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Informist, Friday, Apr. 17, 2026

By Janwee Prajapati

MUMBAI – Prices of government bonds recovered most losses Friday following a slight moderation in crude oil prices and US Treasury yields intraday, dealers said. A slip in overnight indexed swap rates also helped bond prices. Traders had expected the cut-off prices at the gilt auction to lend direction to bond prices, but that did not materialise, as results were broadly in line with expectations and failed to impress, dealers said.

Some traders likely placed short bets on gilts ahead of the weekend as they expect bond yields to rise further, dealers said. Mutual funds also sold gilts, continuing their selling momentum from Thursday, dealers said. Mutual funds had net sold gilts worth INR 8.17 billion Thursday, and turned net sellers after a week, according to data from Clearing Corp. of India.

The 10-year benchmark 6.48%, 2035 bond ended at INR 97.08, down from INR 97.19 Thursday. Its yield ended at 6.9049%, up from 6.8884% Thursday. Trade activity was subdued as traders were reluctant to build aggressive positions amid uncertainty over developments in talks between the US and Iran, dealers said. The total turnover in the government securities market was INR 536.00 billion on Friday, slightly up from INR 511.25 billion on the previous day.

Brent crude for June delivery traded at $96.25 a barrel at 1700 IST, down from $98.33 per barrel at 0900 IST, but up from $95.82 per barrel at the end of Indian market hours Thursday. The 10-year US Treasury yield declined to 4.30% at 1700 IST from 4.33% at 0900 IST but up from 4.27% at 1700 IST Thursday. Traders await updates on the peace talks between the US and Iran amid the wider conflict in West Asia.

"We're just tracking geopolitical events now. I'm expecting positive commentary from international players (officials) over the weekend," a trader at a primary dealership said. "But in the longer run, I don't think we can expect this positivity to continue. It will fizzle out again."

Back home, the government sold INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of the 6.90%, 2065 bond at a cut-off price of INR 98.98 and INR 91.44, respectively. The cut-off prices were largely in line with expectations of INR 99.01 and INR 91.41, respectively, in an Informist poll.

Banks, especially public-sector banks, bought the five-year paper in the auction to match their liabilities. This led the Reserve Bank of India to set a weighted average price of INR 99.02 on the 2031 paper. Traders also bought this paper as they considered its 'carry' or return for its tenure attractive, dealers said. The 6.36%, 2031 paper was the second-most traded paper on the Reserve Bank of India's Negotiated Dealing System after the 10-year benchmark 6.48%, 2035 paper, with a total traded volume of INR 54.45 billion.

The 6.90%, 2065 paper was well bid by insurers and provident funds. Insurers and provident funds have enough appetite for gilts, dealers said. The 'Others' segment of bond market participants, which includes insurance companies, provident funds and the RBI, was the largest net buyer of gilts Thursday. The 'Others' segment net bought gilts worth INR 19.27 billion Thursday, most of which was by provident funds, dealers said.

Long-term gilts were in favour as the supply of these bonds came down in the Centre's Apr-Sept borrowing calendar compared to FY26, and states have also reduced their issuances of long-term bonds, dealers said. Following the ease in supply, traders had expected the RBI to offer long-tenure bonds in the switch auction, which did not materialise, dealers said. 

On Monday, the government will switch nine short-term government securities worth INR 300 billion, with eight longer-term securities. Traders expect the tendering at the auction to be firm as most banks likely have these short-term bonds in their portfolio and most of them are "in the money" or profitable, dealers said. Some traders expect the RBI to receive and accept the highest number of bids for the 6.33%, 2035 bond, they said. Some traders said that even though the switch auction includes two bonds maturing in the current financial year, which could reduce the Centre's gross borrowing this year and should have supported bond prices, it weighed on prices of bonds maturing in nine and 10-year tenures, since the destination securities are largely concentrated in these tenures. 

Traders are betting on the spread between the erstwhile 10-year benchmark 6.33%, 2035 bond and the 6.48%, 2035 bond to narrow after the switch auction. Bond prices will likely take cues from the result of the switch auction, dealers said. The government will switch INR 30 billion of the 5.74%, 2026 bond with the erstwhile 10-year benchmark 6.33%, 2035 bond.

Traders will seek to cover their short positions placed in the 6.33%, 2035 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. The data at 1830 IST showed trades worth INR 104.24 billion in the 6.33%, 2035 gilt, slightly up from INR 103.94 billion Thursday.

"People (traders) were expecting long-term papers, but their sentiments were hit because most of the papers are in nine to 10-year maturity," a dealer at a primary dealership said. "It (fall in bond prices) is mostly weekend positioning. I think the 10-year (benchmark yield) will trade around 6.86-6.95% levels due to shorting and short covering."

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 on Saturdays. On Monday, bond prices will open steady, provided there are no major developments in the situation in West Asia over the weekend, dealers said. Bond prices will also take cues from the movement in Brent crude oil prices. Crude oil prices plunged over 10% after Iran declared the Strait of Hormuz open. The switch auction results will lend direction to bond prices later on Monday, dealers said.

The government will switch INR 300 billion of nine short-trm gilts with eight longer-term securities, the central bank announced Wednesday. Traders do not expect any major impact on gilt prices if the cut-offs set on the bonds are within expected lines, dealers said. However, traders will focus on the cut-off set on the 6.33%, 2035 bond as most expect the spread between the erstwhile 10-year benchmark and current 10-year benchmark bond to narrow, dealers said.  

Traders expect the US-Iran ceasefire to hold, which should keep the 10-year benchmark bond yield below 7.00%. Traders will also track US Treasury yields. 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%.

India Gilts: Off lows as oil prices fall, but still down as traders trim risk

MUMBAI--1544 IST--Prices of government bonds were off the day's lows as Brent crude oil futures for delivery in June fell intraday to $96 per barrel from $98.33 per barrel at 0900 IST. The yield on the benchmark 10-year US Treasury note fell to 4.30% from 4.33% at 0900 IST. Prices remained down as some traders placed short bets on gilts at current prices as they expect the yield on the 10-year benchmark 6.48%, 2035 gilt to rise up to 6.96% due to uncertainty whether the ceasefire between US and Iran will continue to hold, dealers said. Activity was subdued in the secondary market as traders avoided building positions with exposure to risk ahead of the weekend, they said.

The Reserve Bank of India Friday set a cut-off price of INR 98.98 for the 6.36%, 2031 gilt at the weekly gilt auction, lower than INR 99.01--the median of estimates of 13 respondents polled by Informist. Public sector banks are likely to have bid aggressively at the auction for the bond to match their liabilities, dealers said. The weighted average price on the bond was INR 99.02. Meanwhile, the cut-off price for the 6.90%, 2065 bond was INR 91.44, around INR 91.41 as per an Informist poll. Insurance companies bought the bond at the auction, dealers said.

"It (gilt auction) went well. Demand for five-year paper was there despite mixed signals from the market. Cut-offs were on expected lines, but had it (cut-off prices) been better, the market would have reacted. Bond prices would have gone up," a dealer at a private-sector bank said.

Rise in overnight indexed swap rates had also pulled bond prices down. The five-year OIS rate hit the day's high of 6.4350%, up around 6 basis points as offshore participants remained on the paying side, but swaps cooled down as crude oil prices eased, aiding the recovery in bond prices, dealers said.

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in the range of 6.85-6.97%. At 1544 IST, turnover in the gilt market was INR 399.85 billion, similar to INR 399.95 billion at 1530 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. (Diksha Tripathy)

India Gilts: Remain dn in thin trade as oil price rises; auction result eyed

MUMBAI--1220 IST--Prices of government bonds remained down in thin trade amid a rise in crude oil prices and due to caution ahead of INR-320-billion weekly gilt auction result, dealers said. An overnight rise in US Treasury yields also weighed on the bond prices. Traders refrained from building positions ahead of the weekend amid uncertain geopolitical situation, dealers said.   

Bond prices remained down as the Brent crude oil continued to trade near the key level of $100 per barrel. Brent crude oil price for June delivery was over $98.80 at 1200 IST, up from $95.38 per barrel Thursday at the end of Indian market hours. At 1200 IST, the benchmark 10-year US Treasury yield was 4.32%, up from 4.27% at the end of Indian trading hours Thursday. With the Lebanon-Israel ceasefire taking effect at 0330 IST, traders are now watching for updates on US-Iran peace talks in the West Asia conflict.

At the weekly gilt auction Friday, the government sold INR 210 billion worth of 6.36%, 2031 bond and INR 110 billion worth of 6.90%, 2065 bond. Demand for the 40-year paper is likely to be firm from insurance and provident funds. Some traders said this market participant bought gilts in the secondary market after 'others' segment of the market participant was the top net buyer of gilts Thursday. The 'others' segment of market participants – which includes insurance companies, provident funds and the central bank – net bought gilts worth INR 19.27 billion Thursday.

On the other hand, the five-year paper is likely to have mixed demand from mutual funds, primary dealerships and banks for their asset liability management books, dealers said. Some traders likely placed bids at higher yields for the 2031 paper as the heavy supply of short-term bonds weighed, they said. 

"Traders are undecided about whether to buy or short due to geopolitical uncertainty," a dealer at a private sector bank said. "Auction results will lend cues now. I think we (yield on the 6.48%, 2035 bond) can go to 6.80% even if the result is in line with expectation...people (traders) are expecting tail (bidding at higher yield) in five-year paper."

The Reserve Bank of India also conducted an INR-2-trillion variable rate reverse repo auction to drain out liquidity from the banking sytem, weighing on bond prices, dealers said. At the VRRR auction, the central bank accepted bids aggregating to INR 2 trillion out of INR-2.28-trillion offers received at 5.24% cut-off and 5.23% weighted average rate. 

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in the range of 6.84-6.92%. At 1220 IST, the turnover in the gilt market was INR 144.55 billion, lower than INR 220.85 billion at 1230 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. (Janwee Prajapati)

India Gilts: Dn on rise in crude oil prices; traders cautious before auction

MUMBAI--1000 IST--Prices of government bonds were down due to a rise in the price of Brent crude oil, dealers said. Traders also maintained caution ahead of the weekly gilt auction Friday, keeping trade volumes muted. The government will sell INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of the 6.90%, 2065 bond at the auction.

Robust demand is seen for the long-term paper from insurers and provident funds at the auction. Insurers have been on a buying spree, dealers said. The 'Others' category of market participants, which includes insurers, provident funds, and the Reserve Bank of India, have net bought gilts worth INR 217.57 billion so far this month, according to data from Clearing Corp. of India.  

Market participants had mixed views on the short-term paper. Some dealers said the five-year gilt could turn out to be a good purchase amid surplus liquidity, while a few other dealers said the cut-off price might be lower than current market prices due to the large supply. The bond had factored in rate hikes in India in FY27, which made it more attractive amid the global volatility, dealers said. For the 6.36%, 2031 gilt, traders said demand could come from private-sector and public sector banks to add to their asset-liability management portfolios.

"Markets (traders) are maintaining caution right now, so not much trade is happening at the moment. Some movement (in bond prices) will be seen post auction (result)," a dealer at a public-sector bank said.      

Global factors such as crude oil prices and US Treasury yields weighed on bond prices. Brent crude oil futures for June delivery were $98.22 per barrel at 0928 IST, as against $96 per barrel at the end of Indian market hours Thursday. However, with a ceasefire between Israel and Lebanon coming into effect earlier Friday, crude oil prices are expected to cool down, as they have done in Asian trade. The 10-year US Treasury yield also rose to 4.32% at 0930 IST, from 4.27% at 1700 IST Thursday, which also pulled down bond prices.

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen moving in the range of 6.84-6.92%. At 1000 IST, the turnover in the gilt market was INR 61.20 billion, higher than INR 36.45 billion at 0930 IST Thursday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. (Diksha Tripathy)

India Gilts: Seen down on rise in crude, US ylds; auction to sail through

MUMBAI – Government bond prices may fall slightly Friday due to an overnight rise in crude oil prices and US Treasury yields. The result of the INR-320-billion weekly gilt auction will lend further cues to bond prices through the day, with appetite for the fresh supply seen healthy, dealers said.

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open around 6.90% and is seen in a range of 6.85-6.92% during the day, dealers said. The bond had ended at INR 97.19, or 6.8884% yield, Thursday. Gilts ended lower Thursday as traders booked profit and made room for the fresh supply at auction.

Brent crude for June delivery was at $98.21 a barrel, down in early Asian trade Friday but rising from around $96 per barrel at the end of Indian market hours Thursday. The 10-year US Treasury yield rose to 4.31% at 0830 IST from 4.27% at 1700 IST Thursday. With a ceasefire between Lebanon and Israel in effect starting 0330 IST, traders await news on the progress of peace talks between the US and Iran in the broader West Asia conflict.

Even though the offshore triggers will have an early impact, traders said the focus will be on the gilt auction. The government will sell INR 210 billion of the 6.36%, 2031 gilt and INR 110 billion of the 6.90%, 2065 gilt at 1030-1130 IST. The demand for the 40-year benchmark is seen robust, both from traditional long-term investors such as pension funds and life insurers as well as mutual funds, some of which have begun favouring these bonds to maximise mark-to-market gains in case the West Asia war subsides, dealers said.

Meanwhile, banks' asset-liability managers are keen to pick up five-year benchmark bond, with their purchases so far in April having been sluggish. However, the volatility in the segment and the uncertainty in the rate environment domestically may keep traders away from the bond, dealers said. While the large supply of the 2031 gilt will sail through, it may lead to a low cut-off price at the auction, they said.  (Aaryan Khanna)

US$1 = INR 92.93

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

Edited by Saji George Titus

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