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Informist, Monday, Apr. 13, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended off the day's lows Monday on purchases by mutual funds and foreign banks at yield levels seen to be attractive, dealers said. India's CPI inflation for March was in line with expectations while core CPI inflation fell on month, which boded well for bonds, they said.

 

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.85, down from INR 97.03 Friday but off the day's low of INR 96.58. Its yield ended at 6.9395%, up from 6.9119% Friday. India's CPI inflation for March rose to 3.4%, in line with an Informist Poll of 13 economists. Traders were expecting a print of 3.5%. Core inflation, which excludes food and fuel items, eased to 3.3% from 3.4% in February.

 

"CPI was within expectations," a dealer at a state-owned bank said. "Some people were expecting higher also, so that's why prices have risen 5-6 paisa. But now depends on what the upcoming data shows. We knew that government hasn't pushed the (rise in oil prices) to consumers yet, so March would be all right."

 

Bond prices opened sharply lower, tracking a rise in Brent crude oil price to more than $100 per barrel after the US and Iran failed to reach a deal in Islamabad over the weekend, dealers said. Brent Crude futures for delivery in June were at $101.91 per barrel at 1700 IST from $96.00 per barrel at the same time Friday. Tracking the geopolitical developments and after US inflation in March was at its highest in 22 months, the 10-year US Treasury yield rose to 4.34% at the end of gilt market hours from 4.30% at the same time Friday.

 

However, traders found the yields attractive and bond prices recovered a little. Due to aggressive bidding by foreign banks and mutual funds at the auction of the 6.48%, 2035 bond Friday, several traders were unable to get their hands on the bond and its price had surged in the secondary market. After bond prices fell Monday, traders who had missed out on Friday seized the opportunity to buy the 10-year benchmark bond, dealers said.

 

Foreign banks likely bought bonds in the secondary market for the second consecutive session, they said, after buying gilts worth INR 37 billion Friday, as per data from Clearing Corp. of India Ltd. Gilts worth INR 1.56 trillion are maturing this month, leading to replacement demand in the secondary market, especially from foreign banks. These banks were purchasing gilts maturing in 2028 and 2029, dealers said.

 

Mutual funds continued to purchase gilts as they had surplus cash, dealers said. The net liquidity absorbed by the Reserve Bank of India, an indication of a liquidity surplus in the banking system, was INR 5.54 trillion Friday, the highest since May 4, 2022, and up sharply from INR 4.55 trillion Thursday.

 

Mutual funds had net purchased gilts worth INR 110.43 billion so far this month till Friday, as per CCIL data. They were also receiving fixed rate contracts in overnight indexed swaps, limiting a rise in OIS, dealers said. Trade was concentrated in the 10-year benchmark bond after its auction Friday. The turnover in the bond was INR 387.25 billion Monday, 69% of the turnover of INR 562.60 billion in the government securities market. The total turnover was down from INR 834.60 billion Friday. There were no trades using the RBI's wholesale e-rupee pilot. The instrument has remained out of use since February.

 

Cut-off yields at the INR 127-billion state bond auction were largely along expected lines, dealers said, but slightly higher than those estimated in an Informist Poll. State-owned banks were not aggressive in their bids, though some mutual funds and insurance companies bid for the bonds, dealers said. The RBI set a cut-off yield of 7.81% on Kerala's 11-year bond, higher than a poll estimate of 7.79%.

 

"We are preferring SGS (state bonds) over corp (corporate) bonds due to better returns," an official at an insurance company said. "Last month when there were infra (infrastructure) bond issuances, we participated but we did not get and we were also not very aggressive. It was mostly LIC (Life Insurance Corp. of India) and EPFO (Employees' Provident Fund Organisation) so we are right now investing in SGS."

 

The 6.33%, 2035 bond ended 23 paise higher in thin trade. Its yield was 20 basis points below that of the 10-year benchmark as traders possibly unwound spread trades conducted between the two bonds, dealers said. Some traders covered short bets on the bond, they said.

 

OUTLOOK

The financial markets are shut Tuesday for Ambedkar Jayanti. Wednesday, bond prices may track the movement of crude oil prices and developments related to the conflict in West Asia, dealers said. Traders are betting that the US-Iran ceasefire will continue to hold and the yield on the 10-year benchmark bond is unlikely to rise above 7.00%, making current levels attractive to buy bonds, dealers said. Though Iran and the US failed to make headway in negotiations over the weekend, the geopolitical risk is already priced into bonds, they said.

 

There were no surprises in India's CPI inflation for March, released Monday, reinforcing bets that the RBI's Monetary Policy Committee is unlikely to find reason to raise the repo rate in June, dealers said. Traders have mixed views on rate-sensitive short-term bonds, with some preferring these tenures due to their lucrative yield spreads over overnight borrowing rates, while others fear the RBI is likely to drain liquidity through another variable rate reverse repo auction amid surplus liquidity, they said. Most dealers do not expect another VRRR until the one conducted Friday 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 6.80-7.00%.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	96.8450	6.9395%	97.0300	6.9119%
6.33%, 2035	97.2250	6.7437%	97.0000	6.7777%
6.01%, 2030	98.1650	6.5062%	98.4000	6.4412%
6.68%, 2040	94.9025	7.2588%	95.1000	7.2354%
6.90%, 2065	91.0500	7.6211%	91.3900	7.5914%

 

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India Gilts: Off lows as inflation in line with view; core CPI moderates

 

	1619 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.86	96.89	96.58	96.67	97.03
YTM (%)	6.9380	6.9328	6.9790	6.9656	6.9119

 

MUMBAI--1619 IST--Prices of government bonds recovered some losses tracking the CPI inflation data for March, which was in line with the market expectations, dealers said. CPI inflation rose to 3.4% in March, matching the median of an Informist poll and up from 3.21% in February. However, core CPI inflation moderated to 3.3% in March from 3.4% the previous month, according to a calculation by Informist.

 

The impact of the war on retail inflation was lower than some market participants had bet on. Traders had expected a reading around 3.5%. Some traders said the impact of the war would be better captured in the March wholesale price inflation later this week.

 

"The only surprise is the core (inflation) being lower. That is a positive in the market," a dealer at a private-sector bank said. "Foreign banks are not replenishing anything. They have hit stops (stop-losses on their short positions)."

 

Bond prices did not react much to the result of the state bond auction Monday. The INR 127-billion state bond supply was absorbed at cut-off yields largely in line with market expectations, dealers said.    

 

The Reserve Bank of India set a cut-off of 7.81% on Kerala's 11-year bond, slightly higher than an Informist Poll of 7.79%. Public sector banks and insurance companies bought bonds at the auction, considering the levels attractive, dealers said. Investors were not aggressive while bidding for the modest supply as they had a large stock of state bonds in their portfolios from the March quarter. 

 

The losses on bond prices were limited on purchases by foreign banks and mutual funds in the secondary market to replenish portfolios, dealers said. The 7.27%, 2026 and 5.63%, 2026 bonds have matured so far in April, while the 6.99%, 2026 bond will be repaid by the government on Friday. Total gilt redemptions in April amount to INR 1.56 trillion.

 

"Now we're at pre-auction level, and it's good to add here, we're seeing purchases for all books, trading and your AFS (available for sale), HTM (held-to-maturity) also," a trader at a primary dealership said. "So whoever didn't get at auction can enter here."

 

The purchases offset the impact of an intraday further rise in oil prices. Brent crude futures for June delivery rose above $102 per barrel after briefly falling to $101 per barrel intraday, further weighing on bond prices. 

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in a range of 6.92-7.00% for the rest of the day. At 1619 IST, the turnover in the gilt market was INR 493.85 billion, sharply lower than INR 747.95 billion at 1640 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. India's financial markets will be closed on Tuesday for Ambedkar Jayanti.  (Diksha Tripathy and Cassandra Carvalho)

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India Gilts: Recover some losses on foreign banks' buys; auction result eyed

 

	1320 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.78	96.80	96.58	96.67	97.03
YTM (%)	6.9488	6.9462	6.9790	6.9656	6.9119

 

MUMBAI--1320 IST--Government bonds recovered some losses as foreign banks made purchases at levels seen attractive to replenish their portfolios, dealers said. Gilts worth INR 1.56 trillion are maturing this month, leading to replacement demand in the secondary market. Foreign banks were the largest net buyers of gilts Friday, with purchases worth INR 37.16 billion, as per data from Clearing Corp. of India. 

 

The recovery was limited as traders were cautious ahead of the state bond auction result Monday, dealers said. Five states aimed to raise INR 127 billion through sale of bonds, with about INR 42 billion of the supply of bonds maturing in 20 years or more. The auction size is lower than INR 139.50 billion indicated in states' borrowing calendar for the June quarter. Prior to peace talks between the US and Iran breaking down over the weekend, most traders had expected firm demand at the auction due to its smaller-than-indicated size. 

 

Failed talks between the US and Iran and the consequent rise in Brent crude oil prices dampened appetite for bonds at the auction, dealers said. Public sector banks and insurance companies were likely major buyers at the auction, they said. State-owned banks bought short-term papers to add to their available-for-sale portfolios, while insurance companies bought bonds with maturities of 20 years and above, dealers added. 

 

"Demand (at the state bond auction) was there, but with tail bidding because everything is under pressure due to this (US-Iran) war," a dealer at a state-owned bank said. "...But I am sure it (state bond auction) will go through smoothly," the dealer added. 

 

Traders expect yield spreads of state bonds over gilts of comparable maturity to be similar to those at the last state bond auction. At the state government bond auction Tuesday, cut-off yields on states' 10-year bonds were in a range of 7.81-7.91%, a spread of 77-87 basis points over the 10-year benchmark gilt issued by the Centre.

 

"If cut-offs are not as per (traders') expectations, yield (on 10-year benchmark gilt) can go up to 7.00% today (Monday) itself also," a dealer at a private sector bank said.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in a range of 6.92-7.00% for the rest of the day. At 1320 IST, the turnover in the gilt market was INR 303.55 billion, slightly lower than INR 334.00 billion at 1330 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. India's financial markets will be closed on Tuesday for Ambedkar Jayanti.  (Diksha Tripathy)

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India Gilts: Sharply dn on jump in crude oil prices after US-Iran talks fail

 

--Gilts sharply down on jump in crude prices as US-Iran peace talks fail

 

	1005 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.65	96.71	96.58	96.67	97.03
YTM (%)	6.9686	6.9596	6.9790	6.9656	6.9119

 

MUMBAI--1005 IST--Prices of government bonds opened sharply lower Monday as Brent crude oil prices jumped after the US and Iran failed to reach a peace deal, dealers said. Brent crude oil futures for June delivery rose past $102 per barrel, rising nearly 7% from the close of Indian market hours Friday. US President Donald Trump Sunday said the US Navy would close off the Strait of Hormuz, pushing the international benchmark above the crucial $100-a-barrel mark.

 

The latest developments in US-Iran peace talks also pushed up US Treasury yields which further weighed on Indian bond prices, dealers said. The yield on the 10-year US Treasury note rose to 4.35% at 1005 IST, as against 4.30% at 1700 IST Friday.     

 

Traders also maintained caution ahead of the auction of the state government securities Monday. Five states will raise INR 127 billion through the sale of bonds Monday, the Reserve Bank of India had said Thursday. This is lower than INR 139.50 billion indicated in the borrowing calendar for the June quarter. Most traders expected firm demand at the auction due to its smaller size. A few were of the view, however, that the demand might be on the lower side as tensions in West Asia escalated, which may keep cut-off yields high. Traders will closely track the auction result.

 

The CPI inflation print for March is another key factor traders will track Monday. Most traders expect the inflation to remain around 3.5%, as against an Informist Poll of 3.4%, for March. "Even if inflation comes in at a higher-than-expected level, the impact will be there (on bond yields) but it will not be long term," a dealer at a private-sector bank said. "The impact of (US-Iran) war will override the impact of higher-than-expected inflation."   

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in a range of 6.92-7.00% for the rest of the day. At 1005 IST, the turnover in the gilt market was INR 92.20 billion, sharply higher than INR 39.05 billion at 0930 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. India's financial markets are closed Tuesday for Ambedkar Jayanti.  (Diksha Tripathy)

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India Gilts: Seen sharply down as oil prices rise after US-Iran talks fail

 

MUMBAI – Prices of government bonds are seen opening sharply down Monday following a rise in Brent crude oil prices after peace talks between the US and Iran ended without a pact, dealers said. International crude oil prices rose sharply and crossed $100 a barrel after US President Donald Trump said the US Navy will block shipping from the Strait of Hormuz. US Treasury yields also rose after these developments and this will also weigh on Indian bond prices. Traders said they will await the result of the state government bond auction, scheduled later in the day, for further cues.

The yield on the 10-year benchmark 6.48%, 2035 bond is seen opening at 7.00%, up almost 9 basis points from Friday, and is seen in a range of 6.96-7.00% Monday, dealers said. The yield is expected to settle below 7.0%, dealers said, adding that the low prices are likely to spur demand from traders and companies which had refrained from building positions ahead of the US-Iran peace talks. Moreover, some traders expect foreign banks to continue their buying from last week. These banks net bought INR 37.12 billion of gilts Friday. The 6.48%, 2035 bond had ended at INR 97.03, or 6.9119% yield, Friday.

 

President Donald Trump announced Sunday the US Navy would block the Strait of Hormuz, escalating tensions after talks with Iran over the weekend failed to end the West Asia war. This puts the two-week fragile ceasefire between the US and Iran at risk. The blockade, set to begin Monday, will target all ships entering or leaving Iranian ports. Trump vowed to take action against any vessel that paid a toll to Iran for passage from the shipping channel. Iran's Revolutionary Guards warned of harsh retaliation if US military vessels approach the Strait.

 

Following this, Brent crude futures contract for delivery in June rose past the key level of $100 per barrel and hovered near $102 per barrel from $95.94 at the end of market hours in India Friday. 

 

The US Consumer Price Index rose 0.9% in March 2026, the biggest monthly gain since June 2022, after a 0.3% rise in February. Inflation jumped to 3.3% in March, the highest level since May 2024, and up from 2.4% in January and February. Following the release of CPI data and the development in Iran-US peace talks, US Treasury yields rose to 4.36% at 0730 IST, up from 4.29% at the end of Indian trading 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% in March from 3.21% in February, with the war in West Asia likely to have pushed fuel inflation up. A print closer to 4%--the target of the Reserve Bank of India's Monetary Policy Committee--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. 

 

Traders expect the state government bonds to be well bid as the quantum being auctioned is lower than the indicative size in the borrowing calendar for the June quarter, dealers said. Five states will raise INR 127 billion, with only about INR 40 billion supply of long-term bonds, they said. 

 

Rate-sensitive short-term bonds may be out of favour, especially if the liquidity surplus rises to INR 5 trillion, at which point the RBI is likely to conduct another VRRR auction, dealers said. Any sharp movement in overnight indexed swap rates and the rupee will also influence bond prices.  (Janwee Prajapati)

 

End

 

US$1 = INR 93.3750

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

 

With inputs from J. Navya Sruthi

Edited by Rajeev Pai

 

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