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Informist, Friday, Mar. 6, 2026

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended sharply lower Friday as the five-year overnight indexed swap rate rose sharply, dealers said. The rise in crude oil prices also pushed bond prices down. Bond prices fell in morning trade and were down through the day, except for a brief recovery towards the end of the day on speculation that the Reserve Bank of India had bought bonds in the secondary market. OIS rates rose and bond prices fell as crude oil prices rose in the afternoon.   

 

Bond prices were steady for a while after the results of the last bond auction of the financial year as the cut-off prices at the auction were slightly higher than expected. However, prices fell in late afternoon trade as traders gave up expectations that the Reserve Bank of India would buy gilts in the secondary market later in the day. Some traders also hit stop-losses after the 10-year benchmark bond fell below INR 98.40, dealers said. However, bond prices recovered some losses after expectations built up that the RBI would, after all, buy bonds in on-screen trade, dealers said. The central bank seems to have not disappointed the market.

 

"I think it's 'Others' buying. There was a 15 basis point recovery in bond prices...it could be RBI," a dealer at a state-owned bank said. "Also, the (trade) volume is less and the market is volatile, so price action is more."  

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.53, down from INR 98.87 Thursday. The closing yield was 6.6898%, up from 6.6406% Thursday. The bond's intraday low price was INR 98.38 and its intraday high yield was 6.6375%.

 

The five-year OIS rose to 6.23% in intraday volatile trade, up 13 basis points from Thursday. The rise in crude oil futures weighed on both bond prices and OIS rates. The Brent crude futures for May delivery rose to $87 per barrel as the military conflict in West Asia continued.

 

 

Bond prices fell after the RBI set a higher underwriting cut-off price for the 6.68%, 2040 bond at auction, which depicted weak demand from primary dealers to underwrite the bonds, dealers said. At the auction, banks picked up the 15-year benchmark bond and insurers and pension funds bought the 6.90%, 2065 bond, dealers said. Mutual funds also most likely bought the 6.68%, 2040 bond at the auction after they net sold gilts worth over INR 190 billion this week, dealers said. Bidding at the INR 290-billion gilts auction was firm as the bid-to-cover ratio for both the bonds was near three.

 

Bond prices remained down even after the result of the weekly gilt auction was slightly better than expected, due to lack of risk appetite among traders and as traders waited for the central bank to buy bonds in the secondary market. Some traders said the RBI bought gilts in the secondary market to cover up the drain of rupee liquidity after it intervened in the foreign exchange market to sell dollars. However, other traders considered the on-screen gilt purchases as a yield management measure intended to prevent a rise in bond yields beyond a level deemed comfortable for the central bank.    

 

The 'Others' segment net purchased gilts worth INR 172.54 billion in the secondary market Thursday. Till Thursday, players in this segment net purchased gilts worth INR 473.44 billion this week. 'Others' – a category that includes the RBI, insurers and provident funds – were the only net buyers in the secondary market Thursday. Official data released after market hours showed the RBI bought INR 99 billion worth of gilts in the week to Feb. 27.

 

"Everybody is waiting for others to buy...there are no buyers in the market," a dealer at a private sector bank said. "The fundamentals itself has changed now...crude has risen so much and UST (yield on the 10-year US Treasury benchmark note) is also up."

 

The turnover in the government securities market on Friday was INR 559.10 billion, down sharply from INR 719.80 billion Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the tenth straight session, there was no trade using the RBI's wholesale e-rupee pilot.

 

OUTLOOK

Gilts are not traded on Saturdays. On Monday, traders will track movement in crude oil prices after it rose to over $89 per barrel at the end of trade in India Friday. If there is no escalation in the conflict in West Asia, bond prices are likely to open higher Monday, dealers said. The RBI announced INR 1 trillion of open-market operations auction. It will conduct the auctions in two tranches, the first on Monday and the second on Mar. 13, each worth INR 500 billion. Moreover, the bonds selected for the auction are relatively liquid compared to the bonds selected at previous OMO auctions, dealers said. The RBI will buy INR 500 billion worth bonds through these auctions. These are:

--the 6.01%, 2030 bond,

--the 6.10%, 2031 bond,

--the 7.18%, 2033 bond,

--the 6.19%, 2034 bond,

--the 6.33%, 2035 bond, 

--the 6.92%, 2039 bond,

--and the 7.30 53bond.

 

"This OMO auction is a positive only, but we will track the geopolitical situation over the weekend," a dealer at another private sector bank said. "If everything remains the same in the Gulf, then we might see a 2-3 basis point recovery (fall of 2-3 basis points in 6.48%, 2035 bond yield)." 

 

On Monday, the government will also switch seven bonds maturing in 2026 and 2027 with bonds of five maturities ranging between five years and 35 years. However, dealers do not expect the switch results to impact bond prices significantly. "I think the switch auction results will be similar to the last auction because I do not think that RBI will accept higher yields," a dealer at a small finance bank said.

 

Apart from the military conflict, bond traders will track the movement in US Treasury yields. Traders expect the yield on the 10-year benchmark bond to rise to up to 6.78-6.80% if the situation in West Asia worsens. However, dealers expect the RBI to buy bonds in the secondary market despite the OMO auctions and if this happens, the yield on the 6.48%, 2035 bond is unlikely to rise above 6.70-6.72%, dealers said. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.63-6.72% Monday, with 6.63% likely only if there is continued support from the Reserve Bank of India or the military conflict in West Asia eases.  

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.5275	6.6898%	98.8675	6.6406%
6.33%, 2035	98.1300	6.6038%	98.2500	6.5857%
6.01%, 2030	98.9450	6.2876%	99.0650	6.2553%
6.68%, 2040	96.2400	7.1010%	96.5850	7.0612%
6.90%, 2065	92.6400	7.4830%	92.8500	7.4651%

 

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India Gilts: Slump; likely RBI buys at 6.70% yield on 6.48%, 2035 limit fall

 

	1517 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.48	98.89	98.38	98.85	98.87
YTM (%)	6.6970	6.6375	6.7111	6.6433	6.6406

 

MUMBAI--1517 IST--Prices of government bonds slumped and the 10-year benchmark 6.48%, 2035 gilt yield briefly rose above the crucial 6.70% level, tracking an intraday rise in the five-year overnight indexed swap rate to 6.23%, even after the cut-off prices at the INR 290-billion gilts auction were slightly better than expectations, dealers said. The surge in Brent crude oil futures for May delivery to $87 per barrel amid the military conflict in the Persian Gulf region weighed on bond prices. Some traders hit stop-losses on gilts when crude futures and OIS rates surged.

 

The lack of indication of purchases by the "Others" segment of bond market participants, which includes the Reserve Bank of India, insurers, and pensions funds, led to speculation that the central bank had refrained from on-screen purchases Friday. However, once the 10-year benchmark yield rose above 6.70%, sudden purchases that pulled the yield back down below 6.70% probably came from the RBI, dealers said. The RBI is not seen to be comfortable with the 10-year benchmark yield crossing 6.70%, dealers said. Around the time the 10-year benchmark gilt hit the day's low of INR 98.38, an entity, which was likely to have been the RBI, placed bids at INR 98.55, dealers said. Traders still expect such purchases later in the day, since market activity in recent sessions has indicated that a large investor purchased gilts nearing the end of trade. 

 

"Looks like RBI is back on-screen. Prices jumped from 41 (INR 98.41) to 53 (INR 98.53). And as RBI came, some people also covered their shorts (short sales)," a dealer at a state-owned bank said. Earlier in the session, after the auction result was published, some traders felt the fall in prices was "testing" the RBI to see at which price level it would enter the secondary market.

 

Nearing the end of trade, traders await data from the RBI's Weekly Statistical Supplement for confirmation of on-screen purchases by the central bank in the week ended Feb. 27. The RBI accounts for its on-screen gilt trades based on the day of settlement. The "Others" segment of bond market participants net purchased gilts worth INR 166.61 billion between Feb. 20 and Feb. 26, both sessions included. Traders expect around INR 130 billion of these purchases to have been made by the central bank, proof of which will come from Friday's data. The focus is also on the likelihood of further purchases by the RBI. Some dealers speculated that the central bank purchased gilts the past two weeks so that risk-off sentiment and low appetite for bonds amid the worsening geopolitical situation did not transmit to bidding at gilt auctions. The last scheduled gilt auction for FY26 took place Friday.

 

Bidding at the INR 290-billion gilts auction was firm and cut-off prices were slightly better than expected. The RBI set a cut-off price of INR 96.38 for the 6.68%, 2040 gilt, higher than an Informist Poll estimate of INR 96.35. The weighted average price on the bond was INR 96.40. Banks' demand for the bond was firm, especially since the RBI has bought gilts from them, both on screen and through open market operation auctions, since December. Some dealers speculate that the RBI has been buying the 6.68%, 2040 bond along with the 10-year benchmark 6.48%, 2035 bond this week.

 

As for the longer-term 6.90%, 2065 gilt, a state-owned insurance company bid for a large quantum of the bond, dealers said. Demand for the bond was robust from investors since it is the last scheduled gilt supply until the next financial year begins. Around INR 20 billion of the 2065 bond was purchased for bond forward rate agreements, dealers said. 

 

At 1517 IST, the turnover in the gilts market was INR 420.55 billion, down from INR 594.95 billion at 1530 IST Thursday, since the RBI likely refrained from on-screen purchases Friday until it stepped in when the 10-year benchmark yield hit 6.70%, dealers said. The turnover data is from the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.62-6.70% during the rest of the day.  (Cassandra Carvalho)

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India Gilts: Steady on lack of cues, caution before INR 290-bln auction

 

	0950 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.83	98.89	98.81	98.85	98.87
YTM (%)	6.6462	6.6375	6.6490	6.6433	6.6406

 

NEW DELHI--0950 IST--Government bond prices were steady on caution ahead of the INR 290-billion auction at 1030-1130 IST. Traders awaited the auction result for cues, with most expecting further purchases from the Reserve Bank of India later in the day should traders sell bonds aggressively, dealers said.

 

"In case any fresh selling comes, the RBI is likely to be back. I was not expecting them yesterday (Thursday) either but then there was so much buying in the second half," a dealer at a state-owned bank said. "Nobody can short sell anymore anyway since the (gilt) auctions are over, but it doesn't look like demand from the market is good for the 15-year (6.68%, 2040 gilt) at these levels."

 

'Others' – a segment that includes the RBI, insurers and pension funds –  were the only net buyers for gilts Thursday, picking up INR 172.55 billion in the session to take their three-day total this week to INR 473.45 billion. The segment was not active as yet, with banks and primary dealers making room for the fresh supply of gilts, dealers said. Their sales weighed on prices in thin early trade.

 

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. Most banks were not keen to pick up the 15-year benchmark as it was not seen lucrative, with the RBI speculated to have bought the gilt in the secondary market this week, dealers said. Moreover, banks would have the option of buying state bonds in similar tenures in the four scheduled auctions of those securities remaining in March. However, some traders said they were short selling the 6.48%, 2035 bond and buying the 2040 gilt, betting that the 15-year bond's spread over the 10-year benchmark would shrink.

 

Life insurance firms and pension funds were keen to buy the 2065 gilt at auction, especially with this being the last scheduled gilt auction in the financial year ending Mar. 31 and states not offering a 40-year bond so far, dealers said. Some insurers had agreed to enter bond forward agreements with foreign banks Thursday to secure the 6.90%, 2065 bond at auction to meet product requirements, they said.

 

High US Treasury yields and crude oil prices had little impact on gilt prices as the levels were similar to those at 1700 IST Thursday, the last tick on which bond dealers traded on. The 10-year US yield was at 4.12%, while Brent crude for May delivery was at $84.36 a barrel at 0950 IST. Traders could not express their fears higher inflation due to the hefty purchases from 'Others' and avoided fresh short sales bonds with no further gilt supply coming for three weeks, dealers said. 

 

At 0950 IST, the turnover in the gilts market was INR 34.25 billion, nearly halving from INR 66.80 billion at 0945 IST Thursday, 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 6.62-6.70% during the rest of the day.  (Aaryan Khanna)

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India Gilts: Seen steady before INR 290-bln auction; last in FY26

 

NEW DELHI – Government bond prices are seen opening steady Friday, ahead of the INR 290-billion weekly gilt auction at 1030-1130 IST, dealers said. The direction for prices will come from the Reserve Bank of India's potential purchases in the market as most traders are unwilling to buy bonds at current prices, which are seen "on steroids" by the historic pace of 'Others' buys. 

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.62-6.70% Friday, after ending at INR 98.87, or 6.64% Thursday. Gilt prices had surged despite a rise in crude oil prices and US Treasury yields. 'Others' – a segment that includes the central bank, insurers and provident funds – were the only net buyers in the secondary market Thursday, according to Clearing Corp. of India data.

 

'Others' have net bought gilts worth INR 473.45 billion so far this week, of which INR 172.55 billion came on Thursday. Dealers speculate that the central bank is purchasing gilts to prevent yields from surging amid the conflict in West Asia, while simultaneously infusing liquidity to offset its dollar sales in the foreign exchange spot market. Most of the 'Others' purchases have likely come from the RBI and were in the 6.48%, 2035 bond and the 15-year benchmark 6.68%, 2040 bond, dealers said. The pace of on-screen purchases was a record if it came from the RBI, they said.

 

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. Demand for the bonds is expected to be strong as this is the last scheduled auction of gilts in the financial year 2025-26 (Apr-Mar), dealers said. There could be some profit sales after the auction results are known in the afternoon, but these are not expected to bring prices down significantly.

 

US Treasury yields and Brent crude prices remained high amid the extended conflict in West Asia, which entered its seventh day after US and Israel hit Iran in a joint strike and killed its supreme leader Ayatollah Ali Hosseini Khamenei on Saturday. However, the fundamentals will have little to no impact as traders are likely to wait for direction from 'Others' purchases. Should the expected RBI purchases not be aggressive, gilt prices are likely to fall sharply as traders sell bonds at a profit, dealers said.  (Aaryan Khanna)

 

End

 

US$1 = INR 91.74

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

 

Edited by Avishek Dutta

 

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