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Informist, Tuesday, Apr. 21, 2026

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended little changed amid volatile trading as the market awaited fresh developments in the conflict in West Asia. Mixed reports on further talks between the US and Iran kept traders on tenterhooks, though some traders were optimistic on an extension to the two-week ceasefire that ends this week, dealers said. The divergent views have led to healthy trade volumes over the last three sessions. 

 

The 10-year benchmark 6.48%, 2035 bond ended at INR 97.19 from INR 97.18 Monday. Its yield ended at 6.8894%, similar to 6.8901% Monday. The bond had opened lower but recovered its losses in the first hour of trading and didn't slip into the red again until the last few minutes. However, it ended well below the high of INR 97.31. 

 

Some traders were betting that the US and Iran would not prefer to re-engage in war, extend their truce, or work towards a peace deal, which would pull Brent crude prices and send gilts soaring. State-owned banks, which had bought the 10-year benchmark gilt at yields above 6.90% last week, likely booked profits through the day, dealers said. The total turnover in the government securities market Tuesday was INR 504.05 billion, similar to INR 501.20 billion in the previous session. The increase in trading activity was due to divergent views and after the gilt auctions resumed in April, which has led to an increase in the volume of bonds like the new five-year benchmark 6.36%, 2031 gilt, dealers said. 

 

"A good sign is that trading volumes have increased even though there's nothing concrete coming out in the news," a dealer at a primary dealership said. "There's also a fear of missing out – traders have seen that crude prices went down to $85 (a barrel) Friday and don't want to miss out on a rally, since the 6.80% level (yield on the 10-year gilt) will be in play if that happens." Brent crude for June delivery had slumped to as low as $86 a barrel after Iran declared the Strait of Hormuz open on Friday, but has traded around the $95 a barrel mark during Indian market hours this week amid renewed tensions and restrictions on crossing the waterway.

 

Traders' risk appetite has increased after signs of a thaw last week between the two sides and because Brent crude oil futures have been making lower highs, remaining below $100 a barrel despite the spot Brent contract remaining above that mark, dealers said. The risk to gilts, through both higher inflation or a greater fiscal burden, would arise if crude oil prices remain higher for longer. As long as crude prices were in check, traders have kept fears of a sharp and sudden rate hike cycle from the Monetary Policy Committee on the sidelines, dealers said.

 

Comments from RBI Governor Sanjay Malhotra only reinforced those views, dealers said. In a speech at Princeton University Saturday, the governor said it was important to maintain the broad policy stance of 'neutral' and avoid firm commitments on the future path of policy. In the speech, released after Indian market hours Monday, Malhotra said that the second-round effects of the war on India's growth and inflation would be the real concern, including supply shocks if logistics routes see longer disruptions.

 

"The governor spoke in a neutral tone, talking about looking through primary effects and dealing with the second-order impact," a dealer at a private-sector bank said. "Buyers are comfortable with this sort of comment as a gradual rate hike of 25-50 bps in this financial year is already factored into (gilt) prices."

 

Bond prices had opened lower but hit the day's high as Brent crude futures fell to near $94 a barrel intraday. However, reports that Iran would not send a delegation to Pakistan for the second round of talks, due to the US blockade of its ships near the Strait of Hormuz, led to a sharp wave of profit booking. Speculation abounds that the two countries will meet on Wednesday though there is uncertainty over top negotiators being present, including US Vice President J.D. Vance and Iranian Parliamentary Speaker Mohammad-Bagher Ghalibaf.

 

A 0.4?ll in the rupee to INR 93.50 per dollar on Tuesday, after the RBI relaxed some curbs on foreign exchange trading, also weighed on gilt prices in the second half.

 

The impact of the INR-169-billion state bond auction on gilt prices in the secondary market was muted as the result was in line with expectations. State-owned banks likely parked bonds maturing in 15 years in their held-to-maturity portfolios, while life insurance companies bought long-term gilts, dealers said. The spread of Rajasthan's 10-year bond cut-off over the 10-year benchmark 6.48%, 2035 gilt's yield, at around 75 basis points, was considered lucrative by banks, especially in the April quarter, when the supply of state bonds is low.

 

Meanwhile, both short- and long-term bonds ended higher Tuesday as traders were of the view that fresh supply in the segment would sail through. At the same time, primary dealers short sold the most-liquid 10-year benchmark gilt to make room in their portfolios for the INR 320 billion auction Friday, dealers said. The government will sell INR 110 billion each of the 6.03%, 2029 gilt and 6.68%, 2033 gilts and INR 50 billion each of the 7.24%, 2055 gilt and a new 30-year, 2056 sovereign green bond. Some private-sector banks and mutual funds have begun picking up gilts maturing in 30 and 40 years to maximise profits should gilt yields tumble post a deal in West Asia, dealers said. 

 

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

 

OUTLOOK

Traders are optimistic about a peace deal between the US and Iran and may see gilt prices rise slightly on Wednesday as well. The two sides are expected to begin a second round of negotiations in Pakistan Wednesday and concrete takeaways from the meeting are likely to impact gilt prices through the day, dealers said. The reaction of crude oil prices from the headlines emerging from the meeting will likely lend cues to the domestic market, they said.

 

Traders expect the yield on the 10-year benchmark 6.48%, 2035 bond to fall to as low as 6.80% if there is a breakthrough in negotiations and Brent crude futures fall to $85 a barrel. However, traders are not positioned for a scenario in which negotiations fall through and the ceasefire is not extended beyond the deadline early Thursday Indian time, dealers said.

 

Gilt prices are likely to fall sharply if hostilities in West Asia resume. However, state-owned banks are likely to prevent the 10-year gilt yield from rising above 6.95%, with the market expecting a peace deal to be inevitable, even if delayed, dealers said. State-owned banks' appetite for gilts is likely to be firm after booking profit over the last two sessions and with three gilt redemptions so far in April, they said. 

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	97.1850	6.8894%	97.1800	6.8901%
6.33%, 2035	97.1350	6.7583%	97.0600	6.7696%
6.36%, 2031	99.1100	6.5756%	99.0950	6.5793%
6.68%, 2040	95.3100	7.2114%	95.2600	7.2172%
6.90%, 2065	91.6500	7.5688%	91.5700	7.5757%

 

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India Gilts: Give up early gains to trade in thin band; rupee fall weighs

 

	1545 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.21	97.31	97.11	97.15	97.18
YTM (%)	6.8853	6.8709	6.9005	6.8946	6.8901

 

MUMBAI--1545 IST--Prices of government bonds moved in a thin band, giving up early gains tracking intraday developments in US-Iran peace talks. Al Jazeera reported, citing Iranian officials, that no Iranian team has been sent to Islamabad for peace talks currently. An intraday fall of the rupee weighed on bond prices, dealers said. The rupee fell to 93.5050 per dollar in the spot market, as against 93.1275 at 1530 IST Monday. 

 

The cut-off yields at the state bond auction were largely in line with traders' expectations, dealers said. The Reserve Bank of India set a cut-off yield of 7.64% on Rajasthan's 10-year bond, a tad lower than 7.65% estimated by the median of 13 respondents polled by Informist.

 

Public sector banks likely bought state bonds at the auction to add to their held-to-maturity portfolios, while insurers bought long-term papers, dealers said. Five states raised INR 169 billion through the issuance of bonds. Bidding for Maharashtra's eight-year bond was aggressive with 123 competitive bids, out of which only 52 were accepted, as per the full auction result released by the RBI. The cut-off yield for Maharashtra's eight-year bond was set at 7.55%, lower than the median of Informist Poll of 7.56%. 

 

Bond prices are expected to be aided by surplus liquidity in the banking system, dealers said. RBI Governor Sanjay Malhotra, at the outcome of the Monetary Policy Committee meeting earlier this month, had said that the central bank aimed to provide liquidity comfort to banks in times of uncertainty. Traders will closely track any commentary on liquidity in the minutes of the MPC's April meeting, scheduled to be released Wednesday. 

 

"I am not expecting any surprises from MPC minutes because the (MPC) policy was in line with market view and fundamentals since then (from the day policy decisions were announced) have not changed much," a dealer at a private-sector bank 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 6.85-6.95%. At 1545 IST, the turnover in the gilts market was INR 426.60 billion, lower than INR 447.30 billion at 1630 IST Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. (Diksha Tripathy)

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India Gilts: Stay up; PSU bks, insurers seen aggressive at state bond auction

 

	1253 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.24	97.27	97.11	97.15	97.18
YTM (%)	6.8820	6.8768	6.9005	6.8946	6.8901

 

MUMBAI--1253 IST--Prices of government bonds remained up as traders made fresh purchases in the secondary market, dealers said. Demand is expected to be firm at the auction of state government securities, which also helped bond prices, they said.    

 

Five states offered to raise INR 169 billion through the issuance of bonds for which bids were submitted between 1030 IST and 1130 IST. Insurance companies and provident funds likely bid aggressively for long-term papers at the auction, dealers said. Public sector banks also participated actively in the auction, they said. 

 

Traders expect cut-off yields on short-term bonds at the auction to be slightly higher amid upcoming fresh supply of three-year and five-year gilts at the weekly auction Friday. The government will sell INR 110 billion each of the 6.03%, 2029 gilt and the 6.68%, 2033 gilt Friday. 

 

"Overall, it (state-bond auction) will go through easily, but short-term (bonds) may see 2-3 basis points higher cut-offs (on yields) due to fresh supply in Friday's auction," a dealer at a state-owned bank said.    

 

Demand at the auction Tuesday was likely firm due to its small size and lower-than-expected supply of long-term bonds in the Centre's borrowing plan for Apr-Sept. Traders also preferred state bonds over gilts of similar maturity due to attractive yields, dealers said. They expect the yield spreads between gilts and state bonds to widen Tuesday. An Informist Poll estimated the cut-off yield on Rajasthan's 10-year bond at 7.65%, a spread of 78 bps over the last traded yield on the benchmark 10-year 6.48%, 2035 bond. This is higher than a yield spread of 75 bps on Kerala's 11-year bond at last week's state bond auction.    

 

Some traders made fresh purchases in the secondary market at current levels on expectations of de-escalation in the West Asia war, dealers said. They expect the yield on the 10-year benchmark 6.48%, 2035 bond to fall further if there is no fresh escalation in the US-Iran war. 

 

Global factors such as Brent crude oil prices and US Treasury yields have also remained stable since 0900 IST, supporting bond prices. Brent crude oil futures for June delivery traded at $95 per barrel, unchanged from 1700 IST Monday. The yield on the benchmark 10-year US Treasury note was at 4.26% at 1253 IST, similar to its level at the close of gilt trading hours Monday.   

 

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 1253 IST, the turnover in the gilts market was INR 222.45 billion, sharply higher than INR 98.45 billion at 1230 IST Monday, according to data on the RBI's Negotiated Dealing System-Order Matching platform. (Diksha Tripathy)

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India Gilts: Up on hopes of US-Iran peace talks; demand at auction seen firm

 

	1008 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.22	97.27	97.11	97.15	97.18
YTM (%)	6.8842	6.8768	6.9005	6.8946	6.8901

 

MUMBAI--1008 IST--Prices of government bonds reversed early losses and rose as traders expressed optimism about the extension of the ceasefire in the West Asia war, dealers said. The failure of Brent crude near-month futures to rise much above $95 a barrel also aided those traders betting that the inflationary impact of the Strait of Hormuz blockage was dwindling.

 

"People are expecting some good news on the geopolitical front, maybe extension of ceasefire, if not an end to the (West Asia) war. Also, there is sufficient liquidity in the market so that is another reason," a dealer at a state-owned bank said. "Apart from that, the technical levels (for 6.48%, 2035 bond) look good, somewhere in the range of 84-89 (6.84%-6.89%), so that is helping prices."

 

The US and Iran are scheduled to meet in Pakistan on Tuesday for another round of talks before the two-week ceasefire ends early Thursday India time. The US had seized an Iran-flagged ship Sunday, which Tehran has demanded be released, saying it will not negotiate under threats. Media reports say US Vice-President J.D. Vance is heading to Islamabad for peace talks Tuesday. A deal between the US and Iran could push the 10-year gilt yield down to 6.80%, which is what some foreign banks are betting on, dealers said.

 

On the domestic front, five states will raise INR 169 billion through the issuance of bonds for which bids are to be submitted between 1030 IST and 1130 IST. Demand at the auction is likely to be firm due its small size and lower supply of long-term bonds in the market. Traders will also prefer state bonds over gilts of similar maturity due to attractive yields, dealers said. They expect the spreads between gilts and state bonds to widen.  

 

"Demand will be there from across the categories (of traders) because the size (of the auction) is small," a dealer at another state-owned bank said. "Also, papers with maturity of 15 years and above are just INR 8,000 crore (INR 80 billion) at the auction, so people will buy them because of less supply."

 

Traders expect short-term gilts to see lesser demand in the secondary market as the government will sell INR 110 billion each of the three-year 6.03%, 2029 gilt and the seven-year 6.68%, 2033 gilt at the weekly gilt auction Friday, dealers said. The state bond auction has no supply of paper maturing below six years. Meanwhile, the yield on the 10-year US Treasury note remained largely stable at 4.26% at 1005 IST, as against 4.25% at the end of the close of Indian trading hours Monday.

 

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 1005 IST, the turnover in the gilts market was INR 111.85 billion, higher than INR 98.45 billion at 1030 IST Monday, 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 expectation of continuance of Iran war ceasefire

 

MUMBAI – Government bond prices are expected to open slightly higher Tuesday as market sentiments remain positive, with traders expecting the ceasefire in the West Asia war to sustain, dealers said. Bond prices are expected to continue their rally from the previous session, they said. 

 

Traders will closely track developments related to the US-Iran war as it will lend cues to bond prices. The ceasefire between the two warring nations ends Thursday morning, India time. US Vice President J.D. Vance is likely to travel to Pakistan Tuesday to hold peace talks with Iran, according to media reports. However, Iranian officials have denied reports of any such talks. Any war-related development will impact crude oil prices due to possible supply disruptions, which in turn will impact bond prices. Brent crude oil futures for June delivery traded near $95 per barrel at 0700 IST, almost unchanged from $94.61 per barrel at the end of Indian trading hours Monday.  

 

Traders will refrain from placing aggressive bets amid uncertainty over the US-Iran ceasefire, which will keep trade volumes low, dealers said. Bond prices will also take cues from the state bond auction result, they said.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open around 6.88% and is seen in a range of 6.85-6.92% during the day, dealers said. The bond had ended at INR 97.18, or 6.8901% yield, Monday. Gilts ended higher Monday due to a 5-basis-point fall in five-year overnight indexed swap rates along with traders covering their short bets, dealers said. Reserve Bank of India Governor Sanjay Malhotra's comments on inflation also supported bond prices, they said.

 

Malhotra flagged "second-round effects" as the real concern to current supply shocks due to the West Asia war, which can materialise if disruptions to supply chains persist for long. Such shocks could get entrenched in general prices, which is what monetary policy should prevent by influencing inflation expectations instead of outright suppressing demand, Malhotra said in a speech at Princeton University Saturday. 

 

Five states will raise INR 169.00 billion through the issuance of bonds for which bids are to be submitted between 1030 IST and 1130 IST. Demand for these bonds is likely to be firm at the auction as traders would prefer state bonds over gilts of similar maturity due to attractive yields, dealers said. At the auction Tuesday, the spreads between gilts and state bonds are likely to widen, dealers said.  

 
Short-term bonds could come under stress with supply of INR 110 billion each of the three- and seven-year benchmark gilts set to be auctioned on Friday, dealers said. Meanwhile, long-term bonds may see buying interest if the US-Iran ceasefire is extended or if there are indications of a lasting peace agreement. Moreover, if crude oil prices and gilt yields decline, traders and mutual funds would look to buy gilts maturing in 15 years and above to maximise price gains, they said.

 
Though demand for gilt is expected to outpace supply in April, dealers said offshore factors will still drive gilt prices this week as the market looks for crude oil supplies to stabilise. A deal between the US and Iran could push the 10-year gilt yield down to 6.80%, while a rebound in June Brent crude above $100 per barrel could lift it to 6.95%, dealers said.  (Janwee Prajapati)

 

US$1 = INR 93.50

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

 

Edited by Saji George Titus

 

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