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Informist, Monday, Apr. 20, 2026

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended higher Monday due to a fall in overnight indexed swap rates, with several traders also covering their intraday short sales in the most-traded 6.48%, 2035 bond by the end of the day, dealers said. Bond prices had opened lower on uncertainty about the ceasefire between the US and Iran holding. Though most bonds recovered, the rise was limited across tenures, dealers said.

 

The 10-year benchmark 6.48%, 2035 bond ended at INR 97.18, up from INR 97.08 Friday. Its yield ended at 6.8901%, down from 6.9049% Friday. The total turnover in the government securities market Monday was INR 501.20 billion, down slightly from INR 536.00 billion the previous session. Trade volumes were concentrated in the 10-year benchmark gilt slightly more than usual, with 68.8% of the trades coming in the 2035 bond.

 

The five-year OIS rate opened at 6.40% but ended at 6.35%, down 4 basis points from Friday's close. Offshore traders continued to receive fixed rates in domestic OIS markets in line with flows through the rest of Asia, dealers said. With Brent Crude futures remaining below $100 a barrel, traders said the risk of rate hikes in India in the financial year 2026-27 (Apr-Mar) were limited as commentary from the Reserve Bank of India's Monetary Policy Committee suggested there was a high bar to rate hikes, they said.

 

Brent Crude futures for June delivery were at $95.10 a barrel at the end of Indian market hours Monday, against $96.22 a barrel at 1700 IST Friday. Bond prices missed reacting to the dip in crude prices to around $86 a barrel after Iran opened the Strait of Hormuz late Friday and through Saturday. After that, the US seized an Iranian ship in international waters and Tehran declared the key naval passage shut to most traffic once again, even claiming to have attacked US naval vessels. In this backdrop, crude oil futures shot back up in Asian trade Monday.

 

"People who had begun the day with placing shorts (short sales) would have been squeezed as there is no liquidity in the market in the 6.48% (2035 gilt)," a dealer at a private-sector bank said. "Traders don't really have positions in the 10-year, so a lot of the stock is either with the RBI or PSU (state-owned) banks."

 

The trading volumes were largely driven by positioning among banks and primary dealerships, with the market not tracking fundamental triggers too much through the day. Early purchases were likely led by some banks which expected the 10-year gilt's yield to remain in the current 6.85-6.95% trading range, immediately bringing bond prices off their lows an hour into the session. Buying activity only expanded from there, with private-sector banks and primary dealerships covering their short sales and even foreign banks speculated to be purchasers, dealers said. Some investors were replenishing their portfolios after the maturity of INR 1.56 trillion of gilts so far in April.

 

"Oil is making lower highs every time and real investors have no choice but to invest in case crude just goes down like it did on Friday," a dealer at a primary dealership said. "Traders are still hesitating as risk appetite has been hit by the continuous sell-offs, but you have a visibility of a 10-basis-point profit (fall in the 10-year benchmark yield to 6.80%) to play for."

 

Meanwhile, the government switched six bonds worth INR 126.87 billion in the first switch auction of FY27, lower than the notified size of INR 300 billion. Traders had expected a larger switch subscription, but state-owned banks were not aggressive with their bids as the source securities were not very profitable to sell, while most traders did not want to add duration at a time of higher geopolitical risk, dealers said. Some traders were relieved at the small supply since most of the bonds were maturing in seven to nine years.

 

The cut-off price on the erstwhile 10-year benchmark 6.33%, 2035 gilt was INR 96.92, 16 paise lower than an Informist Poll estimate of INR 97.08. Traders wanted to use the fresh supply to cover short sales they were "stuck" in over the past few months due to the bond's illiquidity in the secondary market, dealers said. They expect the bond to feature in further gilt switches in FY27 so that the 6.48%, 2035 bond's spread over the older paper normalises to less than 5 bps from the current 13 bps. 

 

There were no trades using the RBI's wholesale e-rupee pilot Monday. The instrument has remained out of use since February.

 

OUTLOOK

Government bond prices are seen opening steady Tuesday owing to a lack of significant triggers scheduled on the domestic front, dealers said. Intraday, investors are likely to have improved risk appetite if there is progress in the negotiations on the Strait of Hormuz between the US and Iran.

 

Developments in the West Asia conflict will be closely watched, with traders likely to track the impact on crude oil prices and US Treasury yields. While demand is set to exceed supply for gilts in April, traders still see offshore triggers being crucial to determine the movement of gilt prices this week as they hope for crude oil supplies to normalise. The 10-year gilt yield may fall to 6.80% on a breakthrough in negotiations between the US and Iran, but rise to 6.95% if Brent crude for June delivery tops $100 a barrel again.

 

Short-term bonds may be under pressure with INR 110 billion each of the three- and seven-year benchmark gilts to be sold at auction Friday. On the other hand, long-term bonds may be in favour should there be further steps to extend the ceasefire between the US and Iran or signs of a more permanent peace deal, dealers said. Traders and mutual funds would want to pile on to gilts maturing in 15 years and above to maximise price gains if crude oil prices and gilt yields subsequently fall.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	97.1800	6.8901%	97.0800	6.9049%
6.33%, 2035	97.0600	6.7696%	97.0650	6.7687%
6.01%, 2030	99.0950	6.5793%	99.0800	6.5829%
6.68%, 2040	95.2600	7.2172%	95.1600	7.2289%
6.90%, 2065	91.5700	7.5757%	91.5500	7.5775%

 

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India Gilts: Up on short-covering; little changed post switch auction result

 

	1621 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.14	97.22	96.96	97.05	97.08
YTM (%)	6.8960	6.8849	6.9235	6.9094	6.9049

 

MUMBAI--1621 IST--Prices of government bonds rose to the day's high as traders covered short positions in the secondary market, dealers said. An intraday fall in crude oil prices also helped bond prices, they said. Prices were little changed after the switch auction result. 

 

Traders covered short positions in the market as the yield on the 10-year benchmark 6.48%, 2035 bond is seen falling to 6.85% in the near term if crude prices fall, dealers said. Primary dealerships likely covered their short bets in the market Monday, dealers said. On Friday, primary dealerships were the largest net sellers of gilts with sales worth INR 36.93 billion, according to data from Clearing Corp. of India.             

 

The government switched six bonds worth INR 126.87 billion, lower than the notified size of INR 300 billion, in the first switch auction of 2026-27 (Apr-Mar) Monday. Market views on the switch auction were mixed. Some traders expected full subscription of INR 300 billion. A few others expected the Reserve Bank of India to accept bids worth only INR 150 billion-INR 180 billion. The cut-off price on the 6.33%, 2035 destination security was INR 96.92, 16 paise lower than an Informist poll estimate of INR 97.08. Some traders were relieved by the lack of duration supply since the Centre did not switch three gilts and switched a low amount.

 

"Participation (at the gilt switch auction) was there by both public and private sector banks and I think the auction will go through. We are expecting good cut-offs (prices) also," a dealer at a state-owned bank had said before the auction result was published. A dealer at a private sector bank presented a contrary view, saying, "Public sector banks do not have a lot of pressure (to tender bonds) because this is just the beginning of the year, and it was the first auction of this financial year (FY27)." 

 

Globally, the price of Brent crude oil and US Treasury yields fell intraday. Brent crude oil for delivery in June fell to $94.84 per barrel at 1621 IST from $95.17 per barrel at 0900 IST, while the yield on the 10-year benchmark US Treasury note was 4.26% at 1621 IST, lower than 4.27% at 0900 IST.

 

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond, is seen moving in the range of 6.85-6.95%. At 1621 IST, the turnover in the gilts market was INR 456.95 billion, slightly lower than INR 479.35 billion at 1630 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.  (Diksha Tripathy)

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India Gilts: Recover all losses; PSU banks not aggressive at switch auction

 

	1340 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.10	97.14	96.96	97.05	97.08
YTM (%)	6.9020	6.8968	6.9235	6.9094	6.9049

 

MUMBAI--1340 IST--Prices of government bonds recovered all losses on bets the tensions in West Asia will cool soon, keeping the yield on the 10-year benchmark 6.48%, 2035 gilt in the current 6.85-6.95% range, dealers said. Prices of Brent crude oil and US Treasury yields have remained stable since the beginning of Indian market hours Monday, which further fuelled the market's confidence in picking up bonds, they said.

 

"Asia rates are being received (by foreign investors) and that is playing its part in the recovery," a dealer at a private-sector bank said. "The market is confused right now and we are in the middle of the trading range, so there is two-way activity and quite decent volume."

 

Traders await the switch auction result. The government has offered to switch nine bonds worth INR 300 billion maturing between 2026 and 2030, with eight longer-term gilts through the first switch auction of 2026-27 (Apr-Mar) Monday. The Reserve Bank of India will likely announce the auction result after 1500 IST Monday.  

 

Traders were expecting firm bidding by public sector banks. However, that was likely not the case at the auction, dealers said. Public sector banks likely participated but were not aggressive on fears of bearing marked-to-market losses amid West Asia war-led uncertainty, they said. Dealers expect the RBI to accept bids worth only INR 150 billion-180 billion out of the total INR 300 billion that the government had offered to switch.   

 

"...There could be two reasons why banks wouldn't want to be aggressive (at the auction); first, they do not want to increase the duration of their portfolios amid ongoing tensions (West Asia war), and second, they would not want MTM (marked-to-market) losses," a dealer at a small finance bank said. 

 

Global factors such as price of Brent crude oil and the US Treasury yields remained stable. Brent crude oil price hovered around $95 per barrel, while the yield on the 10-year benchmark US Treasury note was at 4.28% at 1340 IST.

 

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond, is seen moving in the range of 6.85-6.95%. At 1340 IST, turnover in the gilt market was INR 282.30 billion, higher than INR 179.75 billion at 1330 IST Friday, 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 uncertainty over West Asia war; switch auction result eyed

 

	1012 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.05	97.06	96.96	97.05	97.08
YTM (%)	6.9098	6.9079	6.9235	6.9094	6.9049

 

MUMBAI--1012 IST--Prices of government bonds were slightly down due to uncertainty over the continuance of the ceasefire in the West Asia war, dealers said. Traders were also cautious ahead of the INR-300-billion gilt switch auction Monday, they said.

 

Risk appetite was muted as signs of a peace deal between the US and Iran seem remote before the ceasefire ends on Wednesday, with even an extension seen a coin toss, dealers said. The US intercepted an Iranian cargo ship in the Gulf as part of its naval blockade of the Strait of Hormuz, a move that Iran called a violation of the ceasefire. Tehran plans to retaliate over the action and fired at a ship to prevent it from crossing the Strait over the weekend.

 

Earlier optimism over a peace deal had dragged down Brent crude futures to as low as $86 a barrel after Indian market hours Friday. Brent crude oil futures for June delivery were at $95.44 per barrel at 1008 IST, though they remained lower than $96.04 per barrel at the end of Indian gilt market hours Friday. A fall in the 10-year US Treasury yield to 4.27% at 1008 IST from 4.30% at 1700 IST Friday also limited losses in government bond prices. 

 

Traders remained cautious ahead of the switch auction result. Most traders expect the cut-off prices at the auction to remain near Financial Benchmarks India Pvt. Ltd. level or even slightly better due to firm tendering by banks and mutual funds. The government will switch nine bonds worth INR 300 billion maturing between 2026 and 2030, with eight longer-term gilts through the first switch auction of 2026-27 (Apr-Mar) Monday.

 

"It (switch auction) will go through. Banks and mutual funds will be there for 6.33%, 2035 (bond) and transactions will be there as it was being demanded by market (participants) earlier, too" a dealer at a public-sector bank said.  

 

Despite being last issued in September, the 6.33%, 2035 bond has the most outstanding trades in the Clearcorp Repo Order Matching System at nearly INR 100 billion, a proxy for short sales. Traders want to cover those bets even as the erstwhile 10-year gilt's yield is still more than 10 basis points below the yield on the 10-year benchmark 6.48%, 2035 bond.

 

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond, is seen moving in the range of 6.85-6.95%. At 1012 IST, turnover in the gilt market was INR 83.40 billion, higher than INR 33.20 billion at 0930 IST Friday, according to data on the RBI's Negotiated Dealing System-Order Matching platform.  (Diksha Tripathy)

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India Gilts: Seen tad up on fall in oil, US ylds; switch auction result eyed

 

MUMBAI – Government bond prices are expected to open slightly higher Monday tracking a fall in Brent crude oil prices and US Treasury yields, dealers said. However, any escalation in the West Asia war is likely to weigh on bond prices, which will limit the gains, they said. Later in the day, traders will gauge the INR-300-billion switch auction result for further cues, dealers said.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open around 6.91% and is seen in a range of 6.88-6.92% during the day, dealers said. The bond had ended at INR 97.08, or 6.9049% yield, Friday. Gilts recovered most losses Friday as crude oil prices recovered, but ended lower as traders placed short bets ahead of the weekend.

 

Over the weekend, prospects of a fresh round of peace talks between the US and Iran looked shaky after the US seized an Iranian ship that tried to sail past a naval blockade. Following this, Iran said it will "respond and retaliate." This development came after the "in principle" extension of the ceasefire, which is set to expire Wednesday. Tracking these developments in the West Asia war, Brent crude oil futures for June delivery rose to over $94 per barrel at 0730 IST, up from below $90-per-barrel level over the weekend but down from $96.04 per barrel Friday at the end of Indian trade hours. Brent crude oil prices had fallen to below $90 per barrel over the weekend on hopes of an possible end to the Iran war. At 0730 IST, the yield on the benchmark 10-year US Treasury note was 4.27%, down from 4.30% at 1700 IST Friday. 

 
Back home, the government will switch INR 300 billion worth of nine source securities with eight destination securities. Tendering for the securities is likely to be firm as most banks hold these source securities in their portfolios which are "in-the-money" or at a profit, dealers said. However, since the government will issue destination securities in nine to 10-year maturity, it will weigh on the price of the 10-year benchmark 6.48%, 2035 bond, dealers said.

At the switch auction, traders will focus on the cut-off price set on the erstwhile 10-year benchmark bond as they expect the spread between the 6.33%, 2035 bond and the current 10-year benchmark bond to narrow, 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. Some traders do not expect any significant impact on bond prices in the secondary market if the auction result is in line with expectations, dealers said.

Any significant movement in the rupee or overnight indexed swap rates will also lend direction to bond prices, dealers said.  (Janwee Prajapati)

 

End

US$1 = INR 93.12

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

 

Edited by Rajeev Pai

 

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