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Informist, Wednesday, Mar. 11, 2026

By Cassandra Carvalho

MUMBAI – Prices of most government bonds ended sharply higher Wednesday as traders bet on the Reserve Bank of India choosing to buy liquid, 'on-the-run' gilts such as the 10-year benchmark 6.48%, 2035 bond and the 15-year benchmark 6.68%, 2040 bond at the open market operations auction scheduled Friday, the details of which were expected post market hours, dealers said. The 10-year benchmark bond yield fell to a low of 6.6363%, the lowest in nearly a week, and below the key 6.65% level nearing the end of trade. Bond prices closely tracked the movement of Brent crude oil prices and overnight indexed swap rates during the day, making for a volatile session. Brent crude oil prices for May delivery briefly eased below $90 per barrel towards the end of Indian market hours, helping the rise in prices. Some traders also speculated that the central bank purchased gilts on-screen when bond prices had fallen.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.90, up from INR 98.64 Tuesday, marking the second straight day of gains. The closing yield was 6.6366%, down from 6.6737% Tuesday. The 15-year benchmark bond ended at INR 96.72, up 19 paise from the previous close. Brent crude for May delivery was $90.31 a barrel at 1700 IST, hitting a low of $86.24 and high of $92.98 during Indian market hours from $91.18 a barrel at 1700 IST Tuesday.

"The market is largely looking at crude, and some punting on OMO securities, some punting on the 6.48%, 2035 paper," a trader at a primary dealership said. "It's been a volatile day, with all the news, the reaction to crude, and the news affecting crude. Yesterday (Tuesday) we saw some buying from private sector banks, which is likely today also. They're taking bets on benchmark securities being included in OMO."

Post market hours, the RBI said it will buy seven gilts worth INR 500 billion at the OMO auction Friday. Contradictory to traders' expectations, the central bank did not include any benchmark papers. It said it will buy the 6.45%, 2029 and 7.95%, 2032 gilts at the auction. It will also buy the 6.79%, 2034 and 6.64%, 2035 gilts. It also included the 7.41%, 2036; 7.62%, 2039 and 7.06%, 2046 gilts. 

The auction details published post market hours were a disappointment to several traders. Most traders were expecting the RBI to include at least the benchmark 15-year 6.68%, 2040 gilt and the erstwhile benchmark 10-year 6.33%, 2035 gilts. A few were expecting the 6.79%, 2034 gilt, and additionally, sale of the 7.62%, 2039 bond at the OMO will likely lead to replacement demand in the 2040 bond, dealers said. Private sector banks and primary dealerships had net purchased gilts worth INR 22.11 billion and INR 18.90 billion, respectively, Tuesday, as per data from Clearing Corp. of India, purchases which were likely made to bet on the papers which would be chosen in the OMO auction Friday, dealers said. Several bond traders were expecting the details of Friday's OMO auction post-market hours on Monday or Tuesday, which would've given them ample time to purchase bonds that could be sold at the OMO auction on Friday, dealers said. Nearing the end of trade Wednesday, traders also speculated that the RBI purchased gilts on-screen, when bond prices had fallen as Brent crude rose past $90 per barrel.

"Oil prices might be cooling, but price action looks like RBI is back on-screen again," a dealer at a private sector bank said. Oil prices had eased nearing the end of market hours after Japanese Prime Minister Takaichi Sanae said Japan would release stockpiled oil. 

Bond prices were up earlier in the session tracking an intraday and overnight fall in crude oil prices. While state-owned banks largely booked profits when bond prices were up, banks also bought gilts to replenish their portfolios after sales to the RBI at the INR-500-billion OMO auction Monday. However, the yield on the benchmark 10-year bond failed to fall below the key 6.65% level in early trade due to profit-booking. Later in the session, Brent crude rose past $90 per barrel and subsequently, the five-year OIS rate hit a high of 6.3850%, and bond prices reversed gains. Several traders sold bonds while receiving swap rates at levels seen lucrative, dealers said. Traders sold the 6.01%, 2030 and 6.36%, 2031 gilts, which were sharply down earlier in the session, to receive the five-year OIS rate, dealers said. 

A rise in OIS this week also pushed up Treasury bill yields at the INR-340-billion auction Wednesday and cut-off yields were a tad higher than last week's auction cut-offs, dealers said. The one-year OIS rate has risen 13 basis points since Friday's close. Traders preferred receiving a one-year swap rate at 5.74% than buying a 364-day T-bill, they said. However, cut-off yields were still lower than expected as primary dealerships likely bought T-bills to achieve their half-yearly success ratios, dealers said. Additionally, foreign banks may have built positions in T-bills while selling emerging market gilts due to risk-off appetite, dealers said. The RBI set a cut-off yield of 5.32% on the 91-day T-bill, against an Informist poll estimate of 5.33%. The central bank set cut-off yields of 5.54% on the 182-day T-bill and 5.64% on the 364-day T-bill, against estimates of 5.58% and 5.64% respectively.  

Foreign portfolio investors continued to net sell gilts due to risk-off sentiment and fears that an expected rise in inflation will lead to a quicker pace of rate hikes in India, dealers said. As of 1900 IST, FPIs net sold gilts worth INR 5.85 billion through the fully accessible route Wednesday, as per data from Clearing Corp. of India. 

The turnover in the government securities market was INR 597.85 billion, down from INR 426.60 billion Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There has been no trade using the RBI's wholesale e-rupee pilot for almost a fortnight.

OUTLOOK

On Thursday, bond prices will closely track the movement of crude oil prices, as has been the trend the past week. Brent crude oil futures for May delivery remained around $90 per barrel post market hours even after reports that the 32 member countries of the International Energy Agency will release 400 million barrels of emergency oil reserves, the largest release of oil reserves in its history. US President Donald Trump said the war against Iran could end "soon" since there was "practically nothing left to target". Iran's Revolutionary Guard said it fired on two vessels in the Strait of Hormuz after they ignored warnings.

However, elevated crude prices may be offset by speculation of the RBI purchasing gilts on-screen, after the 'Others' segment of bond market participants--which includes insurance companies, provident funds, and the RBI--was the only substantial net buyer of gilts Wednesday, net purchasing gilts worth INR 53.14 billion. This may also offset disappointment from the lack of any liquid papers being included in the OMO auction Friday. 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 are not carrying heavy positions in gilts as constant developments in the West Asia conflict keep traders wary of the likelihood of crude oil prices rising further, they 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, after the 10-year benchmark bond yield closed below the key 6.65% level Wednesday, bond yields could fall further, on the technical front, especially if the RBI intervenes, dealers said. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.59-6.75%.

India Gilts: Up again in choppy trade; traders bet on liquid bonds in OMO Fri

MUMBAI--1608 IST--Prices of government bonds were up again, reversing prior losses in choppy trade. Traders bet on the Reserve Bank of India including liquid bonds such as the 10-year benchmark 6.48%, 2035 gilt and the 15-year benchmark 6.68%, 2040 gilt in the open market operations auction Friday, the details of which are expected post market hours, dealers said. Traders also speculated that a large investor such as the RBI was purchasing gilts on-screen, as the price action was accompanied by a surge in trade volumes, dealers said. At 1608 IST, the turnover in the gilts market was INR 452.70 billion, up from INR 378.65 billion at 1630 IST Tuesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. 

Brent crude oil futures for May delivery also eased below $90 towards the end of Indian market hours, aiding the rise in prices. However, bond prices has risen before the slight ease in oil prices and overnight indexed swap rates, leading to speculation that the central bank was purchasing bonds on-screen, dealers said. Traders also anticipate that the central bank will include profitable, liquid papers in the OMO auction scheduled Friday, and bought gilts based on these expectations. 

"There is definitely a big player in the market, volumes have improved so much suddenly. Could be RBI or could be some other segment also betting on OMO papers, because people are expecting the OMO release today (post market hours) and there is expectation of 10-year benchmark being chosen," a dealer at a state-owned bank said. The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.64-6.70% during the rest of the day. (Cassandra Carvalho)

India Gilts: Give up gains as Brent crude oil hits $90/bbl again, OIS rises

MUMBAI--1438 IST--Government bond prices gave up gains as Brent crude oil for May delivery hit $90 per barrel, up from around $87 per barrel at 0900 IST. Tracking the rise in crude prices, overnight indexed swap rates also rose, and some traders sold bonds while receiving swap rates at levels seen lucrative, dealers said. Traders also booked profits as the yield on the 10-year 6.48%, 2035 benchmark bond hovered around the key level of 6.65%, they said. The fall in prices was limited as traders picked up gilts to replenish their portfolios after selling bonds worth INR 500 billion to the Reserve Bank of India at the open market operations auction Monday, dealers said.

The five-year OIS rate climbed to 6.34% from 6.29% at 0900 IST, tracking the rise in crude prices. Dealers preferred to sell the 6.01%, 2030 and 6.36%, 2031 gilts, which were sharply down, while receiving fixed rate contracts in the five-year swap at levels seen lucrative, dealers said.

Traders avoided building aggressive positions as constant developments in the West Asia conflict kept traders wary of the likelihood of crude oil prices rising further, they said. Iran has threatened to target Israeli and American banks in West Asia after an Iranian bank was attacked, as per media reports.

Some traders picked up gilts as there is no fresh supply of gilts scheduled for the rest of the current financial year 2025-26 (Apr-Mar), dealers said. Traders also look forward to the announcement of bonds chosen for the second tranche of the INR-1-trillion OMO auction scheduled Friday, which is expected post-market hours on Wednesday. Several traders were disappointed that the RBI did not put out the auction notice post market hours Tuesday, which indirectly limited traders' capacity to position before the auction, dealers said. Some dealers said that due to the 'T+1' settlement of trades on the RBI's Negotiated Dealing System-Order Matching platform, traders who wished to sell bonds to the central bank at the OMO Friday would have to purchase these gilts in the secondary market Wednesday itself, to eliminate risk of a delayed settlement. The RBI usually requires the bonds tendered at the OMO auction to be available in the sellers' Subsidiary General Ledger account by noon of the next trading session, so traders can buy such bonds even on Thursday and tender these at the OMO auction Friday, but some traders prefer settling their trades a day prior, they said. 

Traders expect the RBI to choose bonds similar to the last OMO auction, when it set cut-off prices significantly higher than expectations, dealers said. Some traders expect the RBI to include the current 10-year benchmark 6.48%, 2035 bond and the 15-year benchmark 6.68%, 2040 bond at the OMO auction Friday, dealers said. Some traders expect only erstwhile benchmark papers to be chosen, such as the 6.33%, 2035 gilt, they said.

"I do not think he (RBI) will choose on-the-run benchmarks," a dealer at a state-owned bank said. "I think it will be similar bonds as the last auction...could be 6.33%, 2035 (bond) again." The yield spread of the 6.33%, 2035 gilt over the 6.48%, 2035 gilt has inverted, with the former's yield trading 13 basis points lower than the latter. Bonds which are expected to be chosen for the OMO auction Friday will continue to be in favour on Wednesday and Thursday, even though the RBI hasn't yet sought feedback from banks on bonds to be included Friday, dealers said.

The cut-off yields at the INR-340-billion Treasury bill auction were lower than expected, amid ample surplus liquidity and likely due to some primary dealerships looking to complete their half-yearly success ratio targets for T-bills, dealers said. The cut-off yields were slightly higher than last week's cut-offs as traders preferred receiving fixed rate contracts in the one-year OIS rate, which offered a higher rate of 5.74%, dealers said. The RBI set a cut-off yield of 5.32% on the 91-day T-bill, against an Informist poll estimate of 5.33%. The central bank set cut-off yields of 5.54% on the 182-day T-bill and 5.64% on the 364-day T-bill, against estimates of 5.58% and 5.64% respectively.

At 1438 IST, turnover in the gilts market was INR 360.40 billion, up from INR 259.50 billion at 1430 IST Tuesday, 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 6.64-6.70% during the rest of the day. (Janwee Prajapati and Cassandra Carvalho)

India Gilts: Rise tracking fall in oil prices; traders book profits

NEW DELHI--0950 IST--Government bond prices rose Wednesday due to a fall in crude oil prices, which eased rapidly below the $90 a barrel mark overnight. The lack of fresh gilt supply until April also aided prices, though some traders booked profits as the yield on the 10-year benchmark 6.48%, 2035 gilt fell to near 6.65%, a psychologically crucial level, dealers said.

Brent crude for May delivery fell by around 3% overnight and was below $87 a barrel at 0930 IST from $87.81 a barrel at 0900 IST, easing concerns of high inflation in India amid a persistent rise in the price of the imported commodity. The Wall Street Journal reported early Wednesday that the International Energy Agency had proposed a record release of oil from its strategic reserves, topping the 182 million barrels in 2022. Members are likely to decide on the plan by Wednesday, the report said. 

"Bonds were sensitive to crude prices when they were rising. Now, at $87 a barrel (near-month Brent futures), it is lower than yesterday's (Tuesday's) trading range as well," a dealer at a state-owned bank said. Brent futures had jumped to a 44-month high near $120 a barrel Monday. "Because of the report on strategic reserves being used, the sense among traders is that the impact of the war (in West Asia) may not translate as much into crude."

Traders did not expect too many fresh triggers for bonds during the day, especially on the domestic front. India's CPI data for February is due for release at 1600 IST Thursday. India's retail inflation, based on the new CPI series, is seen rising to 3.1% in February from 2.75% in January. Traders do not expect February's inflation data to make much impact on their bets on domestic interest rates, with a status quo at the current 5.25% seen for the entirety of financial year 2026-27 (Apr-Mar), dealers said.

Most traders looked ahead to the RBI's announcement of bonds it will offer to buy at its INR 500-billion open market operation auction Friday. Dealers expect the central bank would choose to buy heavily traded securities at the auction, which would allow for more widespread participation. Speculation of the 10-year benchmark 6.48%, 2035 bond at the OMO auction has increased with no fresh supply of gilts in FY26. 

At 0945 IST, the turnover in the gilts market was INR 75.55 billion, surging from INR 36.20 billion at 0930 IST Tuesday, 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 6.63-6.70% during the rest of the day.  (Aaryan Khanna)

India Gilts: Seen steady after volatility; mkt lacks significant fresh cues

NEW DELHI – Government bond prices are seen steady Wednesday after the recent volatility and amid a lack of significant domestic cues, dealers said. A slight fall in crude oil prices overnight may lead to some traders picking up gilts near the open.

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.62-6.70% Wednesday, after ending at INR 98.64, or 6.67% yield Tuesday. Gilt prices surged Tuesday tracking a sharp fall in crude oil prices and with state bond supply sailing through, dealers said. Moreover, they took bets that the Reserve Bank of India would include liquid and benchmark gilts at its open market operation auction to buy bonds Friday.

Brent crude for May delivery eased to $88.33 a barrel at 0840 IST on a Wall Street Journal report that the International Energy Agency had proposed a record release of oil from its strategic reserves, topping the 182 million barrels in 2022. The contract was at $91.14 a barrel at 1700 IST Tuesday.

In addition to traders tracking oil prices, banks may step up purchases to replace gilts sold to the RBI at Monday's OMO auction, dealers said. Traders are likely to book profit if the 10-year gilt's yield falls to near 6.65%, with no firm trigger to break the current trading range yet amid continued uncertainty over the conflict in West Asia.

'Others' – a category that includes the RBI, insurers and provident funds – net sold gilts worth INR 15.50 billion Tuesday, the segment's first net sales since Feb. 16. The central bank had likely ended its speculated gilt prurchases in the secondary market after announcing OMO auctions worth INR 1 trillion this week, dealers said. Moreover, long-term investors may have trimmed their gilt holdings to free up space to buy state bonds at auction Tuesday, they said.  (Aaryan Khanna)

End

US$1 = INR 92.04

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

Edited by Avishek Dutta

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