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Informist, Monday, Mar. 2, 2026

 

By Janwee Prajapati

 

MUMBAI – Government bond prices ended down Monday as crude oil prices rose after the US and Israel attacked Iran Saturday, followed by Tehran's retaliation over the weekend. Bond prices were off lows after the huge supply of state bonds was absorbed by the market at lower-than-expected cut-off yields, dealers said.

 

The market took solace as crude oil prices settled down after a sharp rise. At 1700 IST, Brent Crude for May delivery was $78.43 per barrel after trading above the key $80 per barrel, intraday. 

 

The 6.48%, 2035 gilt closed at INR 98.63, down from INR 98.73 Friday. Its yield closed at 6.6753%, up from 6.6601% at the end of Friday's trading session. The bond's price rose to an intraday high of INR 98.68, and its intraday low yield was 6.6674% at 1521 IST.

Due to the sudden rise in gilt prices and trade volume, some traders speculated that the 'Others' segment of market participants was likely buying gilts on screen, dealers said. The 'Others' segment includes insurance companies, provident funds, and the Reserve Bank of India. The RBI net bought gilts worth INR 28.15 billion in the secondary market in the week to Feb. 20, data released by the central bank showed Friday. The sudden recovery in bond prices led to traders speculating the central bank had bought bonds Monday as well, dealers said.  

 

At the weekly auction of state government bonds, mutual funds and insurance companies were keen to pick up the long-term bonds as they had missed out on these bonds at previous gilt and state bond auctions, dealers said. Banks likely picked up short-term bonds for their asset-liability management books, dealers said. Some banks considered the yield on state bonds lucrative enough to add them to their held-to-maturity books, dealers said.    

 

"State bond results were in line with expectations of the cut-off being between 7.40%-7.47% (on states' 10-year bonds)," a dealer at a state-owned bank said.

 

The result of the auction to switch gilts was mixed, as the government, through the RBI, switched some bonds at prices above the expected levels, while others were switched below the expected levels, dealers said. The RBI did not accept any offers to switch the 8.24%, 2027 bond to the 7.40%, 2062 bond, as long-term investors refrained from aggressively offering the bond, dealers said. 

 

Earlier in the day, the rupee's fall to 91.4950 against the dollar also weighed on bond prices. Dealers said banks were likely selling dollars on behalf of the RBI near 91.33 a dollar to limit the fall of the domestic currency. Investors also bought gilts as the yield on the 10-year benchmark bond traded at a psychologically key level of 6.70%.        

 

In the secondary market, traders preferred bonds maturing up to four to five years and the most liquid 10-year benchmark 6.48%, 2035 bond, as they remain uncertain about the direction prices will move given the current global scenario, dealers said. In the long term, traders expect bond prices to fall further as they do not expect any rate cut at the next Monetary Policy Committee meeting, dealers said.  

 

"In (a geopolitical) situation like this, it is very difficult to determine the direction of price move," a dealer at a private-sector bank said. "... It (yield on 6.48%, 2035 bond) might go till 6.75% in the current financial year, at which we might see some buying."   

 

The turnover in the government securities market was INR 512.80 billion, down from INR 721.35 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the seventh straight session, there was no trade using the RBI's wholesale e-rupee pilot.

 

OUTLOOK

Markets are shut Tuesday on account of Holi. On Wednesday, bond prices will open, tracking developments in West Asia and overnight movement in US Treasury yields. Traders will most likely not build aggressive positions amid geopolitical uncertainty, dealers said. However, if the 'Others' segment of market participants turns out to have been net buyers Monday, bond prices may recover Wednesday, dealers said.

 

Any significant movement in the rupee, the five-year overnight indexed swap rate, and crude oil prices will also lend cues to gilts.

 

The government will sell INR 140 billion of 91-day Treasury bills, INR 120 billion of 182-day T-bills and INR 80 billion of 364-day T-bills Wednesday. Traders will track the result of T-bill auctions as a significantly higher cut-off may weigh on bond prices, dealers said.  

 

The 10-year benchmark 6.48%, 2035 bond is seen in a 6.64-6.73% range Wednesday.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.6250	6.6753%	98.7300	6.6601%
6.33%, 2035	97.9100	6.6362%	98.0000	6.6226%
6.36%, 2031	100.1900	6.3137%	100.34	6.2782%
6.68%, 2040	96.5400	7.0663%	96.7300	7.0445%
6.90%, 2065	93.4750	7.4126%	93.72	7.3921%

 

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India Gilts: Remain sharply down on rise in oil prices, auction results eyed

 

	1405 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.49	98.62	98.41	98.53	98.73
YTM (%)	6.6944	6.6764	6.7064	6.6890	6.6601

 

MUMBAI--1242 IST--Government bond prices remained sharply lower as crude oil prices rose after the attack by the US and Israel on Iran Saturday, followed by Tehran's retaliation over the weekend. Intraday, Brent crude for May delivery rose above the key $80 per barrel market, after trading below $77 a barrel at 0900 IST. 

 

Traders refrained from placing aggressive bets ahead of the result of the weekly state bond auction and switch auction, dealers said. The large supply of state bonds also weighed on bond prices. Cut-off yields on states' 10-year bonds are expected to be in the range of 7.42%-7.46%, according to the median of an Informist Poll. Thirteen states had offered INR 431.30 billion of bonds at auction 1030-1130 IST, higher than the indicated INR 358.05 billion in the Jan-Mar calendar.

 

At the state bond auction, some traders expect the spread between state bonds and 10-year benchmark gilt may widen as investors demanded higher returns to absorb fresh supply due to weaker risk appetite, dealers said. Long-term investors were keen to pick up bonds maturing in over 15 years, given there is only one gilt auction left for such gilts in 2025-26 (Apr-Mar). Some investors were also worried that the bulk of the supply of state bonds in the remainder of March is likely to be in shorter tenures of up to 15 years, following some banks' request to the RBI for the same. Public-sector banks bought state bonds maturing between eight and 15 years for their held-to-maturity books, dealers said. 

 

"There will be demand from long-term investors as we are seeing good demand from them (in the secondary market for gilts)," a dealer at a state-owned bank said. "But even if the SDL (state bond auction) result is along expected lines, we (yield on 10-year 6.48%, 2035 bond) will be around 6.70%-6.71% today (Monday)."   

 

At the switch auction, the Reserve Bank of India will likely accept offers for less than the notified amount as traders are expected to offer papers at a higher yield, dealers said. The government switched only INR 153.68 billion worth of gilts last week against the INR 250-billion notified amount, with a similar result expected Monday. Traders are more focused on the 8.24%, 2027 bond, which will be switched with 8.32%, 2032 bond, 6.57%, 2033 bond, and 7.40%, 2062 bond at the auction, dealers said. The cut-off yield is likely to be around 3-9 paise lower than the Financial Benchmarks India levels, according to the median of an Informist poll.

 

Some banks may opt to switch the bonds to reduce the run-off of high quality liquid assets from their books in FY27 as their liquidity coverage ratio has reduced, dealers said. However, while bonds maturing up to 26 years may be lapped up at higher yields at the state bond auction, dealers said that the switch for the 2062 bond would likely be poorly subscribed.

 

"The long term (paper) may see some pain," a dealer at a private sector bank said. "Long-term investors are afraid of the future prospects, so there could be some tail bidding (offering at a higher yield) at auction."

 

At 1405 IST, the turnover in the gilt market was INR 301.20 billion, lower than INR 380.70 billion at 1430 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 6.64-6.73% during the rest of the day.  (Janwee Prajapati)

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India Gilts: Down as crude oil prices surge post US, Israel attack on Iran

 

	0950 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.55	98.62	98.50	98.53	98.73
YTM (%)	6.6869	6.6764	6.6934	6.6890	6.6601

 

NEW DELHI--0950 IST--Government bond prices were sharply lower as crude oil prices rose after the attack by the US and Israel on Iran Saturday, followed by Tehran's retaliation over the weekend. However, losses were limited as investors stepped up purchases as the yield on the 10-year benchmark 6.48%, 2035 bond rose close to the pyschologically crucial 6.70% mark.

 

"We saw a knee-jerk reaction which was warranted but broader picture seems alright, I don't expect too much of an erosion in (gilt) prices," a dealer at a primary dealership said. "The recent rally has been led by RBI (Reserve Bank of India) buying rather than the market, so it shouldn't lead to position cutting due to losses from the trading entities in the market."

 

The 'Others' segment – which includes the central bank, insurers and provident funds – net purchased gilts worth INR 196.03 billion in the secondary market last week, including INR 86.05 billion on Friday. About half of these were speculated to be the RBI's purchases, dealers said. Data released Friday showed the central bank net bought gilts worth INR 28.15 billion in the week ended Feb. 20.

 

Near-month Brent crude futures were up 6% from Friday's close at $77.10 a barrel. Traders are closely tracking the movement in crude oil prices when picking up gilts, especially with the INR 431.30-billion supply of state bonds at auction, at 1030-1130 IST, dealers said. Traders were less concerned about the impact on domestic retail inflation since pump prices have not moved since October 2024 and the policy repo rate is not seen being raised in 2026-27 (Apr-Mar). Instead, the widening of the current account deficit from a prolonged rise in crude prices may weaken the rupee, bringing down foreign portfolio investors' appetite for gilts.

 

In early trade, the impact of this was also limited with the rupee down only 0.4% against the greenback at 91.33 a dollar. Dealers said banks were likely selling dollars on behalf of the RBI near 91.33 a dollar to limit the hit to the domestic currency. Moreover, with only one more gilt auction scheduled in the Oct-Mar calendar, banks would likely keep adding gilts to their available for-sale portfolios at higher yields even as traders trimmed risk by selling bonds, dealers said. 

 

At 0955 IST, the turnover in the gilt market was INR 79.65 billion, higher than INR 47.80 billion at 1030 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 6.64-6.73% during the rest of the day. (Aaryan Khanna)

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India Gilts: Seen sharply down as crude oil jumps after West Asia conflict

 

NEW DELHI – Government bond prices are seen opening sharply lower Monday after the US and Israel attacked Iran over the weekend and Tehran retaliated, escalating geopolitical tensions into an open conflict across West Asia. The spike in crude oil prices and concerns of a drawn-out disruption in the commodity's supply is likely to pull down gilt prices owing to inflationary concerns, dealers said. 

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.65-6.75% Monday, after ending at INR 98.73, or 6.66% Friday. Bond prices had opened lower but surged after the INR 320 billion supply of the bond sailed through at the auction and after GDP data was slightly lower than traders had expected, dealers said.

 

Saturday, Israel and the US launched aerial attacks on Iran, killing the country's supreme leader Ayatollah Ali Hosseini Khamenei. Iran has since retaliated against Israel and targetted US military facilities around the Persian Gulf region. Both sides have shown no signs of de-escalation in strikes as of late Sunday, with US President Donald Trump saying the world's largest economy and military is ready to attack Iran for weeks and will not stop until all objectives are achieved.

 

Brent crude futures were up over 5% from Friday's settlement to $76.42 a barrel at 0838 IST Monday. The risk-off sentiment is also expected to lead to a sharp fall in the rupee at the open. The combination of factors is likely to push up imported inflation if it sustains over an expected period, which the bond market will price in immediately due to the risk, dealers said.

 

Traders expect losses to be limited as the 10-year benchmark yield approaches 6.70%, a psychologically crucial level. The Reserve Bank of India is seen uncomfortable with yields above that levels, with latest data for the Feb. 20 week showing net purchases of gilts worth INR 28.15 billion in the secondary market. Robust purchases from the 'Others' segment – which includes insurers, pension funds and the central bank – last week also raised hopes the RBI would continuously buy gilts and support the market, which may lead to a recovery in bond prices after the caution at the open, dealers said. 

 

However, any recovery may be complicated by the substantial supply of state bonds at auction at 1030-1130 IST, dealers said. Thirteen states will raise INR 431.30 billion via bonds at auction, higher than the indicated INR 358.05 billion in the Jan-Mar calendar. Bidding for the bonds may be less aggressive than the prior two weeks amid geopolitical concerns and the lack of liquidity of state bonds, dealers said.  (Aaryan Khanna)

 

End

 

US$1 = INR 91.38

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

 

Edited by Saji George Titus

 

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