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Informist, Monday, Apr. 6, 2026

 

By Cassandra Carvalho

 

MUMBAI – Yields on Indian government bonds fell for the first time since Mar. 11 on Monday on hope of de-escalation in the West Asia war after media reports said Pakistan had put together and shared a plan for a ceasefire between the US and Iran, dealers said. Traders fearing an imminent rate hike by the Reserve Bank of India's Monetary Policy Committee at its policy decision Wednesday pared those bets, and overnight indexed swap rates fell the most in three years.  

 

The 10-year benchmark 6.48%, 2035 gilt closed at INR 96.13, jumping 58 paise from INR 95.55 Thursday. Friday, the gilt market was shut for Good Friday. The bond closed at a yield of 7.0458%, down nearly 9 basis points from the previous session. The 10-year benchmark bond yield fell the most in a day since Dec. 24. 

 

"Currently, the market is reacting to news that ceasefire talks are going on, of de-escalation, or delaying the next 10 days (deadline) to next 45 days, so markets are pricing in that," a dealer at a state-owned bank said. "In my personal opinion, chances of a rate hike in June are definitely there but this policy (in April), RBI is not going to hike rates at this stage."

 

Intraday, Brent crude oil futures for delivery in June fell to a low of $106.85 per barrel during Indian market hours from $109.94 at 0900 IST and $109.31 at 1700 IST Thursday, and offshore traders booked profits on their paid bets in OIS, subsequently leading to a fall in bond yields, dealers said. The yield on the 10-year US Treasury note also fell intraday to 4.34% from 4.36% at 0900 IST. 

 

Traders bought gilts at levels seen attractive, after the yield on the 10-year benchmark bond hit 7.1421?rly Monday, the highest since May 9, 2024. Several traders had expected the 10-year benchmark bond yield to fall after rising to the key level of 7.15%, they said. Bond yields are overpricing in the likelihood of rate hikes by the MPC in 2026, dealers said.

 

Some traders also covered short bets, with a few speculating that the RBI purchased gilts on screen Thursday. The 'Others' segment of bond market participants--which consists of insurance companies, provident funds, and the RBI--net purchased gilts worth INR 95.98 billion in the secondary market Thursday, according to data from Clearing Corp. of India. As per the latest data from the central bank, it last purchased a meagre INR 100 million of gilts on screen in the week ended Mar. 20. Prior to that, the central bank had bought gilts totalling INR 894.55 billion on screen over four consecutive weeks. Some traders speculated that Thursday's purchases were made by insurance companies and provident funds after the auction of the 7.43%, 2076 bond, they said. 

 

"Market is thinking RBI is buying 15-year (bonds) and that has got people excited. I think it is a crashing down to earth of rate expectations since policy is ahead of us. There is also limited supply in April since redemptions are lined up," a dealer at a primary dealership said. The 15-year benchmark 6.68%, 2040 bond yield ended nearly 11 bps down Monday. Gilts worth INR 1.53 trillion mature in April, while a fresh supply of gilts worth INR 1.56 trillion is scheduled this month.

 

Some traders placed short bets on the 10-year benchmark bond with the view that the Centre will issue a new 2036 bond at the weekly gilt auction Friday, dealers said. The outstanding of the current benchmark bond is INR 1.92 trillion, nearing the INR-2.00-trillion mark at which the Centre usually issues a new bond. The RBI post market hours Monday said that the government will re-issue the 6.48%, 2035 bond Friday. A large chunk of the bond is likely held by the RBI as it purchased the gilt on screen, dealers said, and the lower supply has been leading to a "short-squeeze" in the bond, they said. 

 

On the supply side, traders await the first auction of state government bonds in 2026-27 (Apr-Mar), due Tuesday, on hope that yield spreads over gilts of similar maturity will compress compared to those in March quarter of FY26. Some dealers do not expect a fall in yield spreads as risk appetite is poor, they said. 

 

"We will be going for state bonds, but like usual, there's going to be a tail, nothing too exciting about it," a dealer at another state-owned bank said. Seven states will raise INR 181.59 billion through bonds Tuesday, the same as indicated in states' borrowing calendar for Apr-Jun. The central bank has also introduced a benchmark issuance strategy for market borrowing by nine states on a pilot basis, which boded well for lower state bond yields but made the process slightly confusing, dealers said.

 

Some traders were also optimistic of support from the RBI to abate treasury losses due to a rise in bond yields, after The Hindu Businessline reported that lenders have asked the central bank to allow them to spread their provisioning for mark-to-market losses on their bond portfolios over four quarters, starting from Jan-Mar FY26.

 

Turnover in the government securities market was INR 474.25 billion Monday, a tad higher than INR 427.30 billion Thursday, 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. The tool has remained out of use since February, with treasuries entirely giving it a skip in March.

 

OUTLOOK

On Tuesday, bond yields may fall if the West Asia war shows further signs of de-escalation, and the 10-year benchmark bond yield is on track to fall to 6.95% if crude oil prices ease, and the outcome of the meeting of the Monetary Policy Committee, due Wednesday, is favourable for bonds, dealers said. Traders will also track the result of the state bond auction Tuesday. Some traders may place short bets on the 10-year benchmark bond ahead of its fresh supply Friday, dealers said. 

 

Most traders expect the repo rate to remain unchanged on Wednesday, with "hawkish" commentary likely to set the stage for rate hikes. The RBI is likely to peg its inflation forecast for FY27 around 4.60%, dealers said. Most traders expect the rate-setting panel to hike repo rate by 25 bps in June.

 

Due to the rate cues coming from the West Asia conflict, and after the Centre published its borrowing calendar for Apr-Sept, traders expect the bond yield curve to "bear-flatten", dealers added. Foreign portfolio investors may continue selling fully accessible route bonds, weighing on prices. The 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.95-7.20% Tuesday.

 

	MONDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	96.1300	7.0458%	95.5500	7.1329%
6.33%, 2035	95.9425	6.9388%	95.4500	7.0148%
6.01%, 2030	97.2100	6.7670%	96.8700	6.8609%
6.68%, 2040	93.6500	7.4072%	92.7500	7.5157%
6.90%, 2065	89.2700	7.7792%	88.2900	7.8689%

 

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India Gilts: Surge on fall in crude oil prices, OIS; state bond auction eyed

 

	1624 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.17	96.18	95.49	95.50	95.55
YTM (%)	7.0398	7.0390	7.1421	7.1406	7.1329

 

MUMBAI--1624 IST--Prices of government bonds surged to the day's high as crude oil prices fell on hopes of de-escalation of the West Asia war, dealers said. Tracking the fall in crude oil prices, overnight indexed swap rates and US Treasury yields fell, pushing bond prices further upwards, they said. 

 

Brent crude oil futures for June delivery fell to a low of $106.85 per barrel during Indian market hours Monday, from $109.94 at 0900 IST, after Reuters reported, citing sources, that Pakistan has sent the US and Iran a ceasefire proposal which could lead to the reopening of the Strait of Hormuz. A slight intraday fall in the 10-year US Treasury yield to 4.35% also helped the rise in Indian bond prices, dealers said. The unwinding of paid positions by offshore players in swaps pulled down OIS rates. The one-year OIS rate was down over 20 basis points to 6.17% Monday and the five-year swap rate fell 15 bps to 6.69% at 1624 IST. 

     

Traders also await the INR-181.59-billion auction of state government bonds Tuesday – the first state bond auctions in 2026-27 (Apr-Mar) — with expectations that the yield spread of state bonds over gilts will fall, compared to spreads seen in Jan-Mar. "There could be spread normalisation tomorrow (Tuesday), nothing on a directional bias, but spreads (of state bonds over G-sec) could ease a bit," a dealer at a primary dealership said. 

 

Dealers see the yield on the 10-year benchmark 6.48%, 2035 gilt moving in a range of 7.00-7.15% for the rest of the day. At 1622 IST, the turnover in the gilt market was INR 443.65 billion, higher than INR 383.20 billion at 1630 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Friday, Indian financial markets were shut on account of Good Friday. (Diksha Tripathy and Janwee Prajapati)

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India Gilts: Up more as OIS rates slump on view rate hike bets overdone

 

--Dealers:Gilts surge on slump in OIS, value buying as ylds at multi-yr high

--Dealers: OIS rates slump on hope of de-escalation of West Asia conflict

--Dealers: OIS rates slump on view bets of rate hikes by MPC overdone
--Dealers: 1-month swap rate still shows high chance of 25-bps rate hike Wed

 

	1414 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	95.90	95.98	95.49	95.50	95.55
YTM (%)	7.0810	7.0690	7.1421	7.1406	7.1329

 

MUMBAI--1414 IST--Prices of government bonds rose further due to a slump in overnight indexed swap rates on the view that bets of repo rate hikes by the Reserve Bank of India's Monetary Policy Committee were overdone, dealers said. Hopes of de-escalation in the war in West Asia also aided gilt prices. Traders continued to cover short bets along with some fresh purchases due to bond yields trading at levels seen attractive, dealers added.

 

The one-year OIS rate was down by 18 basis points to 6.20% Monday and the five-year swap rate fell 16 bps to 6.71% at 1358 IST. Last week, swap rates maturing in up to three months had priced in nearly 50-basis-point repo rate hike from the current 5.25% at the MPC rate decision Wednesday.

 

This outcome is highly unlikely, especially after the sharp rise in the rupee following the RBI's non-monetary policy measures over the last 10 days, dealers said. The one-month swap rate still shows a high chance of a 25-bps rate hike Wednesday, which only a minority of bond traders expect, they said.

 

"It (rise in bond prices) is an OIS-driven action," a dealer at a private-sector bank said.

 

Hopes of de-escalation in West Asia war also aided gilt prices and cooled oil futures. Reuters reported Monday, quoting sources, that Pakistan had sent the US and Iran a plan to end the West Asia war immediately. The lack of clarity on re-opening of the Strait of Hormuz, a narrow passage through which roughly half of India's crude imports transit, has kept the market in a wait-and-watch mode for the past few weeks even as the 10-year benchmark yield ended at its highest level in nearly two years on Thursday, dealers said. Brent crude futures for June delivery fell to near $108 a barrel at 1345 IST after trading above $110 a barrel earlier in the day.

 

However, traders were still cautious about the decision of the RBI's rate-setting panel, which began its three-day meeting Monday. The yield on 10-year benchmark 6.48%, 2035 bond may top 7.15%, hitting fresh multi-year highs depending on the commentary on inflation and growth by the MPC, dealers said. Moreover, if the conflict in the West Asia continues, traders were afraid of heavy mark-to-market losses and did not want to swell their portfolios with bonds.

 

"Nobody wants to build positions at this time when there is so much of uncertainty in the market. Who would want to take a hit at the beginning of the (financial) year if something goes wrong and markets take a negative turn?" the dealer quoted above said.

 

The yield on 10-year benchmark 6.48%, 2035 gilt is seen moving in a range of 7.00-7.15% Monday, dealers said. At 1414 IST, the turnover in the gilt market was INR 287.95 billion, lower than INR 307.15 billion at 1430 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Friday, Indian financial markets were shut on account of Good Friday. (Diksha Tripathy)

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India Gilts: Reverse early trade losses on value buying, short covering

 

	0956 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	95.70	95.77	95.49	95.50	95.55
YTM (%)	7.1108	7.1006	7.1421	7.1406	7.1329

 

MUMBAI-–0956 IST--Prices of government bonds fell at open Monday but soon reversed losses to rise sharply as traders covered short bets along with some fresh purchases due to bond yields trading at levels seen attractive, dealers said. Market participants, however, do not expect the rise in the 10-year benchmark 6.48%, 2035 bond price to sustain throughout the session, they said. 

 

Banks have asked the Reserve Bank of India to allow them to spread their provisioning for mark-to-market losses on their bond portfolios over four quarters, starting from Jan-Mar due to a sharp rise in yields, The Hindu Businessline reported Monday. The 10-year benchmark bond yield rose 45 basis points in 2025-26 (Apr-Mar), in spite of 100 bps of repo rate cuts in the same period. Hope of the RBI granting this request or implementing some relief measures to minimise treasury losses also likely fuelled the rise in bond prices, dealers said. "Traders are buying (bonds) today (Monday) because bond yields are really attractive. Also, they want to build positions before RBI announces any measures," a dealer at a private-sector bank said.  

 

Elevated US Treasury yields and crude oil prices limited gains. Brent crude oil futures for June delivery was at $109.50 per barrel after US President Donald Trump threatened to destroy Iran's power plants and bridges by Tuesday if it does not open the Strait of Hormuz, a narrow passage through which roughly a fifth of global oil supply transits. The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 7.00%-7.15% Monday. 

 

Market participants will likely refrain from placing aggressive bets ahead of the policy decision by the RBI's Monetary Policy Committee Wednesday, and trade volume may be low Monday, dealers said. A few dealers, however, contradicted this view and said some purchases could be made at current yield levels. Comments by RBI Governor Sanjay Malhotra on inflation and growth will be closely tracked, especially since the ongoing war in West Asia is seen stoking India's CPI inflation, dealers said. Most traders expect a status quo on the repo rate Wednesday but a few are of the view that MPC may hike the repo rate by 25 bps to 5.50% from 5.25% currently.

 

At 0956 IST, the turnover in the gilt market was INR 33.90 billion, slightly higher than INR 26.60 billion at 0930 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. Indian financial markets were shut Friday on account of Good Friday. (Diksha Tripathy)

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India Gilts: Seen steady ahead of MPC decision Wed; rise in oil to weigh

 

MUMBAI – Prices of government bonds are seen opening steady Monday due to caution ahead of the Reserve Bank of India's Monetary Policy Committee meeting decision Wednesday, dealer said. However, a rise in Brent crude oil prices will weigh on the bond prices, they said.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen at 6.95-7.20% Monday. It had ended at INR 95.55, or 7.1329% yield Thursday, the highest closing yield for the 10-year benchmark since May 8, 2024. Money markets were closed on Friday. 

 

Traders are most likely to refrain from placing aggressive bets ahead of the rate-setting panel's decision, dealers said. This caution will likely keep the trade volume low till the policy meeting, they said. Most of the traders expect the rate-setting committee to keep the repo rate unchanged at 5.25%. Traders will track the comments by RBI Governor Sanjay Malhotra and they expect him to signal the markets to prepare for a rate hike in the next policy meeting, in view of the war in West Asia, they said.

 

The commentary of the committee and of RBI members on both growth and inflation will be key, especially for rate-sensitive short-term bonds. A minority of market participants expect the MPC to hike the repo rate by 25 bps, both in the face of likely inflationary pressures and to protect the rupee. The RBI is likely to peg its inflation forecast for FY27 around 4.60%, dealers said.

 

According to an Informist Poll, in the worst-case scenario, where the war in West Asia drags on for the rest of 2026, economists expect the MPC 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.

 

Brent crude oil futures for June delivery rose to over $110 per barrel at 0700 IST, slightly higher from $109.12 per barrel at the end of Indian trading hours Thursday. This was after US President Donald Trump Sunday issued another threat to Iran, in a social media post, saying Iran has 48 hours left to "make a deal" or "open up the Strait of Hormuz." 

 

The US nonfarm payroll data released Friday depicted a fall in jobless rates to 4.3% in March from 4.4% a month ago. Nonfarm payrolls rose by 178,000 in March, while February's decline in jobs was revised to 133,000 from 92,000 earlier. This fall in the unemployment rate strengthened traders' expectations that the Federal Open Market Committee will keep the policy rates unchanged while weighing on the impact of the ongoing war on the country's economic growth and inflation. The yield on the benchmark 10-year US Treasury note was 4.36% at 0700 IST, little changed from 4.37% at the end of Indian trading hours Thursday. 

 

Due to the rate cues coming from the war in West Asia, and after the Centre published its borrowing calendar for Apr-Sept, traders expect the short-term bond yield to rise and the long-term yields to fall or the yield curve to "bear-flatten", they said. Foreign portfolio investors may continue selling fully accessible route bonds, weighing on prices. (Janwee Prajapati)

 

End

 

US$1 = INR 93.06

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

 

Edited by Deepshikha Bhardwaj

 

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