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Informist, Friday, Mar. 20, 2026

By Aaryan Khanna

NEW DELHI – Government bond prices recovered most of their losses Friday on speculation that the Reserve Bank of India bought gilts in the secondary market in the latter half of the session, dealers said. Bond prices had slumped earlier as the rupee hit a record low, logging its worst day in four years, while crude oil prices surged.

The 10-year benchmark 6.48%, 2035 gilt closed at INR 98.21, down from INR 98.24 Wednesday. The bond closed at a yield of 6.7369%, up from 6.7330% the previous session. The bond had hit an intraday low of INR 97.92, and the 10-year yield hit a high of 6.7792%, topping its previous high of 6.7777% in 2025-26 (Apr-Mar) and climbing to levels last seen in January 2025. Money markets were shut Thursday for Gudi Padwa.

"I know what you're calling for, and I am of the same opinion," a dealer at a private-sector bank said. "It looks like the RBI has finally come in and taken the market higher since we were threatening 6.78% (yield on the 10-year benchmark gilt)."

The 6.48%, 2035 gilt's price was INR 97.93 at 1600 IST, near the day's low, before recovering 28 paise in the last hour. The 15-year benchmark 6.68%, 2040 gilt recovered all losses to end marginally higher. Most other bonds ended lower in thin trade, which also signalled that the purchases were not broad-based and from market participants but from the central bank in the 10- and 15-year benchmarks, its preferred tenures to purchase gilts in the secondary market, dealers said.

However, some traders were of the view that the recovery was market-led as short sellers trimmed their intraday positions ahead of the weekend after the sharp fall in gilt prices, dealers said. Traders did not want to risk carrying large positions overnight due to uncertainty about the developments in the war in West Asia. Moreover, Brent crude for March delivery eased to around $108 a barrel after hitting an intraday high of over $111 a barrel. Any purchases or short covering from the positive global trigger may have prompted a follow-on wave of short-covering, especially as the 10-year gilt's yield fell below the psychologically crucial 6.75% mark.

"To me, I don't think he (the RBI) bought in the secondary market today (Friday). The market was well protected around the INR 97.90 level (on the 6.48%, 2035 bond) without needing any support," a dealer at a state-owned bank said. "Since the market had stabilised, I think the recovery would have been caused by short sellers covering since they were very active in building positions intraday and would have been disappointed that 6.78% (yield on the 10-year benchmark) didn't break."  Dealers looked ahead to the secondary market activity data from Clearing Corp. of India Ltd. after the market hours to confirm their speculation.

The RBI infused INR 572 billion in liquidity through secondary market purchases of bonds in the week to Mar. 6, a weekly record for on-screen open market operations. It followed this up with INR 195 billion of purchases outside auction in the Mar. 13 week, data released after market hours showed.  The RBI also bought gilts worth INR 1 trillion through two open market operation auctions in the week to Mar. 13, largely mopping up the liquidity impact of its intervention in the foreign exchange market.

Some traders also hoped that the RBI may infuse durable liquidity into the banking system through an open market operation auction next week, to be announced after market hours Friday. However, most sections of the market were of the view that the central bank need not add more durable liquidity as money market rates would fall sharply in early April, with effectively only five trading days left in March. Credit demand at the quarter- and financial-year ends has led to reduced replacement demand from banks, after they had heavily sold bonds to the RBI through OMO auctions and in the secondary market. Regardless, state-owned banks continued to buy gilts throughout the day as gilt prices slid.

Bond prices had opened near Wednesday's closing levels before falling amid high crude oil prices and a decline in the rupee. The rupee plunged 108 paise against the dollar Friday to a record closing low of 93.71 per dollar. Meanwhile, Brent crude futures for May delivery rose to as high as $111.22 per barrel from $107.38 at 0900 IST.

"Until the war ends or at least crude normalises, I don't think the market is fundamentally in any mood to buy (bonds)," a dealer at a primary dealership said. "Some market activity may continue saving things, but the view on rates is already driving a flattener (in the yield curve)."

Yields on short-term bonds have risen more than those on long-term bonds over the past week, as traders fear the RBI's Monetary Policy Committee may hike the policy repo rate in FY27, where rates were seen earlier as either unchanged or falling. Even though the five-year benchmark yield was attractive, most traders avoided taking large bets as they expected inflationary pressures from high crude oil prices to impact India's macroeconomic data before any hit to GDP growth, dealers said. Oil marketing companies, including Indian Oil Corp., raised the prices of high-octane or premium petrol by INR 2.3 a litre, according to various news reports, the first change in pump prices in over a year and a half. The price of normal petrol and diesel was unchanged but at risk of rising, as India's crude oil basket hit a record high above $156 a barrel on Thursday, dealers said. 

Turnover in the government securities market was INR 406.20 billion, up from INR 305.10 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 in March, a trend that continued on Friday. 

OUTLOOK

Gilts are not traded on Saturdays. On Monday, bond traders will take cues from developments in the war between the US-Israeli alliance and Iran, and from their impact on Brent crude prices, dealers said. Traders have begun avoiding short-term bonds due to fears of domestic rate hikes in FY27 if inflation rises following the surge in global crude prices.

Some traders may be disappointed by data showing 'Others' – a category which includes the central bank, insurers and pension funds – were a non-factor in the secondary market, according to a Clearing Corp. of India release after market hours. The RBI also refrained from announcing any durable measures to infuse liquidity. The central bank will conduct an overnight variable rate repo operation for INR 1 trillion at 0930-1000 IST Monday. This is seen as reducing the chances of open market operations next week, dealers said.

Focus will be on the government's borrowing calendar for Apr-Sept, which is likely to be released by the end of next week, dealers said. The gross market borrowing for FY27 is likely to be revised down to around INR 16 trillion after the government conducted gilt switches with the RBI and in the market. These switches have all targeted bonds maturing in FY27, effectively reducing the repayment burden in the coming fiscal year and lowering gross market borrowing from the record INR 17.20 trillion announced in the Union Budget for FY27.

Traders expect the RBI to purchase gilts in the secondary market for the rest of March as the geopolitical situation pushes yields higher. The central bank had been aggressive in its intervention in the first half of March, capping gilt yields and limiting the rupee's fall. The central bank has bought gilts worth nearly INR 1.8 trillion over the past two weeks, but there have been no signs of any purchases from the RBI this week, dealers said. 

Any significant movement in US Treasury yields, the rupee against the dollar, and overnight indexed swap rates will also lend cues to bond prices during the day. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.68-6.80% Monday.

India Gilts: 10-yr yld hits FY26 high of 6.7792% as rupee slides, oil surges 

MUMBAI--1605 IST--Prices of government bonds were at the day's low as Brent crude oil prices for May delivery rose above $110 per barrel intraday and the rupee plunged 108 paise against the dollar Friday, dealers said. The 10-year benchmark bond yield hit 6.7792%, a fresh high in 2025-26 (Apr-Mar) and the highest since Jan 17, 2025. According to data on the RBI's Negotiated Dealing System-Order Matching platform, at 1605 IST, the turnover in the gilt market was INR 316.75 billion, up over 45% from 1430 IST, and higher than INR 238.20 billion at 1535 IST Wednesday. 

Brent crude oil for May delivery rose to $110.57 per barrel from $107.38 at 0900 IST. Tracking the rise in crude oil prices, both bond prices and the rupee fell further. The rupee ended at 93.7100 per dollar, falling 108 paise Friday—the most in a day since Feb. 24, 2022. Bond prices slumped, but with the 10-year yield at its highest level in over a year, current levels were attractive to buy bonds, and traders, especially from state-owned banks, "bought the dip (fall in bond prices)", dealers said. 

Traders were divided on whether the Reserve Bank of India was purchasing gilts on-screen. There was a sudden spurt of purchases after the 10-year benchmark 6.48%, 2035 gilt touched the day's low of INR 97.92, taking the bond's price to INR 98.00 and higher, leading dealers to speculate that the central bank was purchasing gilts. However, the rise in prices did not sustain and bond prices slumped again, dashing speculation of the RBI buying on-screen, some dealers said. A large investor likely purchased the 10-year bond since the level is attractive, dealers said. 

"Someone was definitely there (buying) in the market, and the way volumes moved. But I am looking to see our closing levels to say whether it's RBI or not. If we close lower than INR 97.92 or INR 97.90 (on the 10-year benchmark bond) then doesn't seem like RBI is there. RBI won't let us close below that if it is on-screen. But some value-buyers are there," a dealer at a state-owned bank said. 

Bond prices may fall nearing the end of trade as traders trim risk ahead of the weekend, dealers said. The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.75-6.80% during the rest of the day. (Cassandra Carvalho)

India Gilts: Fall further on slump in rupee; 'value-buying' limits losses

India Gilts: Fall further on slump in rupee; 'value-buying' limits losses

MUMBAI--1320 IST--Prices of government bonds tumbled, and the yield on the benchmark 10-year 6.48%, 2035 bond rose above the crucial 6.77% level for the fourth time this financial year 2025-26 (Apr-Mar) as the rupee slumped further against the dollar, dealers said. The fall in bond prices was limited due to 'value-buying' at levels seen attractive, they said. Traders refrained from aggressive bets, due to lack of risk appetite ahead of the weekend and an intraday rise in Brent crude oil prices which lead to the low turnover, they said. According to data on the RBI's Negotiated Dealing System-Order Matching platform, at 1320 IST, the turnover in the gilt market was INR 168.80 billion, higher than INR 121.65 billion at the same time Wednesday. Trade volume was subdued in the current week due to low risk apettite.

The fall in bond prices was limited as traders bought gilts after yield on the 10-year benchmark bond rose past the key level of 6.75%, inching closer to 6.80%, dealers said. Some traders expect the 10-year yield to rise further to 6.78% or 6.80%, they said. Some dealers expect the central bank to purchase gilts on-screen at the 6.80% level.

The rupee plunged further to nearly 93.50 per dollar intraday, as the Reserve Bank of India let the currency slide, dealers said. Some traders pared bets of support from the RBI in the gilt market through on-screen bond purchases after it let the rupee slip, dealers said. In the current week, data from Clearing Corp. of India does not indicate any on-screen purchases from the RBI, dealers said. The 'Others' segment of gilt market participants--which consists of insurance companies, provident funds, and the central bank--net purchased gilts worth INR 476 million so far this week, compared to INR 130.32 billion last week. 

Traders await the release of data in the central bank's Weekly Statistical Supplement data to confirm if the central bank bought gilts in the secondary market in the week to Mar. 13. Several traders do not expect the data to impact bond prices, since expectations of further such purchases this month are diminishing. This was even as confirmation of such purchases bode well for bond prices, dealers said.   

"Everybody is light (in positioning) right now, nobody wants to hold overnight positions," a dealer at a small finance bank said. "Even in the morning, people (traders) were cutting positions, but the volume was very less." 

Traders also await the release of the Centre's borrowing calendar for Apr-Sept FY27, which is likely to release in the upcoming week, dealers said. Dealers expect the supply of bonds maturing within 30 to 50 years to be at most 30% of the total quantum. The proportion of borrowing is likely to be heaviest in bonds maturing between four years and 10 years as traders expect more than 50% of borrowing to be done through these bonds, they said.

"Supply of long-term bonds will be lesser because the yields are high on those bonds," a dealer at a state-owned bank said. "In the belly (of the yield curve) I think people (traders) have asked for more frequent auctions of the 10-year and 15-year bonds. Absorbing large quantum (supply of bonds at its auction) at a time is a problem for the market." 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 and Diksha Tripathy)

India Gilts: Down amid elevated Brent crude oil prices, rupee at record lows

MUMBAI--0922 IST--Prices of government bonds fell Friday due to elevated crude oil prices after strikes on energy sites in West Asia, even as crude prices eased off highs from Thursday. A rise in US Treasury yields and a fall of the rupee against the dollar to record lows also dragged down bond prices. Some dealers said that the Reserve Bank of India's INR-750-billion variable rate repo auction was a signal of lower borrowing rates, which limited the fall in bond prices. 

The rupee fell to record lows against the dollar, crossing the key 93/$ mark. This also pulled down bond prices, dealers said. Traders were unsure of the movement of bond prices, with no indication yet of the central bank stepping in to buy gilts on-screen, despite the yield on the 10-year benchmark 6.48%, 2035 bond hovering near the key level of 6.75%, dealers said. Traders still expect the central bank to buy gilts on-screen if yields rise further during the day, they said. Bond prices may fall nearing the end of trade as traders trim risk ahead of the weekend, dealers said. 

"Prices are down because you see the (10-year) US yields are up from 4.20% to 4.24%," a dealer at a state-owned bank said. "In FOMC also, due to the comments, people are now not expecting any ease in rates (in rest of 2026). Inflation (forecast) is also on the higher side." 

The US Federal Open Market Committee kept its federal funds target range steady at 3.50-3.75% for the second consecutive meeting on Wednesday. Additionally, the Fed increased its inflation forecast for 2026. US Treasury yields rose as traders do not expect any easing in rates in the world's largest economy due to fears of already-elevated inflation moving higher due to the war in West Asia, dealers said. At 0900 IST, the benchmark 10-year US Treasury yield was 4.25%, against 4.18% at 1700 IST Wednesday. There was no cash trading of US Treasuries in Asian trade since Japanese financial markets are shut for Vernal Equinox.

Brent crude prices for May delivery rose to $119 per barrel Thursday, before easing to around $106 per barrel Friday. Crude futures fell in early trade Friday as major European nations and Japan offered joint efforts to provide safe passage for ships through the crucial Strait of Hormuz and the US took measures ‌to address oil supply disruptions. 

At 0922 IST, the turnover in the gilt market was INR 23.20 billion, more than twice the INR 9.05 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 6.68-6.78% during the rest of the day. (Janwee Prajapati and Diksha Tripathy)

India Gilts: Seen down amid elevated crude oil prices

MUMBAI – Prices of government bonds are seen down Friday amid elevated crude oil prices, dealers said. The Reserve Bank of India's notice to conduct a variable rate repo auction may limit losses, some dealers said. The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.67-6.75% Friday, after ending at INR 98.24, or 6.73% yield Wednesday. Financial markets administered by the Reserve Bank of India were shut on Thursday for Gudi Padwa. The yield on the benchmark 10-year US Treasury yield was 4.25% at 0800 IST, after hitting 4.33% Thursday, and up from 4.18% at the end of gilt market hours Wednesday. Brent crude oil for May delivery was at $105.98 at 0800 IST, easing off highs, and around the same price as at the end of Indian gilt market hours Wednesday.

Brent crude oil futures for May delivery fell after the US and Israel attempted to ease the oil supply crisis amid the West Asia war. Israeli Prime Minister Benjamin Netanyahu said Israel would help the US in re-opening the crucial Strait of Hormuz. He also said Israel would not attack more Iranian energy centres, after it struck the South Pars gas field. Relatiating to the strike, Iran struck energy sites in Qatar, Kuwait and the United Arab Emirates, following which Brent futures shot up to $119 per barrel Thursday. US Treasury Secretary Scott Bessent said the US might soon lift sanctions on Iranian oil at sea – amounting to around 140 million barrels. The US may also release additional oil reserves. It lifted fertiliser-related sanctions on three Belarusian companies Thursday. 
 

Post market hours Wednesday, the RBI said it would conduct a three-day variable rate repo operation for INR 750 billion Friday. While the notice led to fading bets of further open market operation auctions by the RBI this month, the auction is despite poor subscription at the VRR held Tuesday. This is seen as a positive signal from the RBI to infuse liquidity and keep borrowing rates at or below the repo rate, dealers said.

If the 10-year benchmark bond yield rises to the key 6.75% mark, traders expect the RBI to purchase gilts on-screen to prevent further rise. Data does not indicate that the RBI has purchased gilts on-screen so far this week, contrary to what traders were expecting, dealers said. Traders await the central bank's Weekly Statistical Supplement Friday for data to confirm that the central bank bought gilts on-screen in the week ended Saturday. The RBI accounts for its on-screen gilt trades based on the day of settlement. As per data from Clearing Corp. of India Ltd., the 'Others' segment of bond market participants – which comprises the RBI, insurers, and pensions funds – net purchased gilts worth INR 218.34 billion between Mar. 6 and Mar. 12, both days inclusive. Any fall in bond prices may be limited due to state-owned banks' purchases at levels seen attractive, dealers said. State-owned banks have net purchased gilts worth nearly INR 98 billion so far this week, as per data from CCIL. 

On the monetary policy front, the US Federal Open Market Committee left its federal funds target range unchanged at 3.50-3.75% for the second straight meeting. The summary of economic projections released along with the rate decision showed only one 25-basis-point rate reduction in the policy rate in 2026. The Fed revised upwards its inflation forecast for the end of 2026. The CME FedWatch tool showed that Fed fund futures are pricing in a 49% probability of no rate cut in the US for the rest of 2026. Traders are pricing in rate hikes by the Bank of England and European Central Bank this calendar year, with a rate hike seen in the UK as early as April amid fears of inflation rising due to elevated crude oil prices. In India, most traders do not expect a rate hike at least in the next four months, as the RBI is still looking at transmission of its rate cuts done in 2025, dealers said. (Cassandra Carvalho)

End

US$1 = INR 93.71

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

Edited by Saji George Titus

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