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Informist, Wednesday, Mar. 4, 2026

 

By Janwee Prajapati

 

MUMBAI – Government bond prices ended slightly higher Wednesday after reports that Iran had indirectly reached out to the US' Central Intelligence Agency seeking to end the military conflict between the two countries, dealers said. The rise in the yield of the 10-year US Treasury note weighed on domestic bond prices. At 1700 IST, the yield on the benchmark 10-year US Treasury yield was 4.09%, up from 4.06% at 0900 IST and 3.98% at 1700 IST Monday.

 

The domestic 10-year benchmark 6.48%, 2035 gilt closed at INR 98.64, almost unchanged from INR 98.63 Monday. The closing yield was 6.6732%, slightly down from 6.6753% Monday. In early trade, the bond's price had fallen to an intraday low of INR 98.27 and its intraday yield high was 6.7267%. The fall was limited by some purchases that dealers speculated came from the Reserve Bank of India and from state-owned banks when the bond's yield was near 6.72%.

 

Brent crude oil futures for May delivery fell to $82.20 a barrel at 1700 IST from the day's high of $84.48 per barrel after news reports about a potential ceasefire between Iran and US after Iran reached out indirectly to the CIA seeking to end the conflict. An intraday appreciation of the rupee to 92.0275 per dollar from the record low of 92.3025 per dollar also helped bond prices.

 

"It could also be RBI (Reserve Bank of India) according to the price action...you cannot see such a price action from a normal buyer," a dealer at a private sector bank said. "...And it is not only the bond market, it (RBI) has intervened in the forex (foreign exchange) market also near the close."

 

Traders' expectation of RBI's on-screen gilt purchases was fuelled after data for Monday showed the "Others" segment of market participants, which comprises the central bank, insurers, and provident funds, net purchased gilts worth INR 98.07 billion, the most since Feb. 11, 2021. This segment of participants had bought INR 196 billion worth of gilts in the secondary market last week, data showed. 

 

Talk that the RBI had sought feedback from a state-owned bank on conducting another open market operation auction or a variable rate repo to infuse liquidity into the system also boosted traders' sentiments, dealers said. However, some traders had mixed views about another OMO auction, while most expected another switch auction from the RBI for INR 250 billion, the same as the last switch auction, dealers said.

 

"Bond prices behaved really well today despite the given global situation," a dealer at a state-owned bank said. "Oil was up, UST (US Treasury yields) were also up, (the) rupee fell, still levels (yield on the 10-year benchmark bond) did not rise above 6.72%." Earlier in the day, bond prices were down sharply as crude oil prices rose above the key level of $80 per barrel. 

 

Traders restricted most of their gilts purchases to the 10-year benchmark and 15-year benchmark 6.68%, 2040 bond. They preferred the 10-year benchmark as it is the most liquid bond and some traders placed short bets on the 15-year benchmark bond ahead of its re-auction Friday, dealers said. The two bonds accounted for more than 73% of the total trade volume of INR 740.75 billion. Mutual funds and primary dealerships are likely to have sold gilts due to the worsening macroeconomic environment, dealers said. Some traders booked profit as bond prices rose near the end of the trading session, dealers said.

 

Turnover in the government securities market was INR 740.75 billion, up from INR 512.80 billion Monday, 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

Thursday, bond prices will open tracking developments in West Asia and the overnight movement in US Treasury yields. However, if the 'Others' segment of market participants turns out to have been net buyers Wednesday, bond prices may rise further Thursday, dealers said. Any significant movement in the rupee, the five-year overnight indexed swap rate, and crude oil prices will be watched.

 

The government will sell INR 160 billion of the 6.68%, 2040 bond and INR 130 billion of the 6.90%, 2065 bond Friday. Some traders have placed short bets ahead of the auction to make space in their portfolio for the fresh supply. Some traders expect firm demand from insurers at the auction as it is the last auction for long-term gilts in the current financial year 2025-26 (Apr-Mar). However, some long-term investors could avoid bidding aggressively due to the geopolitical uncertainty, dealers said.

 

Some traders expect the yield on the 10-year benchmark bond to rise up to 6.78-6.80% if the geopolitical situation worsens. However, if the RBI continues to support gilt prices from falling through bond purchases, either in the secondary market or through open market operations, then the yield on the 6.48%, 2035 bond could fall to 6.60-6.65%, dealers said.

 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.65-6.75% Thursday.

 

	WEDNESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.6400	6.6732%	98.6250	6.6753%
6.33%, 2035	97.9400	6.6318%	97.9100	6.6362%
6.01%, 2030	99.0300	6.2645%	99.0950	6.2471%
6.68%, 2040	96.4425	7.0775%	96.5400	7.0663%
6.90%, 2065	93.0000	7.4524%	93.4750	7.4126%

 

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India Gilts: Off lows as Brent eases on reports that Iran sought to end war

 

	1556 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.50	98.66	98.27	98.32	98.63
YTM (%)	6.6934	6.6704	6.7267	6.7194	6.6753

 

MUMBAI--1556 IST--Prices of government bonds were off lows as Brent crude oil futures for May delivery fell to $82.80 a barrel at 1556 IST from a day's high of $84.48 per barrel after reports that Iran reached out indirectly to the US Central Intelligence Agency seeking to end the conflict, dealers said. Rumours of the Reserve Bank of India calling banks to inquire about liquidity infusion measures, such as an open market operation auction or a variable rate repo auction, also aided, dealers said. 

 

The New York Times Wednesday reported that the Iranian Ministry of Intelligence Sunday reached out indirectly to the US Central Intelligence Agency, offering to discuss terms for ending the West Asia conflict, citing officials aware of the outreach. Brent crude futures eased, and gilt prices were off the day's lows following the news, dealers said.

 

On the domestic front, there were rumours that a state-owned bank received a call from the Reserve Bank of India on Wednesday seeking views about the central bank conducting a liquidity infusion, such as an open market operation auction to purchase gilts or a variable rate repo auction, dealers said. Some speculate that such an announcement will be made after market hours Wednesday. The RBI last conducted an OMO purchase auction on Feb. 5. Other dealers said the RBI was unlikely to hold an OMO auction due to comfortable surplus liquidity in the banking system. Some traders also expect the RBI to announce a switch auction for Monday post-market hours. 

 

"If RBI has OMO, then most banks won't have the papers to offer, unless RBI includes 'in-the-money' (profitable) papers, but some are expecting such an announcement after market hours," a dealer at a state-owned bank said.  

 

At 1556 IST, the turnover in the gilts market was INR 434.15 billion, similar to INR 425.75 billion at 1530 IST Monday, 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)

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India Gilts: Remain sharply down; likely RBI, PSU bank buys limit fall

 

	1249 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.35	98.39	98.27	98.32	98.63
YTM (%)	6.7158	6.7093	6.7267	6.7194	6.6753

 

MUMBAI--1249 IST--Government bond prices remained sharply down as an escalation in the military conflict in West Asia led to a rise in crude oil prices and US treasury yields, dealers said. The fall was limited by some purchases that dealers speculated came from the Reserve Bank of India and from state-owned bank near the key 6.72% yield on the 10-year benchmark 6.48%, 2035 gilt.

 

"The team is telling me RBI has come into the market," a treasury head at a private-sector bank said. "We are in for a lot of turmoil on both rupee and gilts if this conflict extends, which is now looking more and more likely. The RBI will have to do a lot more if these are the levels it wants to hold."

 

Expectations of the RBI's support had been cemented after Monday's data showed the "Others" segment of market participants, which comprises the central bank, insurers, and provident funds, net purchased gilts worth INR 98.07 billion Monday, the most since Feb. 11, 2021. This came on the back of INR 196-billion worth of purchases in the secondary market last week by "Others".

 

Bond prices fell sharply at the open, tracking a rise in Brent crude for May delivery past the key level of $80 per barrel and closer to $84 per barrel. The yield on the benchmark 10-year US Treasury yield was 4.08%, from 3.97% at 1700 IST Monday. Mutual funds and primary dealerships are likely to have sold gilts amid the worsening macroeconomic environment, dealers said.

 

The five-year overnight indexed swap rate also rose to 6.12% from 6.03% Monday, which also weighed on gilt prices. The rupee also fell to a record low of 92.3025 a dollar Wednesday, down 0.8% from Monday's close.

 

The volume of trade remained thin as traders did not want to take aggressive positions amid the global uncertainty. The 10-year benchmark 6.48%, 2035 bond and the 15-year benchmark 6.68%, 2040 bond were the two that accounted for almost 74% of the total trade volume. Traders preferred the 10-year benchmark as it is the most liquid bond. Some placed short bets on the 15-year benchmark paper ahead of its auction Friday, to create room in their portfolio, dealers 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 1249 IST showed trades worth INR 61.01 billion in the 6.68%, 2040 gilt, up from INR 41.26 billion Monday.

 

At 1249 IST, the turnover in the gilts market was INR 278.00 billion, up from INR 251.40 billion at 1330 IST Monday, 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 6.65-6.76% during the rest of the day.  (Janwee Prajapati)

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India Gilts:Sharply down on rise in crude, US yields as West Asia conflict widens

 

	0940 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.32	98.37	98.27	98.32	98.63
YTM (%)	6.7202	6.7119	6.7267	6.7194	6.6753

 

NEW DELHI--0940 IST--Government bond prices fell sharply Wednesday, tracking a rise in crude oil prices and US Treasury yields, dealers said. The widening military conflict in West Asia weighed on investor appetite, though some traders bought the 10-year benchmark 6.48%, 2035 gilt near the key 6.72% yield expecting the Reserve Bank of India to buy gilts later in the day.

 

"There is no trader buying--these levels are being protected because of the expectation of 'Others' buying later," a dealer at a state-owned bank said. "Right now, US yields and crude are both rising while rupee has also flown off, so all of it is negative for bonds."

 

Money markets were shut Tuesday for Holi. Turmoil in West Asia only escalated on the fourth day after US and Israeli launched joint airstrikes on Tehran Saturday, killing Iran's supreme leader, Ayatollah Ali Hosseini Khamenei. Brent crude for May delivery is up nearly 5% since 1700 IST Monday at $82.20 a barrel. The 10-year US Treasury yield has risen 10 basis points in that span. The rupee fell to a record low of 92.1875 a dollar in early trade Wednesday, down 0.8% from Monday's close.

 

State-owned banks were likely buyers, though in small quantities, with the RBI also likely to buy gilts in the secondary market later in the day, similar to Monday, dealers said. 'Others'--a segment that comprises the central bank, insurers, and provident funds--net purchased gilts worth INR 98.07 billion Monday, the highest since February 2021.

 

Dealers said they did not want to pick up gilts at current yields as these were seen artificially capped by the RBI's intervention, with worsening fundamentals on expected inflation and current account deficit pointing to the 10-year yield rising to 6.80%. Depending on the scale of the speculated RBI purchases, traders were divided whether the 10-year yield would end Wednesday at 6.72% or closer to 6.75%, with no domestic triggers scheduled intraday.

 

Volatility may be increased further as some traders were on leave around the Holi break, which may keep volumes thin after the initial reaction, dealers said. At 0940 IST, the turnover in the gilts market was INR 68.70 billion, slightly higher than INR 56.20 billion at 0930 IST Monday, 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 6.65-6.76% during the rest of the day.  (Aaryan Khanna)

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India Gilts: Seen sharply down on rise in crude, US yields amid West Asia turmoil

 

NEW DELHI – Government bond prices may open sharply lower after crude oil prices and US Treasury yields rose following the US and Israeli strikes on Iran that has led to increasing regional instability, dealers said. The impact may be magnified as traders return from a public holiday on Tuesday.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.65-6.75% Wednesday, after ending at INR 98.63, or 6.68% Monday. Money markets were shut Tuesday for Holi. Bond prices had opened sharply lower but ended off lows Monday on speculated purchases from the Reserve Bank of India, which are expected to continue Wednesday as well and limit losses, dealers said.

 

Near-month Brent crude futures rose to $82.11 a barrel from $78.14 a barrel at 1700 IST Monday, the last tick gilt traders would have seen. Concerns over immediate oil supply persisted even as US President Donald Trump said late Tuesday that the US would insure all trade vessels travelling through the Persian Gulf at a reasonable price and the US Navy would escort vessels through the key Strait of Hormuz if needed. With inflationary pressures rising, bets on further US rate cuts ebbed and the 10-year US Treasury yield was at 4.07% at 0835 IST, against 3.97% at 1700 IST Monday.

 

Traders' risk appetite is poor and most sections of the market would avoid large purchases even if yields rise, especially with current returns seen artificially capped by the RBI, dealers said. Aggressive purchases from the central bank were speculated on Monday, which kept the 10-year benchmark yield from rising much beyond the psychologically crucial 6.70% mark. Clearing Corp. of India after market hours showed 'Others' – a segment which includes the RBI – bought gilts worth INR 98.07 billion in the secondary market Monday, the highest since February 2021.

 

In additional to the geopolitical factors, traders are also likely to short sell bonds in the second half of the day to make room for the weekly gilt auction on Friday, the last scheduled in the financial year 2025-26 (Apr-Mar). The government will sell INR 160 billion of the 6.68%, 2040 bond and INR 130 billion of the 6.90%, 2065 gilt at auction Friday.  (Aaryan Khanna)

 

End

 

US$1 = INR 92.15

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

 

Edited by Ashish Shirke

 

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