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Informist, Friday, Feb. 20, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds slumped Friday due to rising tensions between US and Iran and a jump in crude oil prices, dealers said. A fall in the rupee against the dollar and rise in overnight indexed swap rates also weighed on bond prices. Traders placed short bets on gilts to trim risk ahead of the weekend, they said. The result of the INR-330-billion gilt auction was largely along expected lines and traders had feared much worse cut-off prices, dealers said.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.30, down from INR 98.60 Wednesday. The bond's yield closed at 6.7214%--the highest since Feb. 10--and up from 6.6780% at end of Wednesday's session. The 10-year benchmark bond yield rose 4 basis points Friday, the most since Feb. 6--the day of the Reserve Bank of India's Monetary Policy Committee meeting. Financial markets administered by the RBI were shut Thursday for Shivaji Jayanti.

"People are emptying auction positions and next week we also have 10-year gilt auction," a dealer at a state-owned bank said. "Plus Brent (crude oil futures) has gone up quite a lot, its above $71 per barrel, so because of that gilts have fallen and 5-year OIS (overnight indexed swap rate) has gone to near 6.10% so sentiment has just worsened. Yields are moving upward only, 10-year (benchmark) yield is on track for above 6.77% again next week, it'll be the third time we're hitting 6.77% this month itself."

 

Foreign banks likely sold gilts due to geopolitical tensions and "risk-off" sentiment, dealers said. Brent crude oil for April delivery rose to $71.39 a barrel at 1700 IST from $68.57 a barrel at the same time Wednesday. US President Donald Trump said the world will find out "over the next, probably, 10 days" if the US will take military action against Iran. Domestic dealers feared a rise in inflation due to imports of higher-priced crude oil. Traders expect bond yields to rise in the near term, and the 10-year benchmark yield is seen hitting 6.75%. However, traders speculate that the Reserve Bank of India will not be comfortable with such high yields and may step in through gilt purchases either on-screen or through auction, dealers said.

 

Further, traders pared some bets of further rate cuts in the US in the rest of 2026 after the minutes of the US Federal Open Market Committee's latest meeting showed some policymakers considering rate hikes due to elevated inflation, they said. The yield on the benchmark 10-year US Treasury note was 4.08% at 1700 IST, after hitting a high of 4.11% Thursday and up from 4.07% at the same time Wednesday.

 

The government will sell INR 320 billion of a 10-year bond at the gilt auction next week, and traders began placing short bets to make room for the large supply Friday itself, dealers said. Traders also feared heavy state bond supply of around INR 450 billion next week, they 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 105.22 billion in the 6.48%, 2035 gilt, up from INR 105.07 billion Wednesday.

 

The result of the INR-330-billion gilt auction was largely along expected lines, dealers said. The RBI set a cut-off price on the 7.24%, 2055 gilt at INR 97.06, lower than an Informist poll estimate of INR 97.16. However, bond traders were expecting much lower cut-offs, they said.

 

Turnover in the government securities market Friday was INR 430.20 billion, up from INR 389.15 billion Wednesday, 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 Friday, whereas one trade of INR 250 million in the 10-year benchmark gilt was conducted through this method Wednesday.

 

OUTLOOK

Gilts are not traded Saturdays. On Monday, bond prices may open lower after the RBI said that 16 states would raise INR 445.50 billion through bond issuances Tuesday, slightly higher than the indicated amount of INR 442.21 billion in the states' borrowing calendar for Jan-Mar. Dealers were fearing an amount higher than indicated, since states usually increase their borrowing close to the end of the March quarter- a seasonally high period of state borrowing, dealers said.

 

Traders may also track the minutes of the Monetary Policy Committee's February meeting released post market hours Friday. Members of the RBI's rate-setting panel said they would remain data-dependent going ahead.

 

Traders may also track the movement of US Treasury yields after the release of economic data, including US Personal Income and Outlays for December. Further developments on rising tensions between Iran and US will be watched.

 

Bonds maturing in six years or more may be under selling pressure due to incoming supply of gilts of these tenures at the INR-250-billion gilt switch auction Monday, dealers said. Later next 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 on Feb. 27. Fresh supply of INR-320-billion at the next gilt auction will likely see a build-up of short bets in the run up to the auction, dealers said. Significant movement in the rupee, the five-year OIS rate, and crude oil prices may also lend cues, dealers said. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.68-6.77% Monday.

 

	FRIDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.3000	6.7214%	98.6000	6.6780%
6.33%, 2035	97.6525	6.6737%	97.8800	6.6396%
6.01%, 2030	98.9375	6.2878%	98.9700	6.2789%
6.68%, 2040	96.2650	7.0976%	96.5250	7.0676%
6.90%, 2065	92.7200	7.4758%	92.7800	7.4707%

 

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India Gilts: Remain down on rise in 5-year OIS, fall in rupee

 

	1520 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.27	98.47	98.21	98.47	98.60
YTM (%)	6.7254	6.6969	6.7341	6.6969	6.6780

 

MUMBAI--1520 IST--Prices of government bonds remained down and were little changed as the weekly gilt auction result was broadly along expected lines, dealers said. Rise in tensions between the US and Iran, rise in five-year overnight indexed swap rate, and fall in rupee also weighed on bond prices, dealers said. The five-year OIS rose to 6.10% from 6.04% Wednesday, up 6 basis points. The rupee fell to an intraday low of 90.9875 against the dollar. It closed the day at 90.9825 to the dollar, down from 90.6675 on Wednesday.

 

"It is likely that offshore players are selling g-sec (gilts)," a dealer at a private sector bank said. "...given the geopolitical situation it is likely that they are selling the emerging market bonds. Also, the INR (rupee) has fallen (against the dollar), so it is also weighing."

 

At the INR-330-billion weekly gilt auction, demand for the 6.68%, 2033 paper and 6.03%, 2029 paper was firm from both state-owned and private sector banks, dealers said. Banks likely bought the seven-year bonds for their held-to-maturity portfolios and the three-year bonds for asset-liability management books.

 

Traders picked up the seven-year bond in the secondary market as some traders had expected the cut off yield on this bond to rise above the 10-year benchmark 6.48%, 2035 bond, which did not materialise, dealers said. The Reserve Bank of India set the cut off yield at 6.7080% and cut off price of INR 99.84 on the 6.68%, 2033 bond, similar to the expected level of 6.71% and INR 99.83 according to the median of an Informist poll.

 

The RBI set a cut-off of INR 97.06 on the 7.24%, 2055 bond against an expected cut off of INR 97.16, as market participants remained cautious of higher supply of state bonds in the upcoming auctions, dealers said. Some traders expect the notified amount of the state bond auction on Feb. 24 to be higher than the indicated amount of INR 442.21 billion. Traders seem to prefer state government bonds over central government bonds as they consider the yields on the former to be lucrative.

 

"The (cut-off yield on) long-term paper was slightly higher than expectation," a dealer at a primary dealership said. "...Also, the weighted average price and yield is similar to cut-off levels which means that the overall sentiment itself was negative. People are in no hurry to buy long-term bonds now."

 

Traders also refrained from placing aggressive bets ahead of the INR-250-billion switch auction Monday, dealers said. Moreover, the government plans to sell INR 320 billion of a 10-year bond at next week's gilt auction, which is expected to weigh on the 10-year benchmark gilt's price due to the heavy supply, dealers said.

 

At 1520 IST, turnover in the gilt market was INR 343.40 billion, higher than INR 324.45 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 6.68-6.76% for the rest of the day. (Janwee Prajapati)

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India Gilts: Down more on rise in 5-yr OIS; demand for 7.24%, 2055 seen poor

 

	1231 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.27	98.47	98.25	98.47	98.60
YTM (%)	6.7258	6.6969	6.7287	6.6969	6.6780

 

MUMBAI--1231 IST--Prices of government bonds remained sharply down, and the benchmark 10-year 6.48%, 2035 bond yield rose above the key 6.72% level, as traders feared tepid demand for the long-term 7.24%, 2055 bond at the weekly gilt auction, dealers said. A rise in the five-year overnight indexed swap rate to 6.11% led to a further fall in bond prices. Geopolitical uncertainty due to rising tensions between the US and Iran and its subsequent impact on crude oil prices also weighed on prices, dealers said. 

 

At the INR-330-billion gilt auction, demand is seen firm for the 6.03%, 2029 bond and the 6.68%, 2033 bond. Traders across market segments, including foreign investors, likely bid for the 2029 paper. Banks' asset and liability managers bid for both the 2029 and 2033 bonds, dealers said. An Informist poll estimated the cut-off on the 2033 bond at INR 99.83 or 6.71%, a yield similar to that of the current 10-year benchmark yield.

 

"While supply is coming to seven-year at the switch (auction), it's only (INR) 250 billion and moreover, banks are going for this for HTM (held-to-maturity) books because with the seven-year you're reducing duration while getting a 10-year yield," a dealer at a private sector bank said. The government will switch four gilts maturing in 2026-27 (Apr-Mar) with five bonds maturing in six years and above at the INR-250-billion switch auction Monday. More supply of the longer-term gilts weighed on the appetite for the 2033 bond at Friday's auction, some dealers said.

 

However, focus is largely on the 2055 bond since large long-term bond investors likely did not bid aggressively for the bond, dealers said, even as some traders were initially speculating good demand for the bond since Friday is the bond's last auction for this financial year, dealers said. 

 

"Risk-off" sentiment due to geopolitical tensions and pared bets of further rate cuts in the US in the rest of 2026 led to offshore traders aggressively paying fixed rate contracts in swap rates, dealers said. The five-year OIS rate hit a day's high of 6.11%, the highest in around a week, which weighed on bond prices, dealers said. The government will sell INR 320 billion of a 10-year bond at next week's gilt auction, further weighing on the 10-year benchmark gilt's price as traders braced for the heavy supply, dealers said.

 

At 1231 IST, the turnover in the gilt market was INR 160.45 billion, higher than INR 145.75 billion at the same time 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 6.68-6.76% for the rest of the day. (Cassandra Carvalho)

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India Gilts: Sharply down on rise in crude prices, short bets before auction

 

	1001 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.35	98.47	98.33	98.47	98.60
YTM (%)	6.7149	6.6969	6.7171	6.6969	6.6780

 

MUMBAI--1001 IST--Prices of government bonds were sharply lower Friday due to a jump in crude oil prices and rising geopolitical tensions between the US and Iran, dealers said. Moreover, traders placed short bets ahead of the INR-330-billion gilt auction. The yield on the benchmark 10-year 6.48%, 2035 bond hit 6.7175%, the highest since Feb. 12. 

 

Crude oil prices rose to a six-month high as Iran organised a collaborative naval drill with Russia, as reported by Iran's Fars news agency, shortly after it closed the Strait of Hormuz for several hours for military exercises. Brent crude contracts for April delivery rose to $71.96 a barrel in Asian trade at 1001 IST from $68.57 a barrel at 1700 IST on Wednesday. US President Donald Trump cautioned Iran on Thursday that it needs to come to an agreement regarding its nuclear programme or face "bad consequences," and seemed to establish a 10-day timeline before the US could respond.

 

The escalation in geopolitical tensions is likely to weigh on demand at the weekly gilt auction, though demand is largely seen firm, dealers said. Banks are interested in purchasing the 6.68%, 2033 gilt at yield comparable to the last traded yield on the 10-year benchmark 6.48%, 2035 gilt, dealers said.

 

The minutes of the US Federal Open Market Committee's latest meeting released 0030 IST Thursday also dampened sentiment and traders unwound some bets of further rate cuts in the US in the remainder of 2026, dealers said. The minutes showed that some policy makers considering rate increases if inflation stayed high.

 

"The crude oil rates have gone up due to US-Iran, that's an issue. Then we also have G-sec auction today (Friday) which is another reason," a dealer at a state-owned bank said. "So weak sentiment right now. Negativity from FOMC minutes also (weighing). Two, three factors came together and became too much."

 

At 1001 IST, the turnover in the gilt market was INR 65.00 billion, higher than INR 23.50 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 6.68-6.76% for the rest of the day. (Cassandra Carvalho)

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India Gilts: Seen tad lower before INR-330-billion fresh supply

 

MUMBAI – Prices of government bonds are seen opening a tad lower Friday before fresh supply at the gilt auction, dealers said. The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.63-6.72% yield Friday, after ending at INR 98.60, or 6.68% yield Wednesday. Financial markets administered by the Reserve Bank of India were shut Thursday for Shivaji Jayanti.

 

The yield on the benchmark 10-year US Treasury note was 4.07% at 0830 IST, after rising to 4.11% Thursday, and unchanged from 4.07% at 1700 IST Wednesday, after minutes of the US Federal Open Market Committee's January meeting showed policymakers largely concurred to maintain interest rates but were divided on future actions, with "several" considering rate increases if inflation stayed high, and others favoring additional cuts if inflation fell as anticipated, and the entire board deliberating the potential economic impacts of artificial intelligence.

 

At the INR-330-billion gilt auction, 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 2029 paper and the 2055 is seen firm. Long-term investors are seen bidding for the 2055 bond since it is the last auction of the bond this financial year, dealers said. The cut-off yield on the 2033 bond is seen similar to the current yield on the benchmark 10-year gilt, as more supply in this tenure is expected in financial year 2026-27 (Apr-Mar), along with more supply supply of bonds maturing in six years and higher at the INR-250-billion switch auction Monday, dealers said.

  

Traders also await the release of the minutes of the Reserve Bank of India's Monetary Policy Committee's February meeting later in the day. Bond prices are likely to continue closely tracking the movement of the five-year overnight indexed swap rate, and offshore flows into gilts and swaps. Foreign banks were the largest net buyers of gilts Wednesday, net purchasing gilts worth INR 13.33 billion. Bonds may also track the movement of the rupee against the dollar during the day, dealers said. Escalating geopolitical tensions between the US and Iran and the rise in crude oil prices is also likely to weigh on bond prices, they said. (Cassandra Carvalho)

 

End

 

US$1 = INR 90.9825

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

 

Edited by Ashish Shirke

 

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