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Informist, Tuesday, Mar. 10, 2026

 

By Janwee Prajapati

 

MUMBAI – Government bond prices ended sharply higher Tuesday tracking an overnight fall in crude oil prices and yield on the 10-year benchmark US Treasury note, dealers said. Bond prices were up throughout the day as traders picked up gilts after selling bonds to the Reserve Bank of India at the open market operations auction Monday.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.64, up from INR 98.33 Monday. The closing yield was 6.6737%, down from 6.7184% Monday. Intraday, the bond touched a high of INR 98.74 with the yield falling to 6.6592%. At 1700 IST, the yield on the benchmark 10-year US Treasury note was 4.13%, down from 4.18% at the same time Monday.

 

Lower overnight indexed swap rates and appreciation of the rupee against the dollar also helped bond prices. Tuesday, Brent crude for May delivery eased to $88.16 a barrel from $105 a barrel at the end of Indian market hours Monday. The five-year OIS closed at 6.28%, down 10 basis points from Monday's session. This was the highest fall in a day since Nov. 29, 2024. Moreover, the rupee appreciated to 91.7000 per dollar during the day from 92.3275 a dollar Monday.

 

Traders picked up gilts in the secondary market as they replenished their portfolios after the central bank bought bonds at prices significantly higher than expected at the INR-500-billion OMO auction, dealers said. Following the replacement demand, bidding at the state bond auction was firm from banks as they picked up state bonds maturing in 15 years for their held-to-maturity books, dealers said. Long-term investors mopped up the state bonds. The cut-off yield at the state bond auction was lower than expected despite the supply size being larger than indicated in the borrowing calendar for the March quarter.

 

"Auction result was decent. It was along expected lines only," a dealer at a primary dealership said. "Intraday, prices rose because of the fall in crude oil prices."

 

At the state bond auction, 17 states raised INR 469.60 billion, which was significantly higher than INR 392.70 billion according to the indicative calendar. The cut-off yield on states' 10-year bonds was in the range of 7.41-7.53%. Investors favoured state bonds over gilts as they considered the yield on the former attractive. A total of 24 bids were received for Kerala's 23-year bond, but the entire offering was sold to one bidder. Demand at the auction was boosted by the lack of fresh gilt supply for the rest of the month, dealers said. The last scheduled gilt auction for FY26 ended Friday.

 

In the secondary market, the bonds bought by the RBI at the OMO auction were in favour. The yield on the five-year benchmark 6.01%, 2030 paper was down almost 11 basis points, while the yield on the erstwhile 10-year benchmark 6.33%, 2035 bond was down 10 bps from Monday's session. The central bank bought INR 134.94 billion and INR 135.07 billion of the bonds, respectively. Both these bonds made up more than 50% of the total amount of gilts bought by the RBI on Monday. The 15-year benchmark's yield fell 14 bps to 7.06% from Monday's high of 7.20%.

 

Some dealers booked profits as the yield on the 10-year benchmark 6.48%, 2035 gilt fell to the psychologically crucial level of 6.68%, which capped gains. Most of the traders avoided building positions aggressively given the uncertainty around military conflicts in West Asia, dealers said.

 

"If you see the bid ask spread is also wide and volume is low," a dealer at a private sector bank said. "This is the kind of movement you see during wartime. You cannot expect the volumes and prices to behave normally in such times."

 

Turnover in the government securities market was INR 426.60 billion, down from INR 440.00 billion Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. For the twelfth straight session, there was no trade using the RBI's wholesale e-rupee pilot.

 

OUTLOOK

Traders expect bond prices to open steady Wednesday if there is no escalation in the military conflict in West Asia, dealers said. Traders will closely track the movement of crude oil prices. Moreover, any significant movement in the rupee against the dollar and OIS rates will also lend cues to bond prices during the day, dealers said.

 

Traders also await announcement of the bond chosen for another INR-500-billion OMO auction scheduled for Friday. This is the second tranche of INR 1 trillion of OMO announced last week. Some traders expect the announcement to come on Tuesday or Wednesday post-market hours, dealers said. If the RBI chooses a liquid paper for the OMO, bond prices will rise, they said. Traders expect the central bank to choose the current 10-year benchmark bond and the 15-year benchmark 6.68%, 2040 bond to buy at the OMO auction Friday. Both these bonds are the most liquid papers.

 

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 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.

 

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, some traders do not expect the RBI to allow bond yields to rise above the key level of 6.72%, dealers said.

 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.63-6.75%, with 6.63% likely only if there is continued support from the RBI or the situation in West Asia eases.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.6400	6.6737%	98.3300	6.7184%
6.33%, 2035	98.4925	6.5501%	98.0800	6.6113%
6.01%, 2030	99.0800	6.2518%	98.8000	6.3265%
6.68%, 2040	96.5300	7.0677%	95.9900	7.1299%
6.90%, 2065	92.8750	7.4631%	92.1975	7.5207%

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India Gilts: Up as banks replenish books; liquid bonds expected in Fri OMO

 

	1535 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.70	98.74	98.52	98.52	98.33
YTM (%)	6.6647	6.6592	6.6910	6.6906	6.7184

 

	1535 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.68%, 2040
PRICE (INR)	96.58	96.60	96.11	96.11	95.99
YTM (%)	7.0619	7.0596	7.1160	7.1160	7.1299

 

MUMBAI--1535 IST--Prices of government bonds were up as banks, especially state-owned banks, purchased bonds across the yield curve to replenish their books after sales to the Reserve Bank of India at the INR 500-billion open market operations auction Monday, dealers said. Traders expect the RBI to detail after market hours Tuesday the bonds it will buy at the OMO auction scheduled for Friday, they said. Several traders expect the RBI to include liquid papers such as the benchmark 15-year 6.68%, 2040 bond.

 

Sentiment improved as crude oil prices and US Treasury yields eased and banks were flush with liquidity received from the RBI's gilt purchases through auction, dealers said. The cut-off yields at the state bond auction were lower than expected, with several bonds swept off in single-digit bids. Replacement demand helped the auction sail through despite the large INR 469.60-billion supply, dealers said.  

 

"If market is good, then dealer (feels) good," a dealer at a state-owned bank said. "Everything is fine right now, US yields and crude have come down. People have enough liquidity also now. After 50,000 cr (INR 500 billion) of (gilt) sales, one needs to buy, one can't keep 50,000 cr less (of gilts) in their books." The yield on the 10-year benchmark US Treasury note eased intraday to 4.10%, from 4.18% at 1700 IST Monday, while Brent crude futures briefly fell below $90 per barrel. Gains were capped as traders took profits when the yield on the 10-year benchmark bond fell near the key 6.65% level.

 

As sentiment improved on offshore triggers, the RBI's OMO auctions totalling INR 1.00 trillion this week led to purchases for investment books to replenish stock sold to the central bank. The RBI set cut-off prices sharply higher than expected at the OMO auction Monday and is expected to continue doing so at Friday's auction where traders expect the 6.68%, 2040 bond to be included. The 15-year benchmark's yield has slumped 14 basis points to 7.06% from Monday's high of 7.20%. The RBI had set a cut-off price of INR 100.30 on the 6.92%, 2039 bond at the OMO auction Monday, higher than expectations of INR 99.34. This furthered demand for the liquid 6.68%, 2040 bond as replacement, dealers said. Some also expect the RBI to include the 10-year benchmark bond if the central bank aims to lower yields further, dealers said.

 

Traders continue to bet on the RBI including the erstwhile 10-year benchmark 6.33%, 2035 bond for Friday's OMO auction. If the RBI does choose the bond, it will be the third consecutive time. It last traded at INR 98.50, or 6.5489% yield, nearly 12 bps lower than the current 10-year benchmark yield. Other bonds that traders expect the RBI to include in Friday's OMO auction are the 7.18%, 2033 gilt, the 6.79%, 2034 gilt, and similar bonds maturing in 2031-2034. 

 

After geopolitical uncertainty kept traders on the sidelines for most of the month so far, traders took the fall in crude prices and US yields as an opportunity to trade actively, with some building positions as the RBI's measures kept them optimistic on the domestic front, dealers said. 

 

At 1535 IST, the turnover in the gilts market was INR 333.05 billion, up from INR 307.10 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 6.62-6.70% during the rest of the day.  (Cassandra Carvalho)

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India Gilts: Remain sharply up on oil price fall; auction demand seen firm

 

	1308 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.67	98.69	98.52	98.52	98.33
YTM (%)	6.6701	6.6661	6.6910	6.6906	6.7184

 

MUMBAI--1308 IST--Government bond prices remained sharply up tracking an overnight fall in crude oil prices, dealers said. A fall in overnight indexed swap rates and rise in the rupee against the dollar helped. Some traders placed short bets on gilts to absorb large supply of state bonds Tuesday, which capped gains, they said. Traders avoided placing any aggressive bets ahead of the state bond auction result and due to volatility in crude oil prices amid the ongoing military conflict in West Asia, they said.

 

At 1308 IST, Brent crude for May delivery was $90.50 a barrel Tuesday from $105.05 a barrel at 1700 IST Monday. Tracking a fall in crude oil prices, bond yields and OIS rates softened Tuesday. The five-year OIS fell to 6.29%, down 10 basis points from Monday's session. Moreover, the rupee appreciated to 91.7800 per dollar intraday from 92.3275 a dollar Monday.

 

"Prices are up because of crude oil," a dealer at a state-owned bank said. "Some traders were shorting (placing short bets ahead of fresh state bond supply) because the quantum is large, and they need space in their portfolios." 

 

At the state bond auction, 17 states aimed to raise INR 459.60 billion, which is significantly higher than the indicated amount of INR 392.70 billion, according to states' borrowing calendar for March quarter. Demand at the auction was firm amid a lack of fresh gilt supply the rest of the month, dealers said. The last scheduled gilt auction for FY26 ended Friday. Banks picked up state bonds maturing in up to 15 years for their held-to-maturity books after they sold bonds to the Reserve Bank of India at the INR-500-billion open-market operations auction Monday, dealers said. 

 

Life insurers and pension funds likely bought long-term state bonds to replenish their books after the RBI set a cut-off price INR 1.36 higher than expected on the 7.30%, 2053 gilt at the OMO auction Monday. Moreover, long-term investors preferred state bonds over gilts due to higher yields on the former, dealers said. Mutual funds also likely picked up state government bonds at the auction, dealers said. 

 

Delhi is one of the 17 states raising funds through bond issuances Tuesday, which piqued traders' curiosity, dealers said. This is the first time Delhi has offered to sell a bond via auction after it entered an agreement with the RBI on Jan. 5, with the central bank now managing its banking operations and public debt. Most traders have positive views on Delhi's borrowing programme, they said. Some traders expect the cut-off yield on Delhi's 10-year bond to be on the lower-end of the cut-off range on states' 10-year bonds Tuesday since it is viewed as fiscally strong, and has the backing of the central government, dealers said.

 

At 1308 IST, the turnover in the gilts market was INR 213.40 billion, up from INR 190.40 billion at 1230 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 6.64-6.74% during the rest of the day.  (Janwee Prajapati)

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India Gilts: Surge as oil prices tumble; caution remains amid West Asia conflict

 

	0955 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.57	98.63	98.52	98.52	98.33
YTM (%)	6.6838	6.6751	6.6910	6.6906	6.7184

 

NEW DELHI--0955 IST--Government bond prices were sharply higher as crude oil prices tumbled overnight, easing some concerns over high inflation. However, gains were limited as traders had covered a bulk of their short sales Monday and were wary of taking large bets on gilts amid the ongoing armed conflict in West Asia, dealers said.

 

Brent crude for May delivery was below $90 a barrel in early Asian trade Tuesday from $105 a barrel at the end of Indian market hours Monday, before climbing to $95 a barrel at 0945 IST. US President Donald Trump said in comments through Monday that the US military objectives in Iran were nearing completion and suggested the war could be over as early as next week, just days after administration officials had pegged the timeline at several weeks. A slight fall in the 10-year US Treasury yield to 4.12% from 4.18% at 1700 IST Monday also aided, dealers said.

 

"The global situation is moving the market but traders never have that much comfort when crude is so volatile," a dealer at a primary dealership said. "Though crude prices have fallen, the current levels are also higher than the market was prepared for and the chances of rate hike are still in the back of the mind." The one-year overnight indexed swap rate fell to 5.78% from 5.84% Monday but was still pricing in a 25-basis-point repo rate increase in 2026, dealers said.

 

Despite the trigger, gilts were traded thinly due to the uncertainty over the West Asian conflict continuing. AlJazeera reported Tuesday that an Iranian government spokesperson acknowledged requests for ceasefire talks from Russia, China and France but ruled them out. Some dealers booked profits as the yield on the 10-year gilt fell to the psychologically crucial 6.68% mark, with a view that yields may fall below that mark depending on appetite for state bonds.

 

Traders expect replacement demand from banks to aid gilt prices through the week, with the Reserve Bank of India conducting open market operation auctions worth INR 500 billion each on Monday and Friday to buy bonds. However, the replacement will first be sought at the state bond auction at 1030-1130 IST as banks will look to stock up on the higher-yielding papers, dealers said.  Seventeen states will raise INR 459.60 billion at the auction, higher than the indicated amount of INR 392.70 billion in the indicative calendar for Jan-Mar.

 

At 0955 IST, the turnover in the gilts market was INR 67.15 billion, surging from INR 83.90 billion at 1030 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 6.64-6.74% during the rest of the day.  (Aaryan Khanna)

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India Gilts: Seen sharply up as oil prices tumble post US Trump's remarks

 

NEW DELHI – Government bond prices are likely to surge Tuesday as crude oil prices tumbled overnight following US President Donald Trump's remarks that the armed conflict in West Asia would end "very soon". Dealers said that prices could reverse Monday's losses and surge above Friday's close due to replacement demand from banks after selling gilts to the Reserve Bank of India.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.62-6.72% Tuesday, after ending at INR 98.33, or 6.72% yield Monday. The 10-year yield rose to an over one-month high of 6.7750% intraday tracking a surge in Brent crude to nearly $120 a barrel and its associated inflation risks. Gilt prices ended off lows after the RBI accepted the notified amount of INR 500-billion of open market operation purchases at auction Monday, with cut-off prices sharply higher than expected.

 

Brent crude for May delivery tumbled to near $90 a barrel in Asian trade Tuesday from $105.20 a barrel at the end of Indian market hours Monday. In an interview with CBS News Monday, Trump said the US was progressing with the war quicker than it had anticipated, and while it would not end this week, its military objectives were nearly complete. Trump also told lawmakers that the war would be over "pretty quickly" and that he wants crude prices to be lower.

 

Foreign banks are likely to cover short sales placed in gilts Monday after the comments, dealers said. India imports over 85% of its crude oil requirements and concerns over a rise in inflation had led to the one-year overnight indexed swap rate on Monday pricing in a potential rate hike by the end of 2026.

 

Traders were also optimistic that the central bank would offer profitable exits at its second OMO auction to buy INR 500 billion of bonds on Friday as well. This may prompt state-owned banks to aggressively reinvest in bonds Tuesday to shore up the amount sold to the central bank at Monday's auction, dealers said. Investors may look to lock in current returns as prices are likely to surge if the West Asia conflict ends soon and Brent returns to the pre-war level of around $65-$70 a barrel, dealers said.

 

This is also likely to lead to robust demand at the state bond auction at 1030-1130 IST. Seventeen states will raise INR 459.60 billion at the auction, higher than the indicated amount of INR 392.70 billion in the indicative calendar for Jan-Mar. The extra supply would be easily mopped up as investors vie for higher-yielding bonds across tenures, dealers said. The result of the auction may lend cues in the second half of the day.  (Aaryan Khanna)

 

End

 

US$1 = INR 91.80

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

 

Edited by Ashish Shirke

 

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