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Informist, Monday, Mar. 9, 2026

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended sharply lower Monday after crude oil prices surged over $100 a barrel and the rupee fell to a record low, dealers said. Rise in overnight indexed swap rates also pulled bond prices down. However, bonds recovered marginally after the Reserve Bank of India set cut-off prices significantly higher than expected at the open market operations auction, dealers said.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.33, down from INR 98.53 Friday. The closing yield was 6.7184%, up from 6.6898% Friday. Intraday, the bond touched a low of INR 97.94 with the yield rising to 6.7750%. In a highly volatile session, the five-year OIS rate rose to 6.44%, the highest since Jul. 3, 2024.

 

The rise in crude oil futures weighed on both bond prices and OIS rates. Brent crude futures for May delivery jumped over 20% in Monday's trade to near $120 a barrel, the highest since June 2022. This, in turn, pushed the rupee to a record low of 92.3350 a dollar. Crude oil prices eased in the second half of the day after G7 countries announced that they would release their oil reserves in order to ease supply concerns.

 

At the open market operations auctions, traders had expected the RBI to set cut-off prices similar to Friday's indicative prices, while some traders had expected the cut-off yields to be 6-7 basis points higher than those indicated by Financial Benchmarks India Pvt. Ltd. on Friday. The central bank set cut-off prices 6 paise to 136 paise higher than expectations. Traders bought bonds in the secondary market on replacement demand after they sold bonds at higher-than-expected prices to the RBI at OMO auction, dealers said.

 

Some traders also speculated that the RBI bought gilts in the secondary market despite purchasing bonds in the primary market, which kept the yield on the 10-year benchmark bond near 6.75% during the day, dealers said. Some traders speculated that any such purchases were confined to the 10-year benchmark bond while others said that RBI also bought the 15-year benchmark 6.68%, 2040 bond.

 

"It is a clear indication from the RBI that the yields are not supposed to go up, there is no point in going against him (RBI)," a dealer at a private sector bank said. "...I think today he (RBI) was there in the secondary market also." 

 

The erstwhile 10-year benchmark bond 6.33%, 2035 outperformed the current 10-year benchmark after the RBI set a cut-off of INR 98.47, up 35 paise from the indicative levels. The central bank accepted INR 135.07 billion of this bond, which was about 27% of the total quantum. Moreover, the central bank bought the 7.30%, 2053 bond at INR 99.53, 136 paise higher than the indicative levels due to which long-term investors such as life insurers were able to sell their holdings at a profit, dealers said.

 

On the other hand, traders avoided participating in the switch auction as most of them did not possess the source securities or their holdings were not-in-money or profitable, dealers said. Furthermore, traders offered the securities at a higher yield to RBI due to which the central bank switched only four securities out of five securities notified. The RBI received eight offers to switch the 6.97%, 2026 bond with 7.50%, 2034 bond but there were no offers to switch the same bond with the 8.32%, 2032 bond. Two offers each were made to switch the 7.33%, 2026 and 5.74%, 2026 bonds; one offer was made for the 8.15%, 2026 bond; and three offers were made for the 8.24%, 2027 bond.

 

In the secondary market, traders avoided placing short bets as they expected the RBI to buy bonds in the secondary market again if the yields rose, which would drive up the prices. Traders avoided buying gilts aggressively amid global uncertainties and remained on the sidelines. Some traders covered their short bets as levels seemed lucrative, dealers said. Some traders received fixed-rate contracts in five-year OIS while they sold bonds maturing in five-year as the spreads were lucrative, dealers said.

 

"I do not think that he (RBI) is buying today," a dealer at another private sector bank said. "... There is no point in coming to the secondary market when you are already buying in primary."

 

Turnover in the government securities market was INR 440.00 billion, down from INR 559.10 billion Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the eleventh straight session, there was no trade using the RBI's wholesale e-rupee pilot.

 

OUTLOOK

Traders expect bond prices to open lower Tuesday due to heavy supply of state bonds at the scheduled auction, dealers said. Seventeen states will raise INR 459.60 billion, 17% higher than INR 392.70 billion indicated in the March borrowing calendar. Traders expect the auction supply to be absorbed, despite the huge quantum, on firm demand as they considered the yields lucrative, dealers said.

 

Investors are likely to pick up the state bonds at the auction after they sold gilts from their held-to-maturity portfolio at the OMO auction Monday, dealers said.

 

Traders also await announcement of the bond chosen for another INR-500-billion OMO auction scheduled on Friday. Some traders expect the announcement to come on Monday post-market hours, dealers said. If the RBI chooses a liquid paper for the OMO, bond prices will rise, they said.

 

On Wednesday, RBI 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. Traders expect the cut-off at the auction to rise significantly following the sharp rise in one-year OIS rates and five-year OIS rates. A surge in T-bill cut-off yields will likely lead to a rise in bond yields, specifically for short-term bonds, dealers said.

 

Apart from the West Asia 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. 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 6.65-6.78%, with 6.65% likely only if there is continued support from the RBI or the situation in West Asia eases.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.3300	6.7184%	98.5275	6.6898%
6.33%, 2035	98.0800	6.6113%	98.1300	6.6038%
6.01%, 2030	98.8000	6.3265%	98.9450	6.2876%
6.68%, 2040	95.9900	7.1299%	96.2400	7.1010%
6.90%, 2065	92.1975	7.5207%	92.6400	7.4830%

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India Gilts: Off lows after OMO cut-off prices much higher than view

 

	1603 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.29	98.34	97.94	98.25	98.53
YTM (%)	6.7242	6.7170	6.7750	6.7300	6.6898

 

MUMBAI--1603 IST--Prices of government bonds were off the day's lows on replacement demand after the cut-off prices at the INR 500-billion open market operations auction were much higher than expected, dealers said. The Reserve Bank of India bought seven gilts for the entire notified amount of INR 500 billion at the auction. Some traders speculated that the central bank was also purchasing gilts on-screen while others said banks purchased gilts to replenish their books after sales to the RBI at the OMO auction.

 

Of the seven gilts the RBI had offered to buy, the central bank accepted the largest amount of INR 135.07 billion in the erstwhile 10-year benchmark 6.33%, 2035 gilt at a cut-off price of INR 98.47. This is higher than an Informist Poll estimate of INR 98.12. The cut-off price set on the 7.30%, 2053 gilt was INR 1.36 higher than estimated, at INR 99.53. Several traders had expected cut-off prices to be higher than expected at the time of bidding, which led to a gradual recovery in bond prices during the day, and further purchases to replenish their books after the OMO result was published, dealers said. Most of the paper the RBI chose to buy at the auction were not profitable and hence dealers offered them at sharply higher prices in an attempt to make a profit, they said. The cut-off prices at the switch auction were below expectations. The government switched only four gilts worth INR 63.09 billion, against a notified amount of INR 200 billion. 

 

"You sold there (at the OMO auction) at a 136 (paise) cut-off (difference between cut-off price and estimates) on the 7.30%, 2053, so you can buy here (in the secondary market) for cheaper," a dealer at a private-sector bank said. "It is a good exit for insurance. Also, it would be good to buy 6.48%, 2035 now, because what if he (RBI) comes with (chooses to buy) this bond at the next OMO auction?"

 

While the central bank's purchases at the auction capped a rise in bond yields, swap rates surged tracking the rise in crude oil prices, widening the spread between the two instruments. Traders chose to receive fixed rates in OIS at levels seen lucrative while selling bonds, dealers said. 

 

At 1603 IST, the turnover in the gilts market was INR 373.40 billion, down from INR 432.90 billion at 1530 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 6.68-6.75% during the rest of the day.  (Cassandra Carvalho)

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India Gilts: Recover some losses; OMO cut-off prices seen higher than view

 

	1337 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.12	98.30	97.94	98.25	98.53
YTM (%)	6.7485	6.7227	6.7750	6.7300	6.6898

 

MUMBAI--1337 IST--Government bond prices pared some losses as the rupee recovered slightly against the dollar, and crude oil futures were off the day's highs, dealers said. Some speculated that the Reserve Bank of India purchased gilts on-screen, while others said the trade volume was too low to indicate purchases by a large investor.

 

Bond prices were sharply down following a sharp rise in overnight indexed swap rates and crude oil prices. Traders were largely on the sidelines as they awaited the open market operations auction and switch auction results, dealers said. 

 

At the INR-500-billion open market operations auction, traders expect the RBI to set cut-off prices higher than initially expected, which will likely lead to a further recovery in bond prices, dealers said. According to the median of an Informist poll, the central bank is seen setting cut-off prices 1-2 paise higher than the prices indicated by Financial Benchmarks India Pvt. Ltd. Friday.  

 

"Looks like RBI(Reserve Bank of India) is interfering (buying gilts on-screen)," a dealer at a primary dealership said. "Nobody else will buy so much to ease levels from 6.7750% to 6.75% (yield on the benchmark 10-year 6.48%, 2035 gilt)...but the volume (of purchases onscreen) must be very low since he (RBI) has also conducted OMO (auction)." Some traders expect the RBI to buy gilts on-screen if the yield on the 10-year benchmark bond rises above 6.75% again, dealers said. 

 

At the INR-200-billion switch auction, some institutions refrained from participating as they did not possess the source security in their portfolios and for some others, those securities were not profitable or in-the-money, dealers said. According to the median of an Informist poll, the central bank is seen setting cut-off prices similar to Friday's indicative prices. However, some traders expect the cut-off yields to be 6 to 7 basis points higher than those indicated by Financial Benchmarks India Pvt. Ltd. Friday.

 

Traders expect bond prices to remain under pressure throughout the day due to a surge in OIS and crude prices. At 1337 IST, Brent crude for May delivery was $106.85 per barrel, up more than 21% from 1700 IST Friday. It hit a high of $119.50 per barrel earlier in the session. The five-year OIS also rose to a high of 6.43%, the highest since Jul. 5, 2024.

 

Unless the RBI purchases gilts on-screen, the yield on the 6.48%, 2035 bond is seen rising to 6.80% ahead of heavy supply of state bonds Tuesday, dealers said. Seventeen states aim to raise INR 459.60 billion, 17% higher than INR 392.70 billion notified in states' indicative borrowing calendar for the March quarter.

 

At 1337 IST, the turnover in the gilt market was INR 225.10 billion, higher than INR 206.70 billion at 1330 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 6.70-6.80% during the rest of the day.  (Janwee Prajapati)

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India Gilts: Slide as oil prices surge, rupee hits record low

 

	0938 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.02	98.30	98.02	98.25	98.53
YTM (%)	6.7634	6.7227	6.7634	6.7300	6.6898

 

NEW DELHI--0938 IST--Government bond prices slumped as Brent crude futures for May delivery jumped over 20% in Monday's trade to near $120 a barrel, the highest since June 2022. The surge in crude oil prices and the corresponding fall in the rupee amid the intensifying conflict in West Asia led traders to aggressively sell gilts on concerns of a rise in both inflation and the current account deficit, dealers said.

 

The yield on the 10-year benchmark 6.48%, 2035 gilt topped 6.76%, its highest intraday level since Feb. 10. Foreign portfolio investors are likely to sell gilts on fear of a long-drawn out conflict in West Asia that may lead to an extended period of high oil prices, a key concern for India as it imports over 85% of its crude needs, dealers said. The rupee hit a record low of 92.3350 a dollar Monday, which is seen pushing up imported inflation, they said. Domestic traders also trimmed their portfolios as the fall in prices triggered stop-losses on the 10-year benchmark 6.48%, 2035 gilt above 6.72% yield.

 

"FPIs (foreign portfolio investors) will also begin selling now," a dealer at a private-sector bank said. "Crude is going up tick by tick and markets have to price in the risk premium. No one is buying (bonds) on the market except him (RBI)."

 

The RBI will buy bonds through an INR 500-billion open market operation auction Monday, the first of two equal tranches this week. However, the central bank's return to the auction mode to infuse liquidity after a month's lull rather than its speculated on-screen purchases of liquid gilts last week will have a lesser impact on keeping yields in check, dealers said.

 

Moreover, this is seen reducing the room for secondary market buys as surplus liquidity remains around 1% of net bank and time liabilities. Banks are also not keen to tender bonds aggressively at the auction Monday due to falling liquidity coverage ratios as well as unprofitable exits, dealers said. The RBI has offered to buy the the 6.01%, 2030; 6.10%, 2031; 7.18%, 2033; 6.19%, 2034; 6.33%, 2035; 6.92%, 2039; and the 7.30%, 2053 gilts at auction. The result may lend cues later in the day, dealers said.

 

Some traders still hope the central bank will nudge yields lower by buying gilts in the secondary market. 'Others', a category that includes the central bank, insurers and provident funds, have been top net buyers of gilts for the last eight sessions and bought INR 667 billion of gilts in the secondary market last week, according to Clearing Corp. of India data.

 

At 0938 IST, the turnover in the gilts market was INR 48.35 billion, surging from INR 19.10 billion at 0930 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 6.68-6.78% during the rest of the day.  (Aaryan Khanna)

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India Gilts: Seen down as crude on the boil; RBI OMOs to limit losses

 

NEW DELHI – Government bond prices are seen opening lower Monday due to a surge in crude oil prices after an escalation in the armed conflict in West Asia over the weekend. The Reserve Bank of India's announcement that it would buy INR 1 trillion of gilts through open market operation auctions this week is, however, likely to limit the losses, 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 98.53, or 6.69% yield Friday. The INR 290-billion weekly gilt auction sailed through but the aggressive selling from traders before the weekend dragged down gilt prices due to the escalating tensions in West Asia, dealers said. The RBI's speculated gilt purchases limited losses. 

 

Near-month Brent crude oil futures surged to a nearly four-year high after Israel bombed some of Iran's oil storage facilities over the weekend. The US' attack on a desalination plant also raised threats to civilian infrastructure in the region amid the intensifying conflict.

 

Brent crude for May delivery surged as much as 29% in Asian trade Monday to $119.50, hitting its highest level since Jun. 29, 2022. At 0835 IST, the contract cooled to near $115 a barrel, still sharply higher than its settlement of $92.69 Friday. The rise in oil prices is likely to push up domestic inflation over time but immediately weaken the domestic currency as the current account deficit widens, with India importing over 85% of its domestic crude needs. The rupee is expected to fall sharply during the day, which may lead to further sales from foreign portfolio investors in gilts, dealers said. 

 

The RBI's announcement of large OMO purchases this week and its secondary market bond purchases may limit the fall during the day, dealers said. 'Others', a category that includes the central bank, insurers and provident funds, have been top net buyers of gilts for the last eight sessions and bought INR 667 billion of gilts in the secondary market last week, according to Clearing Corp. of India data.

 

Informist had reported during market hours Friday, quoting dealers, that the RBI had sought feedback on what liquidity infusion measures should be undertaken following advance tax outflows this week. Banks had suggested OMOs over variable rate repo auctions. After market hours Friday, the central bank sais it would buy gilts worth INR 1 trillion in two tranches this week, the first on Monday and the second on Friday. At 0930-1030 IST Monday, the RBI has offered to buy the the 6.01%, 2030; 6.10%, 2031; 7.18%, 2033; 6.19%, 2034; 6.33%, 2035; 6.92%, 2039; and the 7.30%, 2053 gilts at auction.

 

On Monday, the government will also switch five bonds worth INR 200 billion maturing in 2026-27 (Apr-Mar) with bonds maturing between six years and 35 years. However, dealers do not expect the switch results to impact bond prices significantly.  (Aaryan Khanna)

 

End

 

US$1 = INR 92.32

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

 

Edited by Ashish Shirke

 

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