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Informist, Monday, Feb. 23, 2026

By Janwee Prajapati

MUMBAI – Prices of government bonds ended sharply higher due to a fall in the overnight indexed swap rates, dealers said. The five-year OIS rates fell after Reserve Bank of India Governor Sanjay Malhotra said the central bank would provide sufficient durable liquidity in the banking system to ensure the transmission of its rate cuts to all asset classes, including money market rates and bonds.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.47, up from INR 98.30 Friday. The bond's yield closed at 6.6970%, down from 6.7214% at the end of Friday's trading session. The five-year OIS rate ended at 6.04%, its lowest in a week and a fall of 6 basis points from Friday's close.

"(Gilt) prices were broadly range bound, some bought after the US tariff news and a fall in OIS," a dealer at a private sector bank said. "...OIS fell after the governor talked about sufficient liquidity. He specifically mentioned that RBI will be proactive and pre-emptive...that was positive for the market."

The US Supreme Court Friday struck down most of US President Donald Trump's sweeping tariffs, which weakened the dollar index and led to an early rise in the rupee that aided gilts. However, with the domestic unit erasing most gains by the end of its trade at 1530 IST, it was the RBI governor's assurance of surplus liquidity that led to traders picking up bonds and receiving OIS rates, dealers said. The overnight Mumbai Interbank Outright Rate--the floating leg of the OIS contract--has been set below the policy repo rate of 5.25% since Feb. 2.

Trading volume was modest as traders refrained from buying gilts aggressively amid global and domestic uncertainties. It picked up in the second half due to two-way trading interest at the psychologically crucial 6.70% yield on the 10-year benchmark gilt, dealers said. Traders had booked profits at the key level through the day but the purchases at the close helped the 6.48%, 2035 bond end at the day's high and slightly below 6.70%.

However, the rise in bond prices was capped due to the heavy supply of state bonds. On Tuesday, 16 states plan to raise INR 445.50 billion, in line with the indicated amount of INR 442.21 billion in the Jan-Mar borrowing calendar. Banks will likely buy the state bonds for their held-to-maturity books as they have enough space after selling bonds to the RBI at open market operations. Investors have also preferred state bonds due to their spread over gilts of similar tenures, dealers said.

At the switch auction, state-owned banks were the largest participants, dealers said. Most institutions refrained from participating as they either did not have the source security at a profitable level or they did not possess the security at all, dealers said. The result the auction was broadly along expected lines and failed to move bond prices. The government accepted offers worth INR 153.68 billion at the auction, against the notified amount of INR 250 billion.

Some traders had feared bond prices would fall Monday due to a risk-off global sentiment amid escalating military tensions between the US and Iran. However, the geopolitical conflict had little impact on the fixed income and rates markets of emerging market economies and India's gilt market followed suit, dealers said. However, a potential rise in crude oil prices may spur inflation at a period when the market is pricing it to be benign and near the RBI's 4% target in FY27, making it a key risk factor, they said.

"The next technical level is 6.74-6.75% (yield on the 6.48%, 2035 bond), we will see value buying at these levels," a dealer at a primary dealership said. "Everybody will buy at these levels because they do expect the RBI to support the yields at these levels...It (RBI) will not let the yields rise above this."

Turnover in the government securities market Monday was INR 354.75 billion, down from INR 430.20 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trade using the RBI's wholesale e-rupee pilot Monday, the same as Friday.

OUTLOOK

Gilt prices may open slightly lower Tuesday as traders make room for the INR 445.50-billion state bond auction 1030-1130 IST, dealers said. The supply is in line with the indicative calendar but would put pressure on gilts as investors would look to mop-up the fresh issuance at higher yields. Some dealers had been worried the actual amount would exceed expectations, as states typically increase their borrowing towards the end of the March quarter.

Traders may also track the overnight movement in the US Treasury yields. Further developments on rising tensions between Iran and the US will also be tracked, dealers said.

On Friday, government will sell INR 320 billion of 6.48%, 2035 bond ahead of which bond prices will likely slip as traders will place short bets to make space in their portfolio for the huge supply. Any such impact on bond prices will likely be seen Wednesday onwards, dealers said.

After the auction on Friday, India's GDP for Oct-Dec based on the new series and second advance estimate for GDP growth in FY26 will lend direction later in the day if the data changes bets on the rate trajectory, 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 6.68-6.75% Tuesday.

India Gilts: Remain up on fall in OIS after RBI Malhotra's liquidity remarks

NEW DELHI--1610 IST--Government bond prices remained higher tracking a fall in overnight indexed swap rates following remarks from Reserve Bank of India Governor Sanjay Malhotra earlier in the day. Trade volumes remained thin amid uncertainty on the global front and a lack of view on the direction in which prices were heading, dealers said.

"We have moved down 2 bps (on the 10-year benchmark yield) because of the governor's comments on liquidity," a dealer at a primary dealership said. "It's nothing new, but a reiteration is also good for the market as it suggests he is going to continue keeping (money market) rates lower." The weighted average call rate, the operating target of monetary policy, was 5.13% Monday, below the policy repo rate of 5.25%.

Speaking at a press conference following the RBI's 621st board meeting, Malhotra reiterated that the RBI would be proactive and pre-emptive in providing liquidity and ensuring enough durable liquidity in the banking system, net of seasonal outflows, to make sure of rate transmission to all money market instruments. These were similar to remarks he had made on Feb. 6 at the conclusion of the most recent Monetary Policy Committee meeting.

Following Malhotra's comments, the five-year OIS rate fell to a low of 6.0450%, down nearly 5 basis points from Friday's close. The yields on short-term bonds fell more than the 10-year benchmark 6.48%, 2035 gilt due to the optimism on liquidity, dealers said. Some dealers also trimmed holdings of the 10-year security on the view that its yield may not sustain below the psychologically crucial 6.70% mark considering upcoming state bond and gilt supply.

At 1608 IST, turnover in the gilts market was INR 283.15 billion, against INR 388.10 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 6.68-6.74% for the rest of the day.  (Aaryan Khanna)

India Gilts: Up again on OIS fall; traders assess Malhotra's remarks

MUMBAI--1308 IST--Prices of government bonds were up again in thin trade, after giving up gains earlier in the day. The five-year overnight indexed swap rate fell to 6.07%, from 6.10% Friday. Some dealers said comments by Reserve Bank of India Governor Sanjay Malhotra were slightly positive, while most traders said the remarks were not significantly new. At a joint press conference with Finance Minister Nirmala Sitharaman, Malhotra said the RBI will revise its CPI inflation forecasts due to the new CPI series released in February. Malhotra said the government will "be very quickly" releasing its review of the RBI's inflation target. Malhotra also said gilt switches were a tool to bring down the Centre's FY27 gross borrowing figure.

"I think it was the gross borrowing comment market reacted to but if they had considered this as something new then that's a surprise," a dealer at a private sector bank said.

State-owned banks were the largest participants at the INR-250-billion switch auction, dealers said. Cut-off prices on the destination securities are seen largely at those indicated by the Financial Benchmarks India Pvt. Ltd, dealers said. Several banks do not hold the source securities at profitable prices in their books, while many do not have stock of the source securities, dealers said. Some dealers said tendering would be at prices above indicative prices since banks will take the opportunity to book profits coupled with the lack of any open market operation auctions, dealers said. Additionally, after bond sales to the RBI at OMO auctions since December, banks have appetite to replenish their investment books with the destination securities at current yield levels, they said.

"There's profit pressure on banks this time, so cut-offs (prices) could be 1-2 paisa lower (than indicative prices) but not more than that," a dealer at a state-owned bank said.

Uncertainty about the impact of US President Donald Trump's tariffs on India and the India-US trade deal, along with tensions in West Asia, weighed on sentiment, dealers said. Traders await the INR-445.50-billion state bond auction Tuesday, and they are likely to trim portfolios to make room for the higher-yielding securities, dealers said.  

At 1308 IST, turnover in the gilt market was INR 133.55 billion, lower than INR 160.45 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 6.70-6.76% for the rest of the day.  (Cassandra Carvalho and Janwee Prajapati)

India Gilts: Up on fall in OIS, rupee rise after US SC scraps Trump tariffs

MUMBAI--0942 IST--Prices of government bonds were up Monday, tracking a sharp rise in the rupee against the dollar and a fall in overnight indexed swap rates after the US Supreme Court struck down most of US President Donald Trump's tariffs, dealers said. The five-year OIS rate last traded at 6.08% from 6.10% Friday. The rupee last traded at 90.73 per dollar from 90.98 per dollar at 1530 IST Friday.

"The IRS (interest rate swap) market is 1-2 basis points down, so automatically NDS (G-sec market) will rise," a dealer at a state-owned bank said. "Because of OIS and rupee rise a small rally can be there but because of demand-supply it may not last." The government will sell INR 320 billion of a 10-year gilt Friday. States will raise INR 445.50 billion through the sale of bonds Tuesday. 

Traders await the INR-250-billion switch auction. Participation is seen mixed; several banks do not have much stock of the source securities, some dealers said, while others see robust participation since the Reserve Bank of India had asked banks for feedback on which source securities to include in the auction, dealers said. The government will switch four gilts, worth INR 250 billion maturing in FY27, Monday with five other bonds.

At 0942 IST, the turnover in the gilt market was INR 25.30 billion, similar to INR 26.10 billion at 0930 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 6.70-6.76% for the rest of the day.  (Cassandra Carvalho)

India Gilts: Seen largely steady with downward bias amid mixed cues

MUMBAI – Prices of government bonds are seen opening largely steady with a downward bias Monday due to heavy supply of state bonds, tensions between the US and Iran, and auction of a 10-year gilt this week, dealers said. Traders will also assess the impact of US President Donald Trump's 15% global tariff announced over the weekend, after the US Supreme Court struck down most of his levies Friday. Bonds may also track the movement of the rupee against the dollar during the day, dealers said. 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.70-6.75% Monday, after ending at INR 98.30, or 6.72% yield Friday. Gilts are not traded Saturdays. The yield on the benchmark 10-year US Treasury yield was 4.09% at 0800 IST, up from 4.08% at 1700 IST Friday, hitting a high of 4.11% over the weekend. US yields rose as the striking down of tariffs would likely increase the US government's budget deficit and reduce constraints on economic growth. There was no cash trading of Treasuries in Asian trade since Japanese financial markets are closed for the Emperor's birthday.

On Friday, the US Supreme Court struck down most of Trump's original slate of tariffs -- announced on the liberation Day in April last year. Shortly after the ruling, Trump imposed a new 10% global levy under another trade law provision before increasing that to 15% on Saturday. The new provision allows tariffs of up to 15% for 150 days without Congressional approval. India and the US have deferred trade talks scheduled for this week after the development, as per media reports. On the global front, traders will also track the movement of crude oil prices and tensions between the US and Iran, they said. Both countries will hold talks on Thursday.

On the domestic front, 16 states will raise INR 445.50 billion through the sale of bonds Tuesday, the Reserve Bank of India said post market hours Friday. Gujarat and Maharashtra have provided for a greenshoe. This is largely in line with the INR-442.21-billion figure in the indicative calendar for state borrowing for Jan-Mar. Traders were fearing supply of INR 400 billion or more, and some traders expect bond prices to trade lower due to the heavy supply.

Moreover, focus this week will be on the weekly gilt auction. The government will sell INR 320 billion of a 10-year gilt Friday, the last scheduled 10-year gilt auction for this financial year. Traders will place short bets on gilts, especially on the 6.48%, 2035 bond to make room for the fresh supply, and bond prices are unlikely to sustain any sharp rise until the auction, dealers said.  

Views on India's interest rate trajectory are little changed after the release of the minutes of the RBI's Monetary Policy Committee meeting, dealers said. The minutes indicated that panel members were slightly more open to further policy easing that expected, some dealers said, while others said the minutes were in line with the MPC outcome earlier this month.

The government will switch four gilts maturing in FY27 worth INR 250 billion Monday with five other bonds. Participation at the auction is seen firm, dealers said.  (Cassandra Carvalho)

End

US$1 = INR 90.88

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

Edited by Akul Nishant Akhoury

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