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Informist, Monday, Mar. 30, 2026

By Cassandra Carvalho

MUMBAI – Yields on most government bonds surged and the 10-year benchmark 6.48%, 2035 gilt yield rose for the eleventh consecutive session Monday, cruising past the crucial 7.00% level in thin trade amid poor risk appetite on the final trading session of the financial year 2025-26 (Apr-Mar), dealers said. Trade was choppy amid wide spreads between the bid and ask prices for bonds and low liquidity, they said. Though traders termed the Centre's borrowing calendar for Apr-Sept "balanced", dealers were unimpressed and focused on offshore developments, given the fear that the military conflict in West Asia could last much longer than initially estimated. A slide in the rupee past the key 95-per-dollar mark intraday in spite of the new norms from the Reserve Bank of India to curb dealers' long-dollar bets further pushed yields up, they said. 

"There's barely any volume, and there's just no buyer, that's it. There's nothing more to it," a dealer at a private-sector bank said. 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 96.20, plunging 62 paise from INR 96.82 Friday. The bond closed at a yield of 7.0345%, up over 9 basis points from 6.9419% in the previous session. The 10-year benchmark bond yield has risen 45 bps in FY26, in spite of 100 bps of repo rate cuts in the same period. The 10-year bond yield has risen 37 bps since Israel and the US launched an aerial attack on Iran on Feb. 28, sparking the military conflict in West Asia. The 10-year benchmark yield closed at its highest level since Jun. 4, 2024.

Indian financial markets are shut Tuesday for Mahavir Jayanti. Financial markets administered by the RBI are also shut Wednesday to enable banks to close their yearly accounts.

Amid the wide bid-ask spreads and low appetite for holding risk, trade was lacklustre. The total turnover in the 10-year benchmark bond was INR 91.40 billion, the lowest since Dec. 4. Some traders sold bonds to minimise losses on their holdings before closing their books at the end of the financial year, dealers said. Several traders were on the sidelines, refraining from major changes in positions in the last trading session of the financial year, they said.

"People are actually not doing anything, there is no decisiveness. People are not certain, people are quiet," a dealer at a state-owned bank said. "The problem is no one is trying to get yields lower." Some traders had expected bond yields to fall Monday after opening lower tracking an early rise in the rupee and after the Centre's borrowing plan for Apr-Sept was lower than expected. Some had also expected traders to buy bonds in an attempt to improve mark-to-market valuations of gilts based on Monday's closing levels while banks' "value-buying" was expected to limit a rise in the 10-year bond yield after it hit 7.00%, dealers said. 

The 6.68%, 2040 gilt yield rose 14 bps Monday, the largest one-day rise in the yield of the 15-year benchmark gilt since it became part of the government's borrowing calendar in April 2024. Traders placed short bets on the gilt ahead of its fresh supply Thursday. In the first gilts auction of FY27, the government Thursday will sell INR 170 billion of the bond and INR 120 billion of the 7.43%, 2076 gilt. Moreover, traders were uncomfortable with holding such a long tenure as they began to price in a longer West Asia war that extended into the new financial year, they said. Demand at the auction is seen mixed for the 15-year bond while appetite for the 2076 gilt may be better due to lower-than-expected supply of long-term bonds in Apr-Sept, dealers said. 

"Now we have auctions coming up, starting in the new FY (FY27) so it's good that yields are fundamentally readjusting now, otherwise it would have been a problem for auctions to sail through," a dealer at a primary dealership said. "Everyone is now realising that this is not a short-lived war... and in the beginning of the war RBI was the buyer, when everyone was the seller. Today (Monday) that's not the case."

For most of March, traders were expecting that the military conflict in West Asia would see a resolution within a few weeks, and the rise in bond yields was also limited by aggressive on-screen purchases by the RBI, dealers said. In the last fortnight of March, the RBI largely let bond yields rise, refraining from on-screen purchases even as traders expected these buys even on Monday. Brent crude oil prices for May delivery rose over the weekend and intraday to $115.07 per barrel at 1700 IST, from $110.72 per barrel at the same time Friday. Bond traders were spooked by media reports of the Pentagon preparing to send troops to the Gulf region, which would mark a sharp escalation in the war. 

Focus was also on the five-year 6.01%, 2030 bond as traders began to price in a quicker rate hike cycle as oil supply disruptions due to the war stoke inflation in India, dealers said. Traders expect a "bear-flattening" of the gilt yield curve--wherein short-term yields rise more than long-term yields. This move was exacerbated after the Centre published its borrowing calendar for Apr-Sept Friday. The Centre will raise INR 8.20 trillion through gilt issuances in Apr-Sept, of which 25% will be through bonds maturing within 30-50 years, lower than the market consensus of 30%. The INR 8.20-trillion figure is also lower than what traders were expecting. However, supply of five-year bonds increased to 15.4% of Apr-Sept borrowing, up from 13.3% of borrowing in Oct-Mar. The 6.01%, 2030 bond yield ended nearly 8 bps higher from Friday's close. By comparison, the 6.90%, 2065 bond yield ended nearly 5 bps higher, and its yield was largely lower than its previous close for most of the session Monday. 

Turnover in the government securities market was INR 432.45 billion, up from INR 359.90 billion Friday, 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 Monday, marking a month of no such trades. 

OUTLOOK

Money markets are shut Tuesday and Wednesday. Thursday, bond yields may track the movement of Brent crude oil futures and developments in West Asia. Gilt yields may also track US Treasury yields ahead of the release of jobs data in the world's largest economy. Later in the day, traders will track the result of the INR 290-billion gilts auction, they said.

Thursday is the only trading session for the rest of the week, as financial markets are shut Friday for Good Friday. Next week, traders will track the RBI's Monetary Policy Committee's decision and commentary, especially remarks on the impact of the hostilities in West Asia. Traders expect a "hawkish" pause on the repo rate, with commentary likely to set the stage for rate hikes. The RBI is likely to raise its inflation forecast for FY27 by around 50 bps, dealers said. According to an Informist Poll, in the worst-case scenario, where the military conflict in West Asia drags on for the rest of 2026, economists expect the Monetary Policy Committee to raise the repo rate by up to 50 bps from the current 5.25% in 2026. The one-year overnight indexed swap rate is pricing in 100 bps of rate hikes over the next 12 months, dealers said.

Due to the conflict, and after the Centre published its borrowing calendar for Apr-Sept, traders expect the bond yield curve to "bear-flatten", they said. Some banks may avoid short-selling the 10-year benchmark bond due to its "shut-period" Thursday ahead of its interest payment. As traders unwind their long-dollar bets to meet regulatory requirements, traders expect the rupee to appreciate slightly and subsequently limit a rise in bond yields next week, dealers said. The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.95-7.15% Thursday.

India Gilts: Slump on fall of rupee to record low, poor risk appetite

MUMBAI--1510 IST--Prices of government bonds slumped as the rupee fell to a record low amid poor risk appetite among market participants at the fag end of the current financial year, dealers said. Market participants had expected the rupee to appreciate after the Reserve Bank of India late Friday asked banks to cut their net open overnight limits to $100 million by Apr. 10. The rupee opened sharply higher but then reversed direction in early trade and fell to a record low of 95.22 per dollar in afternoon trade. The announcement of the RBI measures to protect the rupee was expected to provide relief, but that did not happen, which led to a fall in bond prices, dealers said.

The yield on the 10-year benchmark 6.48%, 2035 bond crossed the crucial level of 7.00% Friday. Traders expect the RBI to intervene at the current levels before yields rise further. "The yield (on the 6.48%, 2035 bond) can go up to 7.05% possibly today because this (West Asia) war is not ending and we don't even know when will it end. There is lack of clarity," a dealer at a public-sector bank said. 

While there were quite a few sellers in the market, there weren't enough buyers, particularly as we are at the end of the financial year. "Everybody is selling because of war, nobody knows when will it end, and because of that there is a large supply in the (gilts) market. People want to sell before it worsens," the dealer said.

Some dealers, however, had a contrary view. "I can't believe people are selling at 7.00%. I want to meet these people and understand what they are thinking," a fixed income fund manager at a mutual fund said. "I am not touching (buying) gilts right now, there is too much MTM (mark-to-market risk), but there is no reason to sell so much either," the dealer added.

Foreign banks also likely sold gilts to cover some of their losses after the RBI direction on net open positions, a dealer at a large private-sector bank said. Market partipants expect the RBI to intervene in the final 15-20 minutes of the session through secondary market purchases of bonds to prevent a further increase in yields. If the central bank does not intervene in the day's session, the yield on the 10-year benchmark gilt can go up to 7.05%, dealers said. 

At 1510 IST, the turnover in the gilts market was INR 325.70 billion, up sharply from INR 242.45 billion at 1530 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. The yield on the 6.48%, 2035 bond is seen at 6.94-7.05% during the rest of the day.  (Diksha Tripathy and Aaryan Khanna)

India Gilts: Down on short selling, fall of rupee; action low at end of year 

MUMBAI--1146 IST--Prices of government bonds were down in choppy trade as traders continued to place short bets, dealers said. The benchmark 10-year bond yield crossed the key 6.95% level. The sharp fall of the rupee against the dollar, a rise in price of Brent crude oil futures, and a rise in US Treasury yields since the end of Indian trading hours Friday also weighed on bond prices, dealers said.

Traders are short-selling at these levels, however, there are no buyers at the moment, which is building pressure on bond prices, dealers said. "Buying should come at these levels but not today because it is the last day of this financial year and banks would avoid building positions today", a dealer at a private bank said. Market participants await clarity on the war situation to build further positions, dealers said.

The yield curve is likely to flatten out as short-term yields will rise and longer term yields will fall, reflecting the quantum of new supply that will come through in the first half of the new financial year, a dealer at a public sector bank said. The bid-ask spreads are wider because there aren't enough traders in the market given the year end, the dealer said.

At 1200 IST, the turnover in the gilts market was INR 166 billion, up slightly from INR 160.60 billion at 1234 IST Friday, 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 6.92%-7.00% during the rest of the day.  (Diksha Tripathy)

India Gilts: Rise, then reverse gains on short selling by traders

MUMBAI–-0944 IST--Prices of government bonds opened higher Monday after the rupee appreciated sharply. Bond prices, however, soon reversed early gains due to short-selling by traders and foreign banks, dealers said. A rise in prices of crude oil to its highest levels since the beginning of the West Asia war and higher US yields also weighed on gilt prices. 

Market participants had expected bond prices to open higher as they expected the rupee to open INR 1.80-INR 2.00 higher Monday. However, the rupee opened 123 paise higher at 93.59 per dollar and then fell back as jittery importers bought dollars. The rupee had risen after the Reserve Bank of India directed banks to cut their net open overnight limits to $100 million by Apr. 10. 

Dealers see the 10-year benchmark moving between 6.92% and 7.00% due to uncertainties about how long the war will last and expect the RBI to intervene in the second half of the session. "(The) 6.95% (yield) level (on 10-year benchmark 6.48%, 2035 bond) is very attractive for banks but they are not buying becuase they (banks) are buying in state-bond auctions," a dealer at a state-owned bank said.

"There is nothing much going on right now, volume is also very low," a dealer at a private bank said. Market participants will closely track the movement in crude oil prices and US yields apart from the rupee. At 1019 IST, the benchmark 10-year US Treasury yield was 4.40%.

Dealers will also assess the impact of the lower-than-expected size of the government borrowing calendar for Apr–Sept. The government Friday announced it will borrow INR 8.20 trillion through dated securities in Apr–Sept, lower than the issuance of INR 8.50 trillion–INR 8.90 trillion that the market had expected.

At 1019 IST, the turnover in the gilt market was INR 58.50 billion, significantly lower than INR 69 billion at 1030 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.  (Diksha Tripathy)

India Gilts: Seen up on lower H1 borrowing calendar; crude prices to weigh

MUMBAI – Prices of government bonds are seen opening higher Monday due to the lower-than-expected size of the Apr–Sept government borrowing calendar, dealers said. Moreover, a likely rise of the rupee after the Reserve Bank of India capped banks' net open rupee positions in the onshore deliverable market, will also pull up bond prices, they said. However, the rise in bond prices will be limited as Brent crude oil prices rose over the weekend as the war in West Asia intensified, dealers said.

The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.75-6.92% Monday. It had ended at INR 96.82, or 6.9419% yield, on Friday, the highest closing yield for the 10-year benchmark since July 26, 2024. The yield on the benchmark 10-year US Treasury note was 4.40% at 0800 IST, down from 4.46% at the end of Indian trading Friday.

Post market hours on Friday, the government announced it would borrow INR 8.20 trillion through the issuance of dated securities in April–September, lower than the issuance of INR 8.50 trillion–INR 8.90 trillion that the market had expected. Traders have no issue with the weekly auction sizes and the bond tenures detailed in the calendar. Prices of long-term bonds are likely to rise as the government will issue fewer quantities of such bonds in the first half of the new year. The government will borrow only 25% of its first-half borrowing through long-dated bonds, down from 29.4% in Oct–Mar. In contrast, bonds with maturities of up to 15 years will likely underperform, as their share of issuance has increased compared with the previous half-year. Gross Treasury bill issuance, at INR 2.88 trillion, was also slightly below market estimates, dealers said. Some banks will step up purchases of the 10-year benchmark gilt as it had fallen Friday.

Traders expect the rupee to strengthen after the Reserve Bank of India asked banks to cut their net open rupee positions in the onshore deliverable market to $100 million at the end of each business day and said banks must implement this rule by Apr. 10. Some traders expect the rupee to appreciate by 1.80 rupees to 2.00 rupees Monday, dealers said.  

The rise in bond prices may be limited due to the war in West Asia, especially as crude oil prices are still high. US President Donald Trump hinted at seizing Iran's oil, specifically targeting Kharg Island which is a key export hub, as the US ramps up troop deployment in the region. Trump told the Financial Times, "My favourite thing is to take the oil in Iran," comparing it to the US approach to controlling the oil industry in Venezuela. Brent crude oil futures for May delivery traded at $116.56 per barrel at 0730 IST Monday, up from $110.66 at 1700 IST Friday.

Fiscal worries have added to rate hike fears after the government cut excise duty on petrol and diesel Friday, though these worries might be somewhat softened by the light borrowing calendar for the first half, dealers said. Prices of bonds maturing in up to five years are likely to fall due to heavy supply and expectations of a hike in the benchmark Reserve Bank of India repo rate, dealers added. 

The RBI is estimated to have bought low amounts of gilts in secondary market trade last week, after the heavy buying in the first half of March, and this is likely to weigh on market sentiment, dealers said. Data released Friday showed the RBI bought only INR 100 million worth of gilts in the week ended Mar. 20, compared with nearly INR 900 billion purchased over the previous four weeks, over and above the INR 1 trillion of bonds bought through open market operation auctions. The central bank has also refrained from announcing any durable liquidity infusion measures, which are now seen as unlikely until at least mid-April, dealers said.  (Janwee Prajapati)

US$1 = INR 94.83

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

Edited by Rajeev Pai

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