonds maturing in 2026-27 (Apr-Mar) with five longer-term bonds Monday. The five-year benchmark 6.01%, 2030 bond was steady. Several traders had already priced in the switch auction notice after some banks got calls during market hours Tuesday from the central bank, asking for feedback on a possible switch auction, dealers said. 

 

The government will switch the 6.97%, 2026 gilt, the 5.74%, 2026 gilt, the 8.15%, 2026 gilt and the 8.24%, 2027 gilt with the 8.32%, 2032 gilt, the 7.50%, 2034 gilt, the 7.62%, 2039 gilt, the 6.57%, 2033 gilt and the 7.40%, 2062 gilt. More supply of bonds maturing in six years and more weighed on bond prices, even though the switch auction will bring down the Centre's FY27 gross borrowing, dealers said. Traders fear that demand for the 6.68%, 2033 bond at the weekly gilt auction may be weak Friday. The government will sell INR 90 billion of the 6.03%, 2029 bond, INR 110 billion of the 6.68%, 2033 bond and INR 130 billion of the 7.24%, 2055 bond. Some traders booked profits after a rise in bond prices, while a slight rise in US Treasury yields also weighed, dealers said. 

 

"Just the gross borrow figure (for FY27) will go down, it won't have much effect now, it's not like an OMO (open market operation auction) where supply is going out of market. They're (Centre) just taking some (bonds) and giving back," a dealer at a private sector bank said. "But eventually, yields will go down." 

 

At 0951 IST, the turnover in the gilt market was INR 36.10 billion, higher than INR 29.90 billion at 0930 IST Tuesday, 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 mixed as RBI to conduct INR-250-bln switch, US ylds rise

 

MUMBAI – Prices of government bonds are seen opening mixed Wednesday after the Reserve Bank of India post market hours on Tuesday said the Centre will switch four gilts worth INR 250 billion maturing in 2026-27 (Apr-Mar) with five longer-term bonds Monday, dealers said. Short-term bond prices are likely to rise, while prices of bonds maturing in six years or more are likely to fall. An overnight rise in US Treasury yields may weigh on bonds maturing in 10 years or more.  

 

The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.61-6.70% yield Wednesday, after ending at INR 98.73, or 6.66% yield Tuesday. The yield on the benchmark 10-year US Treasury note was 4.06% at 0830 IST, inching higher than 4.03% at 1700 IST Tuesday, ahead of minutes of the US Federal Open Market Committee's January meeting, due at 0030 IST Thursday.  

 

On Monday, the government will switch four bonds maturing in FY27 with five bonds maturing within 2032 to 2062. Informist had reported Tuesday that the central bank had sought feedback from banks about conducting further switches in the current financial year to bring down the government's gross borrowing in FY27. The five-year benchmark 6.01%, 2030 bond ended 10 paise higher Tuesday from its previous close. A switch operation entails replacing a security maturing in the near term with a longer-maturity paper, effectively postponing the government's debt repayment. The RBI last week bilaterally switched four gilts maturing in FY27 worth INR 755.04 billion with the government.

 

Bond prices are likely to continue closely tracking the movement of the five-year overnight indexed swap rate, as the swap is seen hitting the psychologically crucial 6.00% level in the near term. Bonds may also track the movement of 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 Rajeev Pai

 

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