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Informist, Friday, Apr. 10, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended a volatile week by rising sharply Friday after robust bidding at the auction of the 10-year benchmark 6.48%, 2035 gilt, with the Reserve Bank of India receiving bids worth INR 1.09 trillion for INR 340 billion of supply, dealers said. Mutual funds and foreign banks were likely to have purchased gilts aggressively in the secondary market after several traders were unable to get their hands on auction stock, they said.

 

The 2035 bond ended at INR 97.03, up sharply from INR 96.71 Thursday. Its yield ended at 6.9119%, down from 6.9601% in the previous session. The bond's secondary market turnover of INR 588.75 billion was the highest for a 10-year benchmark since Apr. 29, 2025. The RBI set a cut-off price of INR 96.67 on the bond at the auction, higher than an Informist Poll estimate of INR 96.64. The weighted average price on the bond at the auction was INR 96.69.

 

"Looks like cut-offs (at the auction) were really good, the kind of demand that was there, and there was decent short positioning going into the auction," a dealer at a mutual fund said. "Looks like they (traders) are now trying to cover their positions... Even at cut-off, the successful percentage is much lower, around 10%. So effectively only people who bid at 68 (INR 96.68) and higher would have gotten the stock."

 

The RBI accepted only 48 out of 549 bids for the bond. Mutual funds bought most of the stock and traders covered short bets, dealers said. Mutual funds have been short on gilts after net sales worth INR 443.90 billion in the secondary market last month, as per data from Clearing Corp. of India Ltd. This segment has net purchased gilts worth INR 85 billion so far this month till Thursday. Mutual funds are sitting on cash with banks investing amid ample surplus liquidity, dealers said.

 

Traders covered short bets of around INR 80 billion in the bond, dealers said. A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. Data at 1800 IST showed trades worth INR 203.73 billion in the 6.48%, 2035 gilt. This number is likely to fall because of short-covering Friday, dealers said. 

 

Foreign banks and portfolio investors purchased gilts as risk appetite improved after the US and Iran agreed to a two-week ceasefire Wednesday, dealers said. The ceasefire has largely held so far. By 1800 IST, FPIs had net purchased gilts worth INR 17.35 billion through the fully accessible route, as per data from CCIL, marking their third consecutive session of bond purchases.

 

"There's the view that 10-year (benchmark bond yield) will go to 6.80%-6.85% and that bonds were oversold," a dealer at a private-sector bank said. "People are pricing out that war risk, we will see some positivity (bond price rise) on Monday as well if the ceasefire stays."

 

Some state-owned banks also bought the bond at auction to fill their held-to-maturity books, dealers said. Gilts worth INR 1.56 trillion mature this month, making space in investment books, dealers said. However, these banks were likely taking profits in the secondary market Friday, with sporadic purchases across the yield curve, they said. State-owned banks have largely borne the burden of rising yields, stepping in to net buy gilts worth INR 439.21 billion in the secondary market since the onset of the West Asia war till Thursday, according to CCIL data.

 

Short-term bonds underperformed, and bond prices had fallen briefly, after the RBI unexpectedly announced a variable rate reverse repo auction of INR 2.00 trillion Friday, the first since Dec. 5. At the post-policy press conference Wednesday, Governor Sanjay Malhotra had said the central bank would give banks liquidity comfort during uncertainty, which had led traders to pare expectations of a VRRR auction this month. Some traders feared that the governor's commentary Wednesday--which was initially viewed as slightly "dovish"--would have to be re-evaluated. Others said a VRRR auction was bound to be conducted amid surplus liquidity and heavy bond redemptions.

 

"After the policy, I was thinking we'll be in a 82 to 85 (6.82-6.85% yield on the 10-year benchmark) band, but now after the VRRR I'm not so sure," a dealer at another private-sector bank said. "If you see, the short-term (papers) has not reached its day's high again (since the VRRR announcement), while the 10-year, 15-year (gilts) have hit fresh highs." 

 

Turnover in the government securities market was INR 834.60 billion, up sharply from INR 587.75 billion Thursday and slightly higher than the turnover of INR 802.90 billion on Wednesday, the day of the Monetary Policy Committee decision, 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. The instrument has remained out of use since February.

 

OUTLOOK

Gilts are not traded Saturdays. Monday, bond prices may track the movement of crude oil prices and developments over the weekend related to the West Asia conflict, dealers said. Traders will await the outcome of US Vice-President J.D. Vance's meeting with Iranian officials in Islamabad. The Brent Crude futures contract for delivery in June has hovered near $95 per barrel since the two warring sides agreed to a two-week ceasefire. Gilts will also track the movement of US Treasury yields after the release of CPI inflation for March in the US after market hours Friday.

 

Traders also await India's CPI inflation for March, due 1600 IST Monday. According to an Informist Poll of 13 economists, CPI inflation is expected to have risen to 3.4%, from 3.21% in February, with the war in West Asia likely to have pushed fuel inflation up. A print closer to 4%--the Monetary Policy Committee's target--is likely to send the 10-year benchmark yield to 7.00%, dealers said. However, on the technical front, a rise above 7.00% may be difficult to sustain if risk-on sentiment improves, dealers said. 

 

Rate-sensitive short-term bonds may be out of favour, especially if the liquidity surplus rises to INR 5.00 trillion, at which the RBI is likely to conduct another VRRR auction, dealers said. Most dealers do not expect another VRRR until Friday's is reversed.

 

The movement in overnight indexed swap rates and the rupee may also influence gilts. The yield on the 10-year benchmark 6.48%, 2035 gilt is seen at 6.85-7.10%.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	97.0300	6.9119%	96.7050	6.9601%
6.33%, 2035	97.0000	6.7777%	96.6050	6.8375%
6.01%, 2030	98.4000	6.4412%	98.3000	6.4678%
6.68%, 2040	95.1000	7.2354%	94.8200	7.2682%
6.90%, 2065	91.3900	7.5914%	90.5700	7.6631%

 

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India Gilts: Rise more on short-covering, fresh buys; auction result helps

 

	1610 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.92	97.00	96.44	96.70	96.71
YTM (%)	6.9283	6.9164	7.0005	6.9610	6.9601

 

MUMBAI--1610 IST--Prices of government bonds rose further as traders whose bids for the 10-year benchmark 6.48%, 2035 gilt were not accepted at Friday's weekly auction covered their short sales in the secondary market, dealers said. Some traders also made purchases at levels seen as attractive, amid signs of a thaw in tensions in West Asia, easing crude oil prices, and lower US Treasury yields. 

 

The Reserve Bank of India Friday set a cut-off of INR 96.67 for the 10-year benchmark gilt at the auction, against the median of INR 96.64 in an Informist poll. The RBI received 549 competitive bids worth INR 1.09 trillion in the INR 340-billion auction, signifying robust demand for the paper. The number of bids was a record for a single paper, a dealer at a private-sector bank said. The central bank accepted only 147 bids.

 

"People had placed bids based on the price level before the announcement of the variable rate reverse repo auction...," a dealer at a state-owned bank said. "The difference between the cut-off announced and the cut-off expected post VRRR auction announcement was very high, and therefore, the pressure of VRRR was reversed completely." The RBI announced a VRRR auction at 1213 IST, leading to bond prices falling sharply.

 

A fall in overnight indexed swap rates also supported bond prices, dealers said. The five-year OIS fell near 8 basis points to 6.31%, while the one-year OIS rate fell almost 4 bps to 5.83% at 1551 IST. Global factors, including Brent crude oil prices and US yields, also lent positive cues to the gilt market. Brent crude futures for June delivery continued to trade between $96 and $97 per barrel since 0900 IST, compared with $98.63 per barrel at the end of Indian market hours Thursday, which supported bond prices. Similarly, yield on the benchmark 10-year US Treasury note remained at 4.29%, largely unchanged from 1700 IST Thursday. 

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in a range of 6.90-7.05% for the rest of the day. At 1610 IST, the turnover in the gilt market was INR 714.35 billion, sharply higher than INR 526 billion at 1630 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.  (Diksha Tripathy and Janwee Prajapati)

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India Gilts: Dn on VRRR notice but recover losses as auction cut-off tops view

 

--Dealers:Gilts erase losses after cut-off price at auction higher than view 

--Dealers:Gilts dn, tri-party repo rate up after RBI announces INR-2-tln VRRR 

 

	1431 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.79	96.81	96.44	96.70	96.71
YTM (%)	6.9476	6.9442	7.0005	6.9610	6.9601

 

MUMBAI--1431 IST--Prices of government bonds recovered losses as the cut-off price on the 6.48%, 2035 bond at the auction was slightly higher than market expectations, dealers said. The Reserve Bank of India Friday set a cut-off of INR 96.67 for the 10-year benchmark gilt at the weekly auction, against the median of INR 96.64 in an Informist poll of 14 respondents.

 

Demand at the gilt auction was firm as expected, dealers said, confirming purchases by banks. Primary dealers had built up short bets over the past three sessions and were aggressively covering those sales, while mutual funds flush with liquidity also bid in large quantums, dealers said. Traders who could not get the intended stock of the gilt at the auction covered their short sales in the secondary market, which fulled a further rise in bond prices after a recovery. 

 

"Bidding (at the auction of the 6.48%, 2035 gilt) today (Friday) was aggressive because this was the last auction for this bond. Public sector banks were there. Foreign banks were there, too," a dealer at a private sector bank said. "One interesting development is that mutual funds are also buying now. Earlier, they were selling."

 

Bond prices had falled sharply around 1215 IST following the announcement of a variable rate reverse repo by the RBI. The central bank Friday announced a VRRR auction of INR 2 trillion for 1400-1430 IST Friday. The surplus liquidity in the banking system, as measured by the RBI's net liquidity absorbed, was at INR 4.55 trillion Thursday and INR 4.57 trillion Wednesday, levels last seen in May 2022. The announcement came as a "shocker" to the market as traders were not expecting any such move by the RBI, especially following Governor Sanjay Malhotra's comments on liquidity during announcement of the Monetary Policy Committee's decisions.

 

When asked about conducting a VRRR as the weighted average call rate was below the policy repo rate of 5.25%, the governor had said the central bank intends to give comfort to banks on liquidity during the conflict in West Asia. Traders called the VRRR announcement "irrational" and "poorly timed" as they had based their bids at the gilt auction at levels of the bond seen before the announcement.

 

"More than anything else, the market is now uncertain about the RBI's philosophy, because it seems the governor conveyed something else on Wednesday," a dealer at a primary dealership said. "Now people will reassess all of the statements they have made which had provided comfort."

 

The latest move by RBI also pushed the yield on the 10-year benchmark 6.48%, 2035 gilt beyond 7.00% for a brief period, which had fallen to 6.90?ter the MPC policy decisions were announced Wednesday. Traders saw the yield on the 10-year benchmark gilt crossing 7.00% only on geopolitical uncertainties due to the West Asia war, which were contained Friday on encouraging signs on the ceasefire between the US and Iran.          

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in a range of 6.90-7.05% for the rest of the day. At 1430 IST, the turnover in the gilt market was INR 555.65 billion, significantly higher than INR 400.20 billion at 1430 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.  (Diksha Tripathy and Aaryan Khanna)

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India Gilts: Remain in thin band; 6.48%, 2035 gilt auction demand seen robust

 

	1206 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.71	96.77	96.64	96.70	96.71
YTM (%)	6.9595	6.9506	6.9707	6.9610	6.9601

 

MUMBAI--1206 IST--Prices of government bonds remained in a thin band as traders awaited the result of the INR-340-billion auction of the 10-year benchmark 6.48%, 2035 bond Friday, dealers said. An Informist Poll of 14 respondents estimated the cut-off price on the bond at INR 96.64. Demand for the bond is seen robust across market segments. Traders had placed short bets on gilts ahead of the auction, which had pushed prices lower in early trade, dealers added. 

 

Traders are expected to cover short sales worth INR 80 billion to INR 100 billion at the gilt auction, dealers said. Meanwhile, public sector banks, which have been the largest net sellers for the last two trading sessions, are expected to buy INR 100 billion to INR 120 billion of the bond, amid gilt redemptions this month. Some traders want to add the bond to their held-to-maturity portfolios, they said. 

 

"Demand is good, it should be cleared (at a cut-off price of) around 60 to 62 levels (INR 96.60 to INR 96.62). Weighted average (price) can go till 65 (INR 96.65)," a dealer at a private sector bank said. "There will be around 10-12k (INR 100 billion to INR 120 billion) of short-covering." A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. At 1206 IST, data showed trades worth INR 203.73 billion in the 6.48%, 2035 gilt.

 

Mutual funds and primary dealerships are also expected to make large purchases at the auction. Mutual funds have been sitting on cash this month, after large sales in investments Jan-Mar, and as banks park cash amid ample surplus liquidity, dealers said. Mutual funds were also purchasing gilts in the secondary market Friday, dealers said. This segment has net purchased gilts worth INR 85 billion so far this month till Thursday, as per data from Clearing Corp. of India. This segment had seen net sales of INR 443.90 billion in March.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in a range of 6.90-7.00% for the rest of the day. At 1206 IST, the turnover in the gilt market was INR 173.90 billion, lower than INR 271.65 billion at 1235 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.  (Diksha Tripathy and Janwee Prajapati)

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India Gilts: Steady as traders refrain from large bets before weekly auction

 

	0949 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.73	96.73	96.64	96.70	96.71
YTM (%)	6.9573	6.9573	6.9707	6.9610	6.9601

 

MUMBAI--0949 IST--Prices of government bonds were steady as traders refrained from large bets before the weekly gilt auction, where the government is selling INR 340 billion of the 6.48%, 2035 bond. Some traders short-sold gilts ahead of the auction, which pushed prices lower in early trade, dealers said. 

 

Demand is seen firm at the auction Friday as traders may look to cover their short positions. Banks and mutual funds are also expected to buy the bond at the auction due to levels seen attractive, dealers said. Volume in the market was higher than Thursday ahead of the auction. At 0949 IST, the turnover in the gilt market was INR 57.30 billion, higher than INR 46.20 billion at 0930 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.

 

Traders may also look to stock up on the 2035 gilt as this might be the last auction for the bond, dealers said. The bond already has an outstanding of INR 1.92 trillion. A full issuance Friday will take its outstanding to the most among bonds maturing before 2063.

 

"Demand (for 6.48%, 2035 gilt) might come this time around (at the auction) because people would want to buy at these attractive levels," a dealer at a public-sector bank said. "Also, probably, this is the last auction for this 10-year benchmark bond, so buying will come." 

 

Traders had expected the government to issue a new 10-year benchmark paper at this week's auction. "RBI came up with this (6.48%, 2035) paper again this time because maybe the availability of this (6.48%, 2035 bond) is not as much as it is on-paper. RBI holds a lot of this (6.48%, 2035) paper that it had brought on screen from the secondary market," a dealer at a private-sector bank said.

 

A fall in prices of Brent crude oil to $96 per barrel at 0948 IST, as against $98.63 per barrel at the end of Indian market hours Thursday, helped limit losses on bond prices. "Crude prices are coming down and have remained below $100 per barrel for a few days now. This is bringing some relief," the dealer at the public-sector bank said. 

 

The yield on 10-year benchmark 6.48%, 2035 bond is seen moving in a range of 6.90% to 7.00% for the rest of the day.  (Diksha Tripathy)

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India Gilts: Seen steady on lack of significant cues before weekly auction

 

MUMBAI – Prices of government bonds are seen opening steady Friday due to lack of significant overnight developments related to the war in West Asia and ahead of the weekly gilt auction of the 10-year benchmark 6.48%, 2035 bond, dealers said. Crude oil prices eased a little, while US Treasury yields remained broadly unchanged overnight.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen opening around 6.96%, the same as Thursday, and is seen in a range of 6.90-7.00% Friday. Some traders expect the bond yield to rise till 6.99% due to pressure from supply of INR 340 billion of the 10-year benchmark gilt at the auction. However, due to lack of major escalation in the war in West Asia, the rise in yields will remain limited, dealers said. The bond closed at INR 96.71, or 6.9601% yield, Thursday.

 

The two-week ceasefire agreement between Iran and the US remains fragile as Israel continued its attacks on Lebanon. Brent crude oil prices edged lower amid reports of negotiations between Israel and Lebanon. Brent crude oil futures for June delivery were at $96.64 per barrel at 0730 IST, slightly lower than $97.86 a barrel at the end of Indian trading hours Thursday.    

 

Back home, demand for the 10-year benchmark gilt is seen firm, led by short-covering interest from primary dealers and foreign banks. A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 0730 IST showed trades worth INR 169.85 billion in the 6.48%, 2035 gilt, down from INR 192.31 billion Thursday. 

 

The auction result will lend direction to bond prices in the latter part of the day. State-owned banks and mutual funds may also consider the 10-year gilt lucrative if its yield climbs to near 7%, especially after the Reserve Bank of India's Monetary Policy Committee eased fears of rate hikes in India until October, dealers said. Some banks are likely to buy the 10-year benchmark gilt for their held-to-maturity books, they said. Traders may avoid large bets before the INR 340-billion auction of the 10-year benchmark 6.48%, 2035 gilt at 1030-1130 IST, dealers said.

 

Rate-sensitive short-term bonds may remain out of favour unless tensions in West Asia cool and the ceasefire between the US and Iran holds, dealers said. Traders continued to expect flattening of the yield curve due to a rise in short-term bond yields and a slip in long-term bond yields, dealers said.

 

Data released after Indian market hours Thursday showed US core personal consumption expenditure rose 3.0% on year and 0.4% on month in February, accelerating from the previous month. The rise in the US Federal Reserve's preferred inflation gauge was in line with the consensus view in a Dow Jones poll. After the data, the CME FedWatch tool showed 72.1% of market participants see no change in the US federal funds rate in the remainder of 2026, 26.8% see a rate cut, and a minuscule number expect a rate hike. However, at 0730 IST, the benchmark 10-year US Treasury yield was 4.29%, unchanged from 1700 IST Thursday. 

 

Traders now await India's CPI inflation data for March, due Monday, which is seen at 3.4%, according to an Informist poll of 13 economists. A print closer to 4.0% will again spur bets of a quicker rate hike cycle. The movement in overnight indexed swap rates and the rupee may also influence gilts.  (Janwee Prajapati)  End

 

US$1 = INR 92.7275

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

 

Edited by Rajeev Pai

 

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