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Informist, Friday, Apr. 10, 2026

 

--Dealers: RBI met mkt participants on high ylds post Apr 2 gilt auction 

--Dealers: RBI quizzed traders on poor bids at Apr 2 gilt auction, high PD fee 

--Dealers: See firm bids at gilt tender Fri on short-covering, W Asia truce

 

By Janwee Prajapati and Cassandra Carvalho

 

MUMBAI – The Reserve Bank of India held one-on-one meetings with some banks and primary dealerships this week to inquire about high government bond yields and underwriting commissions on the day of the last gilt auction on Apr. 2, dealers aware of the meeting said. On the first trading day of the new financial year, the 10-year benchmark 6.48%, 2035 government bond yield had risen nearly 10 basis points to 7.13%. This was the 12th consecutive day of a rise in yields, reflecting higher cut-off yields at the gilt auction and risk-off sentiment due to the war in West Asia. 

 

"(The) day before yesterday we had (a meeting with RBI)," a dealer at a public sector bank said. "It was a one-to-one interaction where they asked general market views...There was a discussion about why there was a big tail (at the gilt auction last week). They were asking the reason." 

 

At the auction on Apr. 2, the RBI had set a cut-off price of INR 92.63 on the 6.68%, 2040 bond, sharply lower than an Informist poll estimate of INR 92.88. The cut-off price on the 7.43%, 2076 gilt was INR 94.38, also much lower than the INR 94.75 estimated in the poll.

 

Primary dealerships demanded an underwriting commission of 7.40 paise for the 2040 bond and 10.10 paise for the 2076 bond, much higher than the poll estimates of 3 paise and 5 paise, respectively. The underwriting commission set on the 2076 bond was the highest set on a bond since Jun. 13, 2025.  

 

Banks and primary dealerships told the RBI that the underwriting commissions were high to accommodate heightened volatility in the gilt market caused by the West Asia war, dealers aware of the meeting said. Since the US-Israel war against Iran began on Feb. 28, crude oil prices have surged 64%, leading to fears of a rise in inflation in India.

 

Such fears and uncertainty about the trajectory of the war pushed bond yields higher in India, market participants told the central bank. Some traders had also expected the RBI's Monetary Policy Committee to raise interest rates Wednesday in response to the war in Iran and the rupee's fall.

 

Some traders said the RBI is likely to have only met banks and primary dealerships that had placed bids for bonds on the lower end of the price range at the Apr. 2 auction. "They didn't call us, but there was a meeting with some PSUs (state-owned banks) and private (sector) banks to ask about high yields and underwriting commissions," a dealer at a private sector bank said. 

 

Bond yields have eased this week after the announcement of the US-Iran ceasefire. RBI's commentary on interest rates on Wednesday also allayed fears of an imminent rate hike in June, increasing expectations of higher demand for the 10-year benchmark bond at the auction Friday, dealers said. The RBI set an underwriting commission of 0.64 paisa on the bond, lower than an Informist poll estimate of 0.80 paisa.

 

State-owned banks are likely to buy around INR 100 billion of the 2035 bond Friday, of the INR 340 billion on sale, dealers said. Public sector banks are expected to buy the 2035 bond for held-to-maturity books, they said. Banks have space in their investment books amid INR 1.56 trillion worth of gilt redemptions this month, dealers said.

 

"Traders are light, there's still a large amount of shorts (short sales) in the market, so short-covering will be there, and PSUs (state-owned banks) will also take (bid for the bond)," a dealer at another private sector bank said. "RBI has bought some 6 to 7 lakh crore (INR 6 trillion - INR 7 trillion) from them (through open market operations auction), they should be bidding well."  End

 

With inputs from Aaryan Khanna

Edited by Avishek Dutta

 

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