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Informist, Thursday, Mar. 12, 2026

 

By Janwee Prajapati

 

MUMBAI – Government bond prices ended sharply lower Thursday due to an overnight rise in crude oil prices and the benchmark 10-year US Treasury yield, dealers said. The decision of the Reserve Bank of India not to include any liquid bonds in the open market operations auction Friday, also weighed on the sentiment. Losses were limited as traders bought gilts to replenish their portfolios after selling bonds to the RBI at the open market operations auction Monday.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.69, down from INR 98.90 Wednesday. The gilt closed at a yield of 6.6666%, up from 6.6366% Wednesday. Brent crude for May delivery was slightly over $97 a barrel at 1700 IST, up from $91.98 a barrel at the same time Wednesday. The contract had touched a high of $101.59 during Indian market hours. At 1700 IST, the yield on the benchmark 10-year US Treasury was 4.24%, up from 4.16% at the same time Wednesday. 

 

Traders had expected the RBI to buy 'on-the-run' 10-year 15-year benchmark bonds at the OMO auction Friday. However, the seven bonds selected by the central bank for the OMO auction were 'in-the-money' or profitable, dealers said. 

 

Gilt prices were little changed after the release of February CPI inflation data. India's CPI inflation rose to 3.21% in February from 2.74% a month earlier, according to data released by the statistics ministry at 1600 IST. CPI inflation in February was slightly higher than expectations. According to an Informist Poll, headline inflation was seen at 3.1% in February.

 

Despite the slightly higher-than-expected CPI, traders refrained from further gilt sales, preferring higher indicative prices for Friday's OMO auction, dealers said. When tendering bonds in an OMO auction, traders use the price published by Financial Benchmarks India Pvt. Ltd. for the previous session as the benchmark. 
 

A few traders bought gilts to refill their portfolios after selling bonds to the RBI at the OMO auction Monday, dealers said. Public sector banks picked up gilts as the levels were seen as lucrative, while some traders covered short bets expecting RBI's secondary market purchases to continue. However, traders avoided building aggressive positions ahead of the second tranche of the OMO Friday, dealers said.

 

"People covered short bets yesterday (Wednesday), today (Thursday) it is mostly replacement buying," a dealer at a private sector bank said. "Levels (yield on 6.48%, 2035 bond) are not going to rise above 6.70% due to these OMOs, unless there is a rise in oil prices."

 

Some traders speculated that the central bank bought gilts in the secondary market Thursday to protect the bond yields from rising above 6.70%, dealers said. A few dealers said that the RBI's purchases were a liquidity management strategy.

 

These speculations were fuelled after the 'others' segment of market participants, which includes insurers, pension funds and the central bank, was the top net buyer of gilts on Wednesday, net purchasing gilts worth INR 53.14 billion, Clearing Corp. of India data showed. Wednesday, traders speculated the RBI bought 10-year benchmark 6.48%, 2035 gilt near the day's low of INR 98.51 or the yield high of 6.69%.

 

"I think RBI is trying to keep yields low because there is heavy supply of state bonds lined up, if the gilt yields will go up too much then the state auctions would lead to cancellation." a dealer at a state owned bank said. "It (RBI) will not allow the yields to rise above 6.70% (on the 10-year benchamrk 6.48%, 2035 bond)."

 

Traders await the OMO auction Friday for further cues, as higher cut-off prices would lead to a rise in bond prices, dealers said. Some traders said 6.45%, 2029 bond will be in focus and traders may offer this bond at prices 20-25 paise higher than the indicative prices, whereas other bonds could be offered 50-60 paise higher than the Financial Benchmarks India Pvt. Ltd. levels. Insurers likely have the 7.06%, 2046 bond and will offer the same at 60-80 paise higher than the indicative levels, dealers said.

 

The bonds the RBI has chosen to buy at the auction are:

--the 6.45%, 2029 bond,

--the 7.95%, 2032 bond,

--the 6.79%, 2034 bond,

--the 6.64%, 2035 bond,

--the 7.41%, 2036 bond, 

--the 7.62%, 2039 bond,

--and the 7.06%, 2046 bond.

 

Dealers said domestic traders preferred to short-sell short-term gilts and receive swap rates as they speculated that the RBI was purchasing the longer-term 10-year benchmark 6.48%, 2035 and 15-year benchmark 6.68%, 2040 gilts on-screen. Foreign banks were likely to have been selling longer-term gilts and purchasing some short-term bonds, including Treasury bills, amid risk-off sentiment due to the West Asia conflict, they added.

 

The turnover in the government securities market was INR 495.95 billion, down from INR 597.85 billion Wednesday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There was no trade using the RBI's wholesale e-rupee pilot for a fortnight.

 

OUTLOOK

Traders expect bond prices to open steady Friday if there is no escalation in the military conflict in West Asia, dealers said. Traders will closely track movement in 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.

 

Some traders expect the central bank to conduct a variable-rate repo auction to maintain comfortable liquidity in the system, dealers said. Such an announcement is expected to come by the end of next week, they said.

 

"If RBI was not buying gilts in the secondary market, we would have easily seen 6.80-6.82% (yield on the 10-year benchmark bond)," a dealer at a state-owned bank said. "We have already seen 6.75% (yield on the 10-year benchmark bond), the next crucial level is 6.78-6.80%."

 

Traders are not carrying heavy positions in gilts, as ongoing developments in the West Asia conflict keep them wary 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 the 6.62-6.75% range.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	98.6900	6.6666%	98.8975	6.6366%
6.33%, 2035	98.4625	6.5546%	98.6700	6.5238%
6.01%, 2030	98.8850	6.3042%	99.0300	6.2653%
6.68%, 2040	96.4000	7.0827%	96.7150	7.0465%
6.90%, 2065	92.4400	7.5001%	92.9400	7.4577%

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India Gilts: Inch lower as India Feb CPI slightly higher than view

 

	1604 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.69	98.75	98.50	98.60	98.90
YTM (%)	6.6666	6.6587	6.6940	6.6796	6.6366

 

MUMBAI--1604 IST--Prices of government bonds inched lower and overnight indexed swap rates rose slightly after India's CPI inflation for February was slightly higher than expectations, dealers said. Bond prices remained sharply down as Brent crude for May delivery fluctuated between $95 and $100 per barrel.

 

India's CPI inflation was 3.21% last month, up from 2.74% in January, according to data released by the statistics ministry at 1600 IST. This is slightly higher than an Informist Poll estimate of 3.1%. Traders were also expecting CPI inflation to be around 3.1%, but they had expected bond prices to fall significantly only if the reading were 3.5% or higher.

 

More than last month's data, however, focus is now on inflation in March, a period that has seen volatile crude oil prices and a brief surge to $120 per barrel, dealers said. As the military conflict in West Asia disrupts oil supply, Nomura Wednesday raised India's inflation forecast for the financial year 2026-27 (Apr-Mar) to 4.5% from 3.8%.

 

"Inflation is largely within expectations, but this is a pre-war number, so doesn't matter," a dealer at a private-sector bank said. "It is slightly higher, yes, market was expecting 3.1%."

 

Intraday, some traders speculated that the Reserve Bank of India had purchased gilts on-screen earlier in the session while others said some traders were covering short bets as bond prices were off the day's low. The central bank's likely on-screen gilt purchases deterred traders from aggressively short-selling gilts even as they preferred to place short bets on gilts and receive fixed-rate contracts in overnight indexed swap rates at levels seen to be lucrative, dealers said. Most domestic traders preferred to short-sell short-term gilts and receive swap rates since the RBI was speculated to be purchasing the longer-term 10-year benchmark 6.48%, 2035 and 15-year benchmark 6.68%, 2040 gilts on-screen, they said. Foreign banks were likely to have been selling longer-term gilts and purchasing some short-term bonds amid risk-off sentiment on account of the West Asia conflict, they added.

 

At 1604 IST, the turnover in the gilts market was INR 448.00 billion, similar to INR 473.30 billion at 1630 IST Wednesday, 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.  (Cassandra Carvalho and Diksha Tripathy)

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India Gilts: Off lows on intraday fall in oil price; banks replenish portfolios

 

	1256 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.72	98.75	98.50	98.60	98.90
YTM (%)	6.6623	6.6587	6.6940	6.6796	6.6366

 

MUMBAI--1256 IST--Government bond prices were off lows following an intraday fall in crude oil prices, dealers said. Some traders purchased bonds to refill their portfolios after selling gilts to the Reserve Bank of India at the last INR-500-billion OMO auction. Bond prices remained down on the overnight rise in crude oil prices. Moreover, the Reserve Bank of India did not choose widely expected bonds for the open market operations auction Friday, which also weighed on sentiment.

 

Bond prices recovered some losses as Brent crude futures for May delivery fell to $96.85 at 1256 IST, down from $101.06 at 0900 IST. Some traders also said that reports of Iran allowing India-flagged tankers to pass through the Strait of Hormuz was positive for Indian bond prices. Citing sources, several Indian media agencies reported that India-flagged tankers could pass the crucial strait following talks between External Affairs Minister S. Jaishankar and Iran's Foreign Minister Abbas Araghchi. However, the overnight rise of almost $10 per barrel in crude oil prices kept bond prices down.  

 

Some traders also bought gilts as they continue to refill portfolios after selling bonds to the RBI at the last OMO auction, dealers said. Public sector banks purchased gilts at levels seen as lucrative, while some traders covered short bets as they expected RBI to buy bonds in the secondary market. The 'Others' segment of market participants, which includes insurers, pension funds and the central bank, net bought INR 53.14 billion of gilts on Wednesday, data from Clearing Corp. of India showed. 

 

"In case he (RBI) intervenes in the rupee market today, we might expect him to buy gilts also," a dealer at a state-owned bank said. "I do not think he (RBI) is trying to protect any levels...it is for giving liquidity to the system." Wednesday, traders speculated the RBI bought gilts near the day's low of INR 98.51 or the yield high of 6.69%. 

 

Post-market hours Wednesday, the central bank said it will buy the 6.64%, 2035 bond along with six other bonds at the OMO auction Friday. This is contrary to traders' expectations of the central bank choosing the 10-year benchmark 6.48%, 2035 bond or the erstwhile 10-year benchmark 6.33%, 2035 bond. However, most of the bonds selected for the second tranche of the INR-1-trillion OMO auction Friday are 'in-the-money' or profitable, dealers said. Traders expect cut-off prices at the auction to be close to indicative levels which will be published by Financial Benchmarks India Pvt. Ltd. for Thursday, they said.  

 

Caution ahead of India's CPI inflation data for February, scheduled for release at 1600 IST, deterred aggressive trades, dealers said. However, most traders do not expect any significant movement in bond prices since the CPI data does not include the impact of the West Asia conflict, dealers said. According to an Informist Poll of 13 economists, CPI inflation is expected to 3.1% in February from 2.75% in January.

 

At 1256 IST, the turnover in the gilts market was INR 287.40 billion, slightly higher than INR 234.25 billion at 1230 IST Wednesday, 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.  (Janwee Prajapati)

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India Gilts: Slump on rise in crude, US ylds; hope of RBI buys limits losses

 

	0940 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	98.67	98.70	98.50	98.60	98.90
YTM (%)	6.6695	6.6655	6.6940	6.6796	6.6366

 

NEW DELHI--0940 IST--Government bond prices slumped Thursday as near-month Brent crude futures topped $100 a barrel, with an overnight jump in US Treasury yields also raising concerns of widespread sales from foreign investors, dealers said. Expectations of purchases from the Reserve Bank of India during the day limited losses.

 

The rise in oil prices amid the wide and intense military conflict in West Asia fuelled inflationary concerns in the domestic economy, even as some traders believed the hit to economic growth over the medium-term from the fuel supply crunch would be positive for rates and fixed income instruments, dealers said. The 10-year US Treasury yield rose to 4.24% from 4.13% at 1700 IST Wednesday after US CPI inflation accelerated on month in February and inflationary fears rose tracking crude prices. Foreign portfolio investors have sold fully accessible route gilts worth INR 54.12 billion between Mar. 2 and Wednesday, with further sales from this segment expected Thursday, dealers said. 

 

Meanwhile, traders had also widely expected the erstwhile five-year benchmark 6.01%, 2030 gilt, as well as the 10-year benchmark 6.48%, 2035 gilt and 15-year benchmark 6.68%, 2040 bond to be included in the next tranche of the RBI's OMO purchases. None of these bonds were included among the seven gilts the RBI picked for the INR 500-billion auction Friday, which were largely illiquid securities maturing between 2029 and 2046, a release after market hours Wednesday showed. 

 

"There is definitely some disappointment on the OMO front since the market was expecting liquid bonds. Crude prices are also $10 (a barrel) higher than yesterday's levels and so is UST (10-year US yield)," a dealer at a primary dealership said. "The market should hold these levels as this is where the RBI had come in to buy yesterday."

 

There had been heavy speculation that the central bank bought gilts at the day's low Wednesday, helping a vigorous recovery in the second half of trade that brought the 10-year benchmark gilt to its lowest closing level since Jan. 22. The 6.48%, 2035 bond had hit a low of INR 98.5050 Wednesday. Banks were buying bonds and traders were covering their short sales near that level, helping bonds recover some losses Thursday, dealers said. The 'Others' segment--which includes insurance companies, provident funds, and the RBI--was the only substantial net buyer of gilts Wednesday, picking up bonds worth INR 53.14 billion, Clearing Corp. of India data showed.

 

India's CPI data for February, scheduled for release at 1600 IST, may lend cues to bond prices later in the day. An Informist poll pegged India's CPI inflation in the new series rising to 3.1% in February from 2.75% in January. However, dealers said the impact of the inflation reading may be limited as it would not take into account the conflict in West Asia, which began with the US and Israel striking Iran on Feb. 28.

 

At 0940 IST, the turnover in the gilts market was INR 81.50 billion, sharply higher than INR 45.35 billion at 0930 IST Wednesday, 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)

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India Gilts: Seen down on rise in oil prices, US ylds; RBI buys may support

 

NEW DELHI – Government bond prices are seen opening lower Thursday due to an overnight rise in Brent crude oil prices and US Treasury yields. Traders were also disappointed with the Reserve Bank of India's choice of bonds for its INR 500-billion open market operation auction Friday. However, speculated purchases from the RBI during the day are expected to limit losses, dealers said.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.60-6.71% Thursday, after ending at INR 98.90, or 6.64% yield Wednesday. Bonds ended a volatile day higher, largely due to speculated purchases from the central bank. The 10-year benchmark gilt yield ended at its lowest since Jan. 22 despite the uncertainties from the conflict in West Asia.

 

Brent crude for May delivery topped $100 a barrel in Asian trade Thursday, jumping from $90.31 a barrel at 1700 IST Wednesday, the end of Indian gilt market hours. Oil prices have been volatile and were reacting to Iran's attack on two foreign oil tankers in a port in Iraq. The International Energy Agency's record release of 400 million barrels from emergency reserves, agreed upon by members Wednesday, was not seen as sufficient to immediately make up for the supply lost from the closure of the Strait of Hormuz.

 

The 10-year US Treasury yield also hit an over one-month high of 4.24% Thursday as concerns over an extension of the West Asia crisis pushed back hopes of rate cuts amid inflationary fears. Data released Wednesday showed retail inflation for February accelerated to 0.3% on month from a 0.2% increase in January. The annualised reading of headline inflation, at 2.5%, and core CPI inflation, at 2.4%, were in line with consensus estimates. The reading does not take into account disruptions due to the West Asia conflict. Expectations of two more 25-basis-point rate cuts in the US in 2026 have shrunk to 38.1% from over 50?ay prior, according to the CME FedWatch tool.

 

Moreover, traders had been widely expecting the RBI would buy liquid or benchmark bonds in the five-, 10- and 15-year segments at its OMO auction Friday. Instead, RBI has chosen to buy the 

--the 6.45%, 2029 bond,

--the 7.95%, 2032 bond,

--the 6.79%, 2034 bond,

--the 6.64%, 2035 bond,

--the 7.41%, 2036 bond, 

--the 7.62%, 2039 bond,

--and the 7.06%, 2046 bond.

 

The lack of liquid securities is likely to particularly lead to selling in the 6.01%, 2030 gilt, the 10-year benchmark bond and the 15-year benchmark 6.68%, 2040 gilt, dealers said.

 

Though all the negative factors are likely to weigh on prices, losses may be limited ahead of the RBI's OMO purchase and demand from banks to replace gilts sold to the central bank earlier this week at the INR 500-billion OMO purchase Monday. Speculation that the RBI has been consistently buying bonds in the secondary market is also likely to offset the negative factors, dealers said. 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, Clearing Corp. of India data showed. 'Others' are expected to be the largest net buyers on Thursday as well, dealers said.  (Aaryan Khanna)

 

End

 

US$1 = INR 92.19

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

 

Edited by Saji George Titus

 

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