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Informist, Thursday, Feb. 26, 2026

By Janwee Prajapati

MUMBAI – Prices of the most-traded government bonds ended lower Thursday as traders made space in their portfolio ahead of the weekly gilt auction Friday, dealers said. Some traders also expect India's GDP growth data to be higher than earlier expectations, which also weighed on the bond prices.

The 6.48%, 2035 gilt closed at INR 98.49, down from INR 98.61 Wednesday. Its yield closed at 6.6943%, up from 6.6777% at the end of Wednesday's trading session. Bonds maturing in 30 years and more erased all gains from earlier in the day but did not fall sharply. Losses in bonds maturing in up to five years were also limited.

The upcoming auction's huge 10-year benchmark bond supply weighed on prices on the 6.48%, 2035 and 6.68%, 2040 gilts the most. The government will sell INR 320 billion of 6.48% 2035 bond Friday. Demand at the auction is likely to be strong due to short covering and it being the last 10-year bond auction of FY26, dealers said. However, some fear a higher GDP print might impact bidding, dealers said.

Most of the market expects GDP growth of 7.5% on year in the December quarter, matching the Informist poll median. This is not likely to induce fresh bets on further repo rate cuts and instead may reinforce the view the Reserve Bank of India's Monetary Policy Committee will hold the repo rate at the current 5.25% through 2026-27 (Apr-Mar). However, some traders fear growth could be closer to 8% or higher, given it will be the first GDP reading under the new series with the base year updated to FY23 from FY12. This may reignite fears of repo rate hikes in Jan-Mar 2027, dealers said.

"Prices are down due to auction pressure and some people are expecting GDP number around 8.2% now," a dealer at a private-sector bank said. "...GDP number is expected higher because it will be calculated on a new base year." Some dealers also pointed to the fact that the last base year revision for GDP had shown substantially higher growth numbers when introduced in 2013.

Losses were limited as traders continued to speculate that the RBI purchased gilts in the secondary market this week, though talk of further purchases on Thursday were scant. The 'Others' segment--which includes insurance companies, provident funds, and the RBI--were the largest net buyers Tuesday and Wednesday, picking up INR 88.30 billion of gilts. The central bank's actual activity this week will only be known on Mar. 6 when it releases weekly statistical supplement data.

Some traders see the purchases as a move by the central bank to keep the 10-year benchmark yield below 6.70%, dealers said. Another section of the market rubbished the speculation entirely as trade volumes were thin on both Wednesday and Thursday, unusual for days when the RBI is buying bonds on-screen. Moreover, the 15-year benchmark 6.68%, 2040 gilt--seen a target for its purchases--also ended lower Thursday.

"Trade volume doesn't suggest it (RBI) is there," a dealer at a primary dealership said. "Tuesday he (RBI) must be there since the yield (on the 10-year benchamrk 6.48%, 2035 bond) rose to 6.70%...I think it will buy again on Monday because GDP is likely to be higher."

The 6.48%, 2035 bond had opened higher after the RBI announced after market hours Wednesday that the government would switch four gilts worth INR 250 billion at auction Monday. Since the government had switched bonds with the market Monday, another such auction so soon was unexpected but was likely due to the Centre's aim in bringing down its gross market borrowing in the financial year beginning April, dealers said. 

Including two bilateral switches with the RBI, the government's total gilt switches in FY26 have risen to INR 2.55 trillion. The reduction in its redemptions in FY27 has led to the projected gross borrowing for the next financial year falling to INR 16.29 trillion from the budgeted INR 17.20 trillion. This is likely to fall further depending on the subscription at the switch auction Monday and any further gilt switches the government conducts of FY27 bonds.

Long-term bonds ended largely steady and have gained sharply since Tuesday. With only one long-term bond auction left in FY26, investors likely picked up gilts in the secondary market after missing out of previous auctions of long-term bonds, both from the Centre last week and state bonds on Tuesday, dealers said.

The 6.36%, 2031 and 6.01%, 2030 bonds were the third- and the fourth-most heavily traded gilts on RBI's Negotiated Dealing System-Order Matching platform Thursday. Both the five-year bonds have been in favour with banks, along with other short-term gilts, following RBI Governor Sanjay Malhotra's comments Monday assuring a banking system liquidity surplus for the transmission of the rate cuts to all markets, dealers said.

Turnover in the government securities market was INR 362.80 billion, slightly higher than INR 333.35 billion Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the fifth sesssion running, there was no trade using the RBI's wholesale e-rupee pilot.

OUTLOOK

On Friday, gilt prices may open steady ahead of the weekly gilt auction at 1030-1130 IST, dealers said. The overnight movement in US Treasury yields may also lend cues.

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.

The auction result may lend direction to prices but traders are likely to wait for the release of GDP data at 1600 IST before placing significant bets, dealers said. The median estimate in an Informist poll puts India's GDP growth at 7.5% for the December quarter. The 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 Friday. In Jul-Sept, GDP growth was 8.2% in the old series with FY12 as the base year.

Traders are positioning for a reading around 8%, which may stoke concern about a quicker rate hike if inflation rises past the RBI's 4% target in the second half of 2026, dealers said. If GDP growth for the December quarter is in line with or slightly lower than expectations, bond prices may rise. 

Traders may also track any geopolitical developments between Iran and the US, with crucial nuclear talks scheduled later Thursday, dealers said. Significant movement in the rupee, the five-year overnight indexed swap 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 6.64-6.75% Friday.

India Gilts: Down on short sales before auction, lack of large investor buys

MUMBAI--1556 IST--Prices of government bonds were down, as traders placed short bets on gilts ahead of fresh supply of the benchmark 10-year 6.48%, 2035 gilt, dealers said. Some traders also sold gilts on hopes of India's GDP growth for Oct-Dec based on the new series printing on the higher side of expectations--near or above 8.0%, dealers said. The volumes and price action during the day did not indicate purchases by a large investor such as the Reserve Bank of India, contrary to what traders were expecting, which led them to trim their bets on gilts, dealers said. 

Due to the amount of short sales in the 10-year benchmark 6.48%, 2035 gilt, traders expect robust demand at the gilt auction Friday as they look to cover short bets at a lower price. The government will sell INR 320 billion of the bond Friday. After the auction, traders look to India's GDP growth data for Oct-Dec based on the new series, due at 1600 IST Friday. Traders largely expect a print of 7.5%, the same as an Informist poll median. Some traders fear that the print could be closer to 8% or higher, especially since 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. State Bank of India economists estimate a print of 8.1%.

Traders were also expecting the RBI to buy gilts onscreen Thursday, after the 'Others' segment of gilt market participants--which includes insurance companies, provident funds, and the RBI--were the largest net buyers Wednesday and Tuesday. 'Others' net bought gilts worth INR 13.46 billion Wednesday, after net purchases of INR 74.84 billion Tuesday, according to data from Clearing Corp. of India. However, there was no indication of any such purchases Thursday, which led traders to place short bets, dealers said. 

"When the expected flow did not come then people started selling," a dealer at a private sector bank said. "They were waiting that prices will rise, but volumes also low, and prices didn't move."     

At 1556 IST, the turnover in the gilt market was INR 319.60 billion, higher than INR 216.15 billion at 1530 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 6.66-6.72% for the rest of the day. (Cassandra Carvalho)

India Gilts: Mixed; 10-yr benchmark tad down ahead of auction, GDP data Fri

India Gilts: Mixed; 10-yr benchmark tad down ahead of auction, GDP data Fri

MUMBAI--1235 IST--Prices of government bonds were mixed Thursday. The 10-year benchmark 6.48%, 2035 gilt was a tad down ahead of the INR 320 billion of its fresh supply at the gilt auction Friday. Caution before the release of India's GDP growth data for Oct-Dec Friday limited trade activity, dealers said. 

Losses in the 10-year benchmark were limited as some traders continued to speculate that the Reserve Bank of India bought gilts in the secondary market. "Tuesday's 7 thousand (INR 74.84 billion) was definitely RBI, and yesterday's (Wednesday) 1 thousand (INR 13.46 billion) also...a similar 10 paise (upward) move was seen today (Thursday) also," a dealer at a state-owned bank said. "It could be RBI in 10-year (6.48%, 2035) and 15-year (6.68%, 2040) bond." The 'Others' segment of gilt market participants--which includes insurance companies, provident funds, and the RBI--net bought gilts worth INR 13.46 billion Wednesday, after net purchases of INR 74.84 billion Tuesday, according to data from Clearing Corp. of India.    

Some traders placed short bets ahead of the weekly gilt auction to make space in their portfolio for the fresh supply. Demand at the auction is likely to be firm as traders look to cover short bets. Additionally, this is the last auction for the 6.48%, 2035 bond in financial year 2025-26 (Apr-Mar), dealers said. The government will sell INR 320 billion of the 6.48%, 2035 bond on Friday. The large incoming supply weighed on bond prices, dealers said. Foreign banks were likely selling gilts, dealers said.   

India's GDP growth 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 Friday. The median estimate in an Informist poll puts India's GDP growth at 7.5% for the December quarter. Some traders expect the GDP print to match poll estimates, while others expect a slightly lower figure, which could boost bond prices, dealers said.

At 1235 IST, the turnover in the gilt market was INR 162.90 billion, higher than INR 97.75 billion at 1230 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 6.65-6.70% during the rest of the day. (Janwee Prajapati)

India Gilts: Up on switch auction notice, bets that RBI bought gilts onscreen

MUMBAI--0959 IST--Prices of government bonds were up Thursday, as traders speculated on-screen purchases by the Reserve Bank of India, and after the central bank said it would conduct a switch auction of INR 250 billion Monday, dealers said. Several traders refrained from placing short bets on bonds even ahead of the INR 320 billion of fresh supply, with the view that the central bank would limit a rise in bond yields, 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 0959 IST showed trades worth INR 129.44 billion in the 6.48%, 2035 gilt, down from INR 131.77 billion Wednesday. The government will sell INR 320 billion of the 10-year benchmark 6.48%, 2035 gilt Friday.  

The 'Others' segment of gilt market participants--which includes insurance companies, provident funds, and the RBI--net bought gilts worth INR 13.46 billion Wednesday, after net purchases of INR 74.84 billion Tuesday, according to data from Clearing Corp. of India. While several traders believe that Tuesday's purchases were largely made by the RBI, a few also speculate that such purchases were made on-screen Wednesday. The RBI is seen purchasing gilts Thursday as well, dealers said. Some dealers see any bond purchases by the RBI this week as a move to deter a rise in bond yields, while others see it as a liquidity infusion measure to offset a drain in rupee liquidity in the foreign exchange market.

"It seems like RBI is targetting 6.70% (yield on the benchmark 10-year gilt), it's not letting it go above that," a dealer at a state-owned bank said. "Otherwise by now shorters (short-sellers of gilts) would've taken it to 6.75% already before auction. Market is not able to determine if RBI is buying and what is the reason so people are avoiding shorts, and see now they've (RBI and government) come with a switch." The government will switch four bonds worth INR 250 billion maturing in FY27 with five longer-term gilts through an auction on Monday.

At 0959 IST, the turnover in the gilt market was INR 52.25 billion, more than double of INR 23.80 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 6.65-6.70% during the rest of the day. (Cassandra Carvalho)

India Gilts: Seen up on switch notice; some speculate RBI bought gilts Wed

MUMBAI – Prices of government bonds are seen opening higher Thursday after the Reserve Bank of India said the government will switch four gilts maturing in 2026-27 (Apr-Mar) with five other bonds through auction Monday, dealers said. The notice was published post market hours Wednesday. A few traders speculate that RBI bought gilts on-screen Wednesday, though most traders are not of this view. Due to maturities of dollar/rupee forward contract sales in the non-deliverable forward market lined up, some speculate that the central bank could make gilt purchases Thursday. 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.65-6.72% Thursday, after ending at INR 98.61, or 6.68% Wednesday. The yield on the benchmark 10-year US Treasury yield was 4.04% at 0830 IST, a tad lower from 4.06% at 1700 IST Wednesday.

The government will switch four bonds worth INR 250 billion maturing in FY27 with five longer-term gilts through an auction on Monday, after switching INR 153.68 billion of four bonds maturing in FY27 through an auction this week. Such auctions effectively bring down the Centre's record gross borrowing for FY27, dealers said. Some market participants had received calls from the RBI Wednesday inquiring about bonds to include if it conducted a switch auction, dealers said. 

The 'Others' segment of gilt market participants--which includes insurance companies, provident funds, and the RBI--net bought gilts worth INR 13.46 billion Wednesday, after net purchases of INR 74.84 billion Tuesday, according to data from Clearing Corp. of India. While several traders believe that Tuesday's purchases were largely made by the RBI, a few also speculate that such purchases were made on-screen Wednesday. The RBI may have purchased gilts onscreen, and is likely to do so Thursday, 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 $7 billion of such contracts are set to mature in the near term. Around $3 billion of such contracts matured Wednesday, dealers in the foreign exchange market said. Some traders do not believe the RBI was buying gilts onscreen, since long-term investors such as insurers have been actively purchasing gilts recently. 

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. Traders will also watch for developments on talks between the US and Iran in Geneva Thursday over the latter's nuclear programme and the impact on crude oil prices, dealers said. (Cassandra Carvalho)

End

US$1 = INR 90.91

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

Edited by Akul Nishant Akhoury

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