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Informist, Wednesday, Feb. 25, 2026

By Janwee Prajapati

MUMBAI – Prices of most government bonds ended higher Wednesday as traders speculated about on-screen purchases by the Reserve Bank of India for the second day in a row, dealers said. However, the 10-year benchmark 6.48%, 2035 bond ended off the day's high as traders placed short bets to make space in their portfolios ahead of the bond's auction Friday.

The 6.48%, 2035 gilt closed at INR 98.61, up from INR 98.58 Tuesday. Its yield closed at 6.6777%, down from 6.6812% at the end of Tuesday's trading session. The 6.68%, 2040 gilt was the second most-traded bond and ended 9 paise higher at INR 96.74 Wednesday, with traders speculating the central bank bought the 15-year benchmark gilt.

The speculation began during market hours Tuesday and gained steam after the 'Others' segment of gilt market participants--which includes insurance companies, provident funds, and the RBI--net bought gilts worth INR 74.84 billion Tuesday, according to data from Clearing Corp. of India. This is the largest single-day net purchase by this segment since Jun. 28, 2023, as per data. The recovery in the 10-year gilt's price Wednesday after a brief fall in the latter part of the day also led to increased hopes of central bank support for gilts, dealers said.

However, all traders did not agree with the theory that the RBI was behind the purchases, pointing to the thin trading volumes through the day. Dealers said the 'Others' purchases may have come from life insurers and pension funds piling into bonds maturing in 15 years and above after missing out on long-term bond supply at the last two auctions of gilts and state government securities. Moreover, the share of supply in the 15-year segment is seen lower in Apr-Sept after banks gave that feedback to the RBI. The Centre is expected to finalise its borrowing calendar by the end of March.

"The 'Others' segment bought yesterday (Tuesday) and volume was recorded in both 6.48%, 2035 bond and 6.68%, 2040 bond... but I don't think it's RBI," a dealer at a state-owned bank said. "What is the point of RBI buying at 6.67% (yield on 6.48%, 2035 bond) levels? It could be investors who bought in fear of missing out." Long-term bond prices outperformed gilts of other tenures on both Tuesday and Wednesday, but their trade volumes were modest, dealers said.

Traders awaited the segment-wise data on purchases and sales of gilts, which is released after market hours, to see whether the 'Others' segment remained a net buyer Wednesday. However, whether the RBI was involved will only be known when the central bank releases the weekly statistical supplement data on Mar. 6.

Traders were expecting liquidity conditions to remain easy after RBI Governor Sanjay Malhotra's comment Monday that the central bank would ensure enough durable liquidity in the banking system for the transmission of its policy rate cuts. Cut-off yields at the treasury bill auction were lower than expected, likely due to bets on money market rates remaining lower than the policy repo rate of 5.25% due to the lack of liquidity draining measures by the RBI, dealers said.

"The yield curve is now coming to a perfect shape," a dealer at a private-sector bank said. "Short-term bonds were underperforming earlier, but now they are intact and the long-term (yields) are coming down." Some traders were also short-selling the 10-year benchmark gilt, hoping to cover the sale cheaply at the auction Friday while adding the 6.68%, 2040 gilt.

The overall trade volumes remained low even after activity rose later in the day. Traders avoided aggressive bets before the INR 320-billion supply of the 6.48%, 2035 bond Friday, the last auction of the 10-year benchmark in the financial year ending Mar. 31. There was also some caution in the market ahead of the release of India's GDP growth data Friday, the first in the new series with base year FY23, dealers said.

Turnover in the government securities market was INR 333.35 billion, down from INR 536.05 billion Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the fourth sesssion running, there were no trades using the RBI's wholesale e-rupee pilot.

OUTLOOK

On Thursday, gilt prices may open tracking overnight movement in US Treasury yields. However, later in the day, prices may fall as traders make room for the gilt auction Friday, dealers said. The government will sell INR 320 billion of the 6.48%, 2035 bond, the last scheduled auction of the 10-year benchmark gilt in FY26. The large supply is likely to be mopped up, though traders expect lower demand from banks as they have focused on picking up higher-yielding state bonds in recent weeks, dealers said. Some traders expect demand at the auction to be subdued on caution ahead of India's GDP growth data.

After the auction, India's GDP for Oct-Dec based on the new series and second advance estimate for GDP growth in FY26 are scheduled to be released at 1600 IST. The data may lend cues to gilt prices if they change bets on the domestic rate trajectory, dealers said. India's GDP growth is likely to have slowed to 7.5% in the December quarter, according to the median of economists' estimates in an Informist poll. In Jul-Sept, GDP growth was 8.2% in the old series with FY12 as the base year.

After market hours Wednesday, the RBI announced the government will switch four bonds worth INR 250 billion maturing in FY27 with five longer-term gilts through an auction Monday. This upcoming supply may weigh on demand for gilts maturing in six to 13 years, dealers said.

Traders may also track any geopolitical developments between Iran and the US, dealers said. Significant movement in the rupee, the five-year OIS rate, and crude oil prices may also lend cues to gilts. The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.64-6.72% Thursday.

India Gilts: Up again, volumes jump; traders speculate 'Others' bought

MUMBAI--1557 IST--Prices of government bonds were up again on likely purchases from the 'Others' segment of bond market participants, which includes the Reserve Bank of India, dealers said. The rise in the 10-year benchmark 6.48%, 2035 gilt was capped ahead of its fresh supply Friday. At 1557 IST, the turnover in the gilts market was INR 270.35 billion, down from INR 424.80 billion at 1530 IST Tuesday but up 63% from the turnover at 1430 IST, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Until the sudden rise in bond prices late in trade, volumes were thin and trade was lacklustre owing to the lack of major cues until Friday and the lack of any large investor presence Wednesday, dealers said.

Traders speculated that the RBI bought the 10-year benchmark gilt Tuesday and Wednesday, with some speculating that the central bank may have picked up the erstwhile 10-year benchmark 6.33%, 2035 gilt and the 15-year benchmark 6.68%, 2040 gilt. Some traders do not believe the central bank is purchasing gilts on-screen and think long-term investors are purchasing gilts on bets of lower supply in Apr-Sept, or other institutional investors such as the Deposit Insurance and Credit Guarantee Corp. are doing so. Longer-term bonds were up throughout the day on bets of lower supply in the Centre's borrowing calendar for Apr-Sept, dealers said.

The 10-year benchmark bond was briefly down ahead of its fresh supply. The government will sell INR 320 billion of the 10-year benchmark gilt Friday. Since it is the penultimate scheduled gilt auction of the financial year ending Mar. 31, demand is largely seen robust. Moreover, active intervention by the RBI and the government to pull down bond yields has lessened fears of the yields rising sharply in the near term, dealers said. Some dealers, however, said there is not enough appetite for the large supply and demand may be weak. After the auction, India's GDP growth data for Oct-Dec, based on the new series, is due 1600 IST Friday.

"Auction is the only cue for now. Because of auction on same day, GDP also isn't being positioned for as much," a dealer at a state-owned bank said. "And the Iran-US talks are there tomorrow (Thursday), so if there is anything from that (then bond prices may react)." The next round of talks between the US and Iran on the latter's nuclear programme will be held Thursday in Geneva, Switzerland.

Bond prices changed little after cut-off yields at the Treasury bill auction were lower than expected. The auction result reflected comfortable liquidity in the banking system and bets that it would continue to remain so, especially after RBI Governor Sanjay Malhotra reiterated Monday that the central bank would ensure enough durable liquidity in the banking system for the transmission of policy rates, dealers said. For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.65-6.70%.  (Cassandra Carvalho)

India Gilts: Give up most gains in thin trade; hope of RBI buys limits fall

MUMBAI--1246 IST--Government bonds gave up most gains but speculation of on-screen gilt purchases by the Reserve Bank of India on Tuesday limited the fall in prices from the day's high, dealers said. Bond prices rose earlier in the day in thin trade, as traders refrained from placing aggressive bets ahead of the weekly gilt auction Friday. Some traders are also waiting for segment-wise data on purchases and sales of gilts that will be released post-market hours for any indication of the RBI purchasing bonds on-screen Wednesday. However, due to low volumes, most dealers said it was unlikely that the central bank was buying bonds Wednesday.

"Prices are up because of the 'Others' buy number, which is speculated to be RBI," a dealer at a private sector bank said. "Well it could be RBI but volume in 15-year was also seen (and it's a bond) which I don't think RBI will buy. Also, during auction days, investor demand is also firm, so they could also have bought good quantum." 

Long-term investors likely picked up gilts as they expect the supply of long-term bonds to reduce in the Centre's upcoming borrowing calendar for Apr-Sept period of 2026-27 (Apr-Mar), dealers said. Bankers have asked the RBI for gilt issuances in three- to seven-year tenures to be increased, and reduce supply of bonds maturing in more than 10 years as it would better match their liabilities, dealers said. This is likely to lead to yields of longer-term gilts over the 10-year benchmark bond compressing.

The government will sell INR 320 billion of the 10-year benchmark 6.48%, 2035 bond on Friday. Some traders expect demand at the auction to be subdued ahead of the India's GDP growth data due on the same day. India's GDP for Oct-Dec based on the new series and the second advance estimate for FY26 will lend direction to bond prices later Friday if the data changes bets on India's interest rate trajectory, dealers said. 

At 1246 IST, the turnover in the gilt market was INR 112.45 billion, lower than INR 141.95 billion at 1230 IST Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The rest of the day the yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.65-6.70%.  (Janwee Prajapati)

India Gilts: Up on speculation RBI bought gilts onscreen Tue

MUMBAI--0944 IST--Prices of government bonds rose Wednesday on speculation that the Reserve Bank of India bought gilts Tuesday, dealers said. The 'Others' segment of gilt market participants--which includes insurance companies, provident funds, and the RBI--net bought gilts worth INR 74.84 billion Tuesday, according to data from Clearing Corp. of India. This is the largest single-day net purchase by this segment since Jun. 28, 2023, data shows. 

Traders speculated that the RBI purchased gilts onscreen to offset a likely drain on rupee liquidity from a possible onshore settlement of its dollar/rupee forward contract sales in the non-deliverable forward market, dealers said. Around $3 billion of such contracts are set to mature Wednesday, dealers in the foreign exchange market said. Traders speculate that the RBI bought a large quantum of the 10-year benchmark 6.48%, 2035 gilt Tuesday. Some of the INR-75-billion buys by 'Others' were by insurance companies and provident funds, but these investors largely bought state bonds, dealers said. 'Others' net bought state bonds worth INR 31.49 billion Tuesday, according to data. Some traders however do not expect that the RBI bought gilts Tuesday, since such speculation recently has been dis-proved by RBI data. 

Gains were capped on short sales, and profit-booking, dealers said. Focus is also on the INR-320-billion gilt auction Friday, wherein the government will sell the 6.48%, 2035 gilt. 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. At 0944 IST, data showed trades worth INR 130.77 billion in the 6.48%, 2035 gilt, up from INR 118.22 billion Tuesday. 

"Whatever upward (price) move is there it won't last, market will be range-bound only today (Wednesday)," a dealer at a primary dealership said. "The short-sales will start again before the auction on Friday." 

At 0930 IST, the turnover in the gilt market was INR 23.80 billion, more than INR 10.85 billion at the same time 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 6.65-6.70% during the rest of the day.  (Cassandra Carvalho)

India Gilts: Seen slightly higher on speculation of RBI onscreen gilt buys

MUMBAI – Prices of government bonds are seen opening slightly higher Wednesday on speculation that the Reserve Bank of India purchased gilts onscreen Tuesday, dealers said. The 'Others' segment of gilt market participants--which includes insurance companies, provident funds, and the RBI--net bought gilts worth INR 74.84 billion Tuesday, according to data from Clearing Corp. of India. 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.66-6.72% Wednesday, after ending at INR 98.58, or 6.68% Tuesday. The yield on the benchmark 10-year US Treasury yield was 4.05% at 0815 IST, little changed from 4.04% at 1700 IST Tuesday.

Along with primary dealerships, the 'Others' category was the only net buyer of gilts Tuesday, data showed. Bond prices had risen sharply Tuesday tracking a fall in US yields and overnight indexed swap rates, and after state bond auction cut-off yields were lower than expected inspite of the large supply. A few dealers had speculated that the RBI was purchasing gilts onscreen, a day after Governor Sanjay Malhotra had reiterated that the central bank would ensure enough durable liquidity in the banking system for the transmission of policy rates in all markets, including government bonds. Some traders do not believe the RBI was buying gilts onscreen, since such speculation recently has been dis-proved by RBI data. 

Any gains in prices may be capped as traders look to short-sell the 10-year benchmark gilt ahead of INR 320 billion of its fresh supply Friday, dealers said. Traders await India's GDP growth for Oct-Dec based on new series and the second advance estimate for FY26, due Friday. GDP growth is seen at 7.5% for the December quarter from a six-quarter high of 8.2% in the September quarter, according to the median of estimates by 14 economists in an Informist Poll. The December quarter GDP data will be the first based on the new series, under which the base year has been updated to 2022-23 (Apr-Mar) from FY12.  (Cassandra Carvalho)  End

US$1 = INR 90.94

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

Edited by Rajeev Pai

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