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Informist, Tuesday, Mar. 24, 2026

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended sharply lower after swinging between gains and losses, as traders were cautious about holding bonds overnight amid uncertainty about the war in West Asia. Gilts had recovered some losses near the close of trade Monday and rose earlier Tuesday as hopes that the conflict was nearing an end pulled down Brent crude prices. Poor demand for short-term bonds at the state bond auction Tuesday also weighed on gilt prices near the close, dealers said.

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 97.32, down from INR 97.52 Monday. The bond closed at a yield of 6.8681%, up from 6.8379% the previous session. The bond's price traded in a band of INR 97.29-97.73 Tuesday. The 10-year benchmark yield closed at its highest level since Nov. 22, 2024.

 

The Reserve Bank of India set cut-off yields on states' 10-year bonds at 7.55%-7.87%, much higher than an Informist poll estimate of 7.57-7.65%. The cut-off yield on Sikkim's 10-year bond was 7.87%, over 100 basis points higher than the yield on the benchmark 10-year 6.48%, 2035 bond. A 100-bps spread on a 10-year state bond was last seen in December. Short-term bonds saw even more tepid demand, with Tamil Nadu's five-year bond commanding a cut-off yield of 7.24%, higher than the Informist poll median of 7.18%.

 

Several states did not accept, or only partially accepted, bids for five- and six-year bonds, likely because investors were demanding higher returns, dealers said. The yield curve in both central and state government securities had flattened as traders began pricing in the risk of rate hikes in India in 2026-27 (Apr-Mar), pushing more rate-sensitive short-term gilts out of favour.

 

Long-term bonds saw robust demand from life insurers and provident funds, with a large state-owned life insurer reportedly sweeping the supply of 25-year state bonds. The 25-year bonds worth INR 51.62 billion were mopped up in single bids across four states, each at a cut-off yield of 7.79%.

 

"Probably some traders got stock of state bonds and then didn't want to keep the risk of g-sec (gilts) on their book overnight, which led to the selling near the close," a dealer at a primary dealership said. "What we have seen is that some positive news comes and that is always sold into due to the volatility in the (West Asia) war. As of now, there is no certainty and so there are no buyers." 

 

An intraday rise in US Treasury yields and crude oil prices from lows also weighed on gilt prices in the second half of the day. Brent crude futures for May delivery were at $101.73 a barrel at 1700 IST, up from an intraday low of near $100 a barrel. The yield on the 10-year US Treasury note rose to 4.37% at the end of Indian market hours from a low of 4.34% intraday.

 

Domestic monetary policy is also expected to tighten after the April Monetary Policy Committee meeting, due to external pressures and a weak rupee. The rupee recovered from a record closing low hit on Monday but did not gain materially due to hefty dollar demand, despite a rise in domestic equities on Tuesday. The RBI had allowed the weighted average call money rate to fall to below its policy repo rate of 5.25?tween early February and mid-March. However, the central bank has not taken any steps to infuse durable liquidity into the banking system in the second half of March, including primary or secondary market purchases of gilts. Outflows for tax payments have pushed up money market rates and traders expect them to hover near the repo rate going ahead, rather than near the lower end of the Liquidity Adjustment Facility corridor of 5.00%, dealers said.

 

The central bank has likely not bought gilts in the secondary market in the past week despite yields rising to multi-year highs, dealers said. The RBI's hands-off approach has puzzled some traders, given the about-face from the first half of the month, when it bought a record amount of gilts on screen while conducting two open market operations auctions to buy INR 1 trillion of bonds. Others said the central bank has likely allowed yields to rise as the West Asia conflict extends into its fourth week, and that this is likely to push up domestic inflation while pulling down growth.

 

Bond prices had opened lower due to an overnight rise in US yields and crude oil prices before reversing those losses intraday after a report in Al Arabiya news agency said Iranian Supreme Leader Mojtaba Khameini had agreed to negotiate with the US to end the war. US President Donald Trump said on Monday that the two sides were discussing ways to de-escalate and end the war. However, Iranian media and officials have consistently denied reports that leaders from the two sides were negotiating a ceasefire, with Tehran insisting on reparations from the US and Israel after its bombing campaign over the country through March and a guarantee of no further aggression.

 

"There was definitely some relief in the market after the newsbites started flowing," a dealer at a private-sector bank said. "I personally think that the US wants to get out of Iran as soon as possible and this situation is going to calm down quicker than the market is currently pricing in."

 

The volatility in prices was amplified by the fall in volumes. Turnover in the government securities market was INR 390.60 billion, down from INR 449.80 billion Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. There were no trades using the RBI's wholesale e-rupee pilot on Tuesday, the same as the rest of March.

 

OUTLOOK

On Wednesday, 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. News on negotiations to end the war in West Asia will likely drive gilt prices higher, especially as traders were of the view that the 10-year gilt was attractive after it closed at a 16-month high Tuesday. Continued attacks on energy infrastructure in the region – as reported on Monday and during Indian market hours Tuesday – will keep risk appetite for bonds low, 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. Currently, most traders do not expect a rate hike at the next three meetings or within the next six months, but fear a lengthening of the West Asia conflict, which could bring those hikes forward, dealers said. The one-year overnight indexed swap rate is pricing in two to three 25-basis-point rate hikes over the next 12 months.

 

The size of the state bond auction on Friday will also affect bond prices, with the RBI expected to announce the auction details later Tuesday. Traders expect states to announce an auction between INR 200 billion and INR 300 billion on Friday, which will likely further dampen demand for gilts. The indicative calendar for state borrowing in Jan-Mar had put Friday's auction at INR 120 billion.

 

The RBI's apparent lack of secondary-market gilt purchases, following significant activity in the first half of March, has disappointed traders. The central bank also refrained from announcing any durable measures to infuse liquidity through auction, which are seen as unlikely until at least mid-April, dealers said. After market hours Tuesday, the central bank announced it would conduct two variable rate repo auctions to supply liquidity to the banking system through the end of the financial year on Mar. 31 next week.

 

Focus will be on the government's borrowing calendar for Apr-Sept, which is likely to be released by the end of the week, dealers said. The gross market borrowing for FY27 is likely to be revised down to around INR 16.09 trillion after the government conducted gilt switches bilaterally 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 first-half borrowing to be around 55% of the full-year target, with the weightage of specific tenures largely unchanged from the Oct-Mar calendar. 

 

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 6.75-6.92% Wednesday.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	97.3150	6.8681%	97.5200	6.8379%
6.33%, 2035	97.0200	6.7723%	97.2000	6.7449%
6.01%, 2030	97.9500	6.5594%	98.1000	6.5183%
6.68%, 2040	95.0500	7.2402%	95.2500	7.2167%
6.90%, 2065	90.3000	7.6864%	90.6500	7.6554%

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India Gilts: Down in choppy trade as state bond cut-off yields disappoint

 

--Sikkim 10-yr bond cut-off 7.87%, over 100 bps more than India 10-yr gilt yld 

 

	1625 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.42	97.73	97.33	97.45	97.52
YTM (%)	6.8527	6.8072	6.8659	6.8483	6.8379

 

MUMBAI--1625 IST--Prices of government bonds were down after the results of the state bond auction disappointed traders, they said. The Reserve Bank of India set cut-off yields on states' 10-year bonds at 7.55%-7.87%, much higher than an Informist poll estimate of 7.57-7.65%. The cut-off yield on Sikkim's 10-year bond was 7.87%, over 100 basis points higher than the last traded yield on the benchmark 10-year 6.48%, 2035 bond. A 100-bps spread on a 10-year state bond was last seen in December. 

 

Demand for long-term state bonds was robust, and a large investor, such as an insurance company or a provident fund, took up almost all the papers maturing in 18 to 20 years at a single cut-off yield, dealers said. The RBI set a cut-off yield of 7.88% on states' 18-year and 20-year bonds. However, short-term bonds saw tepid demand, especially the five-year state bonds, dealers said. Several states did not accept or only partially accepted bids for five-year bonds. Assam did not accept any bids in the re-issue of its 7.22%, 2032 bond as well.

 

"We've been buying short-term state bonds over the past few auctions, so we also didn't go for five-year this time," a dealer at a state-owned bank said. "And the 10-year spread is unbeatable, it's the most attractive tenure right now."

 

Traders also made room for the state bond supply scheduled for Friday. States' borrowing calendar for Jan-Mar shows that states aim to raise INR 120 billion through bonds Friday, but traders expect this amount to be around INR 450 billion or more, dealers said. Some dealers expect the notified amount to be INR 150 billion to INR 200 billion. The auction details are expected post-market hours Tuesday. Several traders were expecting the auction details post-market hours on Monday itself. 

 

In the secondary gilt market, traders trimmed risk exposure after no official clarification from Iran on whether it has agreed to negotiate with the US. Traders fear that the war in West Asia could escalate and crude oil prices could rise further. Bond prices closely tracked movement in crude oil prices and US Treasury yields during the day, making for volatile trade.

 

At 1625 IST, turnover in the gilt market was INR 333.15 billion, slightly higher than INR 314.30 billion at 1630 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 6.80-6.87%  the rest of the day. (Cassandra Carvalho and Diksha Tripathy)

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India Gilts: Reverse losses as US ylds ease, report Iran may mediate with US

 

--Dealers: Gilts reverse losses on report Iran leader agreed to talks with US 

 

	1327 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.66	97.71	97.33	97.45	97.52
YTM (%)	6.8174	6.8101	6.8659	6.8483	6.8379

 

India Gilts: Reverse losses as US ylds ease, report Iran may mediate with US

 

MUMBAI--1327 IST--Government bond prices reversed losses on hopes of the West Asia war de-escalating on reports that Iran's supreme leader has agreed to negotiate with the US, dealers said. Following the report, the rupee also appreciated further against the dollar, lift the bond prices. US Treasury yields also eased intraday, and overnight indexed swap rates tracked the fall. Crude oil prices also eased intraday following the reports.

 

Iran's newly-chosen supreme leader Mojtaba Khamenei has agreed to negotiate with the US, said CNN-News18 citing a report by Al Arabiya, which itself quoted Israeli media. The news led to a "knee-jerk" recovery in bond prices, and the 10-year benchmark 6.48%, 2035 bond rose to the day's high of INR 97.72 and its yield fell to 6.81%. Traders covered short bets tracking the fall in the 10-year US Treasury yield to 4.35%, from 4.38% at 0900 IST. However, some traders awaited official confirmation of the news, or clarity from Iran before taking aggressive positions, dealers said. 

 

"Currently it looks like the report is the only news market is reacting to...Rise in (bond) prices were more because of low trade volumes also," a dealer at a public sector bank said. "We will wait for further official confirmation on this." Low trade volumes amplified the price action, dealers said.

 

Gains were limited as Brent crude oil prices remained above the key $100-per-barrel level. Traders avoided aggressive positions as they waited for the result of the state government bond auction, and were cautious of fresh developments in the West Asia war, dealers said.

 

Public sector banks and traders bought gilts in thin trade as the yield on the 10-year benchmark 6.48%, 2035 bond had risen to 6.85?rlier in the day, which they considered an attractive level to buy, dealers said. "There is some buying at 85 levels (6.85% yield on the 6.48%, 2035 bond)," a dealer at a private sector bank said. "Most of the short (bets) were covered yesterday (Monday). Levels are holding because there is no fresh shorting."

 

At the state bond auction, banks likely bid for bonds maturing between eight and 15 years to replenish their portfolios after they sold gilts to the Reserve Bank of India at open market operations auctions, dealers said. Banks picked short-term state bonds for their asset and liability management. Mutual funds also picked up state bonds. However, state bonds maturing in between seven and eight years are likely to see bids at higher yield levels due to rising gilt yields, dealers said. According to the median of an Informist poll, RBI is expected to set the cut-off yields on states' 10-year bonds at 7.57-7.65%. 

 

"I think the demand will be firm (at auction) because there is only one more auction left (in FY26, scheduled Friday) and the supply could be less (lower than expectations)," a dealer at a state-owned bank said. "At previous auctions also even when gilts (prices) were falling, SDL (state bond) cut-offs were not as bad. So, demand is there for state bonds."

 

At 1327 IST, turnover in the gilt market was INR 190.00 billion, slightly higher than INR 171.05 billion at 1335 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 6.78-6.90%  the rest of the day.  (Janwee Pajapati and Diksha Tripathy)

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India Gilts: Off lows as rupee rises; fear of war escalation keeps prices dn

 

	0930 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.40	97.50	97.33	97.45	97.52
YTM (%)	6.8556	6.8409	6.8659	6.8483	6.8379

 

MUMBAI--0930 IST--Prices of government bonds were off lows Tuesday as the rupee appreciated against the dollar, dealers said. Moreover, traders covered short bets and some banks purchased gilts at levels seen lucrative after the 10-year benchmark gilt yield hit its highest in 16 months Monday, dealers said. Bond prices were down as Brent crude oil price for May delivery remained above $100 per barrel, after briefly falling to $96.00 per barrel Monday, and fears of escalation in the war in West Asia persisted, after Iran denied having held talks with the US, dealers said. 

 

The rupee hit day's high of 93.64 per dollar Tuesday, after US President Donald Trump paused strikes on Iran's power plants for five days Monday. Some traders covered short bets, and 'value-buying' also limited the fall in bond prices, dealers said. While sentiment improved slightly after Trump's comments, bond traders were still wary of the war and its impact on inflation, especially after reports of Iranian leaders calling Trump's comments of having spoken to Iran as "fake news". Goldman Sachs Tuesday hiked its forecast for India's CPI inflation to 4.6% in 2026 from 4.2?rlier. The investment bank expects 50 basis points of rate hikes by the Reserve Bank of India's Monetary Policy Committee in 2026. Several bond traders also expect a rate hike by the MPC in the second half of 2026, they said. 

 

"The rupee has recovered (appreciated after hitting record lows Monday) a bit, but if you look at crude (prices) it is back at $103-104 per barrel after falling to $96 (Monday), so bond prices are down because of that," a dealer at a state-owned bank said. 

 

Traders await the INR-574.08-billion state bond auction, and demand is seen firm inspite of the large supply, dealers said. State-owned banks and provident funds are seen bidding for the securities, dealers said. The yield spread of states' 10-year bonds are seen 75-85 basis points above the 10-year benchmark gilt Tuesday, they said. However, expectations of more-than-indicated supply at the state bond auction scheduled Friday may weaken demand Tuesday, they said. States' borrowing calendar for Jan-Mar shows that states aim to raise INR 120 billion through bonds Friday, but this amount is likely to be at least INR 300 billion or more, dealers said. The auction details are expected post market hours Tuesday.   

 

At 0930 IST, the turnover in the gilt market was INR 26.85 billion, down from INR 37.10 billion at 0935 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 6.75-6.90% during the rest of the day.  (Cassandra Carvalho and Diksha Tripathy)

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India Gilts: Seen higher as Trump pauses strikes on Iran energy infra

 

MUMBAI – Prices of government bonds are seen opening higher Tuesday due to signs of de-escalation in the West Asia war after comments by US President Donald Trump hinting at negotiations with Iran, dealers said. After the 10-year benchmark bond yield hit its highest since late 2024, dealers may also purchase gilts at levels seen lucrative, they said. However, a large supply of state bonds and tight liquidity conditions may weigh, they said. Traders are cautious of sudden changes in geopolitics after a social media post by Trump on Monday led to Brent crude and US yields tumbling.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.70-6.90% Tuesday. It ended at INR 97.52, or 6.84% yield in a volatile session Monday, recovering some price losses towards the end of trade. The bond had hit INR 97.19 or 6.8871% yield during the day, the highest yield for a 10-year benchmark bond since Nov. 22, 2024. Bond prices slid Monday as several traders hit stop-losses, after no indication of on-screen purchases by the Reserve Bank of India and expectations of a quicker rate hike cycle in India due to a likely rise in inflation amid oil supply disruptions. However, nearing the end of gilt market hours, US Treasury yields fell and Brent crude for May delivery briefly fell below $100 per barrel after Trump ordered a five-day halt to US strikes on Iran's energy infrastructure citing progress in talks with Iran.

 

Since then, senior Iranian officials have denied that talks were held with the US, several media outlets have reported. Reuters reported, citing a Pakistani official and a second source, that direct talks between Iran and the US could be held in Islamabad as soon as this week. Brent crude oil futures for May delivery traded at $104.14 per barrel at 0800 IST, little changed from $104.50 at 1700 IST Monday. The yield on the benchmark 10-year US Treasury note was 4.38% at 0800 IST, against 4.36% at the end of gilt market hours Monday. 

 

Gilts may see selling pressure as traders make room for heavy state bond supply Tuesday. In a revised press release Saturday, the Reserve Bank of India said 22 states would raise INR 574.08 billion through the sale of bonds Tuesday. Cut-off yields on states' 10-year bonds are seen at a yield spread of at least 85 basis points over the benchmark 10-year gilt, compared to a spread of 71-85 bps at last week's auction, dealers said. Traders are bracing for nearly INR 1.00 trillion of state bond supply this week, with another state bond auction scheduled Friday. States' borrowing calendar for Jan-Mar shows that states aim to raise INR 120 billion through bonds Friday, but this amount is likely to be at least INR 300 billion or more, dealers said. The auction details are expected post market hours Tuesday. 

 

Tight systemic liquidity conditions may also weigh on bond prices, dealers said. The net liquidity injected by the RBI into the banking system--a proxy for the systemic liquidity deficit--was INR 653.96 billion Sunday, down from INR 659.36 billion Saturday. The figure for Saturday was the highest deficit since Dec. 29. Traders were expecting some measure from the RBI to infuse durable liquidity into the banking system nearing the end of the month, but so far the RBI has held variable rate repo auctions, and will conduct another auction for INR 1.00 trillion Tuesday. As banks approach the end of the March quarter and financial year 2025-26 (Apr-Mar), traders will focus on maintaining their book value, and attempt to mitigate marked-to-market losses, they said. (Cassandra Carvalho)

End

 

US$1 = INR 93.8650

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

 

Edited by Saji George Titus

 

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