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Informist, Wednesday, Apr. 22, 2026

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended sharply down Wednesday as Brent crude prices neared the $100-per-barrel mark and risk sentiment was hit after there was no indication of a peace deal between the US and Iran, dealers said. 

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.96, down from INR 97.19 Tuesday. Its yield ended at 6.9225%, up from 6.8894% the previous session. Brent crude oil futures for delivery in June were $99.38 per barrel at 1700 IST, up from $98.33 at 0900 IST and $95.02 per barrel at the end of gilt market hours Tuesday. US President Donald Trump extended the ceasefire with Iran indefinitely, but continued with the US naval blockade of the crucial Strait of Hormuz. Bond traders were expecting talks between the two warring nations Wednesday, but the US overnight called off its visit to Islamabad. Prior to the developments, bond traders were expecting the yield on the 10-year benchmark bond to fall to 6.80% since a peace deal in the near-term seemed likely. 

"If it (yield on benchmark 10-year 6.48%, 2035 gilt) closes above 6.95% for two weekly candles (formations on technical charts), then you're definitely poised for (10-year benchmark) yields to reach 7.23%," a dealer at a small finance bank said.

Bond prices closely tracked the intraday movement of Brent crude during the day. An indefinite ceasefire left little urgency for the two countries to cement a peace deal, and in the interim, any skirmishes could send crude prices higher, dealers said. Some dealers now expect a deal by end of May, but until then, the yield on the benchmark 10-year bond could rise to 7.00% or higher, they said. Even though Brent crude is seen taking at least four months to fall to its pre-war prices and for supply chains to normalise, traders had priced in Brent at around $85-$95 per barrel, they said.

In the near term, traders see the yield on the 10-year benchmark hitting 6.95%. Losses in bond prices were limited Wednesday as some banks stepped in to buy gilts when the yield hit the technical level of 6.92%. However, the yield has scope to rise further this week especially with an auction of four gilts scheduled Friday, dealers said. The government will sell INR 110 billion of the 6.03%, 2029 bond, INR 110 billion of the 6.68%, 2033 bond, INR 50 billion of the 7.24%, 2055 bond and INR 50 billion of a new 30-year, 2056 green bond. Demand for the three-year bond is seen firm. Some state-owned banks are looking to buy the seven-year bond while demand for the 2055 bond is seen robust.

Traders are uncertain about demand for the green bond. Green bonds have been received poorly at previous auctions, as banks have to pay a "greenium" or premium over normal gilt prices for the bond. However, due to its tenure, long-term investors such as pension funds may buy the bond, dealers said. Some foreign investors also purchase green bonds to fulfill their mandates, dealers said. FPIs net purchased INR 644 million of the 7.37%, 2054 green bond Wednesday, as per data from Clearing Corp. of India at 1830 IST. 

Traders across market segments preferred longer-term bonds due to their lucrative return over overnight funding rates, dealers said. "I heard FPIs were buying long-term bonds today (Wednesday). People have been punting on flatteners (flattening of the bond yield curve), and the 30-year (gilt) is a good carry-adjusted buy. And it (long-term gilts) will be hit the least by the West Asia volatility, supply is also lesser," a market participant said. 

As of 1830 IST, FPIs net purchased gilts worth INR 18.59 billion through the fully accessible route Wednesday, as per data from CCIL. Purchases from FPIs limited the losses in gilts, dealers said, with some speculating that the Reserve Bank of India's partial rollback of some curbs it had imposed earlier this month brought in foreign flows. FPIs were net buyers for the fifth consecutive session Wednesday, as risk appetite had improved since last week, dealers said. 

Intraday, a fall in the rupee against the dollar also weighed on bond prices. The rupee ended at 93.7950 per dollar at 1530 IST, from 93.50 at the same time Tuesday. Traders fear that the rupee could fall further to the key 94/$1 mark as uncertainty on a peace deal persists, they said. High overnight borrowing rates amid decreasing liquidity surplus also weighed on bond prices, dealers said. The weighted average call rate was 5.34%, above the repo rate Wednesday amid outflows for goods and services tax. Traders expect ample liquidity surplus in the banking system till the end of May, but it may not be as high as figures seen earlier this month, dealers said. The net liquidity absorbed by the RBI--a proxy for the banking system liquidity surplus--fell to INR 3.28 trillion Tuesday from INR 4.07 trillion Monday.

There were no trades using the RBI's wholesale e-rupee pilot Wednesday. The instrument has remained out of use since February. The total turnover in the government securities market was INR 492.50 billion, similar to INR 504.05 billion in the previous session.

OUTLOOK

Bond prices are seen opening lower Thursday as Brent crude oil prices rose further past the $100 per barrel mark after market hours Wednesday, dealers said. Traders may also begin placing short bets to make room for fresh supply at the weekly gilt auction Friday, they said. Traders will also track the movement in the rupee against the dollar and fresh headlines emerging from developments on US-Iran peace talks.

The minutes of the Reserve Bank of India's Monetary Policy Committee meeting held earlier this month, released post market hours Wednesday, may provide some solace to bond traders, as from the commentary, the panel was viewed as slightly "dovish" and not as favourable to rate hikes as traders had expected. "I think the minutes was dovish," a dealer at a state-owned bank said. "(The panel is) growth supportive although inflation forecast is high." RBI Governor Sanjay Malhotra said it was prudent to wait and watch amid global uncertainty, as per the minutes. 

Traders are on the watch for the likelihood of El Nino and its impact on monsoon this year, and the subsequent impact on growth and inflation, they said. The India Meteorological Department sees a 62% chance of El Nino emerging in Jul-Aug, and expects it to persist till the end of 2026.

Value-buying is likely to prevent the 10-year gilt yield from rising above 6.95%, with the market expecting the US-Iran peace deal to be inevitable, even if delayed, dealers said. The yield on the benchmark 10-year 6.48%, 2035 bond is seen in a range of 6.88-6.97%.

India Gilts: Remain dn on US-Iran war escalation fears; MPC minutes awaited

MUMBAI--1616 IST--Prices of government bonds remained down on fears of escalation in the West Asia war, dealers said. Traders also maintained caution ahead of the Monetary Policy Committee's minutes, scheduled for release at 1700 IST, they said.

The likelihood of the ceasefire between the US and Iran ending and a return to a full-scale war pushed Brent crude oil futures for delivery in June to $99.32 per barrel at 1600 IST, up from $98.33 per barrel at 0900 IST. Oil prices jumped after reports said two ships were attacked near the Strait of Hormuz, hours after US President Donald Trump extended the ceasefire with Iran indefinitely. Some traders, however, used the opportunity to build their trading portfolios and bought bonds in the secondary market, dealers said.  

"The market is closely tracking crude (oil prices). There is some cautious buying in the market at the moment which is protecting the prices at current levels," a dealer at a state-owned bank said. "But I expect some hardening in bond yields." 

Other than crude, the MPC's commentary on inflation and liquidity will be closely tracked amid uncertainty over the conflict in West Asia. The reversal of the variable rate reverse repo operation that the Reserve Bank of India had announced on Apr. 16 will take place this week, which makes commentary on liquidity all the more important, dealers said.

"Largely it (MPC minutes) will be in line with the policy decisions that the (RBI) Governor (Sanjay Malhotra) had announced. But liquidity comments we will track because the market has changed after that. On the day of the policy decision, a ceasefire was announced and that was taken into consideration, but now the situation has changed a little. Uncertainty around the ceasefire is there and, hence, it will be important to track what MPC says," 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 expected to move in the range of 6.88–6.95%. At 1616 IST, turnover in the gilt market was INR 446.10 billion, similar to INR 451.10 billion at 1630 IST Tuesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy)

India Gilts: Fall more as Brent Crude futures near $100/bbl intraday

MUMBAI--1425 IST--Government bond prices fell more as the Brent crude oil futures contract hit the crucial $100-per-barrel mark intraday, dealers said. The fall was limited as the yield on the 10-year benchmark bond rose to 6.92%, at which level banks stepped in to buy gilts, they said. Foreign portfolio investors were also purchasing gilts, dealers said.

Brent crude oil futures for delivery in June rose to $100.32 per barrel intraday from $98.33 per barrel at 0900 IST. Oil prices rose on reports that two ships were attacked near the Strait of Hormuz, just hours after US President Donald Trump extended the ceasefire with Iran indefinitely.

A rise in overnight indexed swap rates and a fall in the rupee also weighed on bond prices, dealers said. Traders said foreign portfolio investors were purchasing gilts earlier in the day and were likely to be doing so currently, too, limiting the fall in bond prices, dealers said. As of 1425 IST, FPIs net sold gilts worth INR 793.80 million through the fully accessible route Wednesday, as per data from Clearing Corp. of India. 

"Market is a little dicey right now, bit of a bearish view. Brent is up, the rupee is near 93.85, when will the positive news (US-Iran peace deal) come?" a trader at a primary dealership said. "The only reason market is holding is because there's an FPI flow, is what we're hearing."

The result of the INR-240-billion Treasury bill auction was largely along expected lines. Dealers said banks and mutual funds bid aggressively at the auction, with banks primarily adding to their asset-liability management portfolios. However, tighter liquidity conditions this week, driven by goods and services tax outflows, reflected in a slightly higher cut-off yield on the 364-day T-bill. The RBI set a cut-off yield of 5.5990% on the bill, against an Informist Poll estimate of 5.58%.

A sharp depreciation of the rupee against the dollar also exerted pressure on bond prices. The rupee weakened by nearly 34 paise to 93.84 per dollar at 1425 IST, compared with 93.50 per dollar at 1530 IST Tuesday.

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is expected to move in the range of 6.88–6.95%. At 1425 IST, turnover in the gilts market was INR 379.05 billion, slightly higher than INR 364.85 billion at 1430 IST Tuesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy and Cassandra Carvalho)

India Gilts: Down on rise in crude oil prices, US Treasury yields

MUMBAI--1001 IST--Prices of government bonds fell Wednesday, tracking a rise in crude oil prices and overnight rise in US Treasury yields. Bond prices were also down on uncertainty over continuation of the ceasefire between the US and Iran, dealers said.

At 0930 IST, Brent crude oil futures for June delivery traded at over $98 per barrel, compared with $95.30 per barrel at close of Indian market hours Tuesday. Prices had briefly surged to near $100 per barrel late Tuesday on concerns of potential escalation in tensions between the US and Iran, after the expected expiry of the ceasefire Wednesday. Though US President Donald Trump has extended the ceasefire, the absence of official confirmation from Iran to join further peace talks has kept crude oil prices elevated.

At 0930 IST, the yield on the benchmark 10-year US Treasury note was 4.30%, up from 4.26% at 1700 IST on Tuesday. Traders will closely monitor the decision of the US Federal Open Market Committee meeting scheduled on Apr. 28–29 due to prevailing uncertainty over the West Asia situation.

Back home, traders are waiting for the minutes of the Monetary Policy Committee meeting held early this month. The minutes will be released at 1700 IST. Traders are expected to closely parse commentary on liquidity conditions and inflation. Reserve Bank of India Governor Sanjay Malhotra had assured that liquidity in the banking system would remain comfortable despite the US-Iran war. However, announcement of a variable rate reverse repo auction shortly after his remarks had surprised traders.

"It will be interesting to see what MPC members say in the minutes, because a ceasefire (between the US and Iran) is in place, uncertainty is still there. Fundamentals have not changed significantly since the policy announcement (on Apr. 8), so the market will look for cues (from MPC minutes) this time," 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 expected to move in the 6.88–6.95%. At 1001 IST, turnover in the gilts market was INR 125.85 billion, sharply higher than INR 25.85 billion at 0930 IST Tuesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy)

India Gilts: Seen down as crude prices near $100 per bbl; MPC minutes eyed

MUMBAI – Government bond prices are seen opening lower Wednesday due to a rise in crude oil prices, which remained near the key level of $100 per barrel tracking uncertainties around the second round of US-Iran peace talks, dealers said. An overnight rise in US Treasury yields due to war-related developments is likely to further weigh on bond prices, they said. Later in the day, traders will assess the minutes of the Reserve Bank of India's Monetary Policy Committee's April meeting for further cues.

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 6.89-6.93% during the day, dealers said. The bond had ended at INR 97.19, or 6.8894% yield, Tuesday, similar to the closing levels Monday. Bond prices ended almost flat Monday as traders were wary of building positions ahead of the end of the ceasefire Wednesday, dealers said. 

Hours ahead of the end of the US-Iran ceasefire, US President Donald Trump extended the ceasefire indefinitely, saying he did so on Pakistani mediators' request. "...I have therefore directed our Military to continue the Blockade and, in all other respects, remain ready and able, and will therefore extend the Ceasefire until such time as their proposal is submitted, and discussions are concluded, one way or the other," Trump said in his social media post.

However, the blockade on the Strait of Hormuz is set to remain in place until the two warring nations reach a deal. On the other hand, Iran's Foreign Minister Abbas Araghchi said blockading Iranian ports is an act of war and a violation of the ceasefire.

Brent crude oil prices had remained well below $100 per barrel till 1700 IST, Tuesday on hopes of a ceasefire extension between the US and Iran. However, Brent crude oil futures for June delivery rose to over $98 per barrel at 0700 IST from $95.30 per barrel at the end of Indian government bond trading hours due to uncertainties about an end to the West Asia war. At 0700 IST, the benchmark 10-year US Treasury yield was at 4.29%, up from 4.26% at 1700 IST, Tuesday.  

Gilt prices are likely to drop sharply if hostilities in West Asia resume. However, dealers expect purchases from state-owned banks to keep the 10-year gilt yield from rising above 6.95%, as the market expects a peace deal to materialise eventually, even if delayed. State-owned banks' appetite for gilts should stay firm after profit booking in the last two sessions and with three gilt redemptions so far in April, they added.

Traders will also track MPC minutes, scheduled to be released at 1700 IST. They will focus on the tone of the commentary from the rate-setting panel as they expect members to have a cautious and neutral tone, with no dissenting opinion, dealers said. Traders will also look for commentary on liquidity in the minutes, as RBI Governor Sanjay Malhotra had said he will maintain comfortable liquidity in the banking system, while announcing policy decisions of the April MPC meeting.

Over the long term, traders are also awaiting economic data to gauge the trajectory and impact of rising crude oil prices since the war began. Even if a peace deal is secured, they don't expect crude prices to return to pre-war levels right away, and expect supply chains to take months to normalise, dealers said.  (Janwee Prajapati)

End

US$1 = INR 93.7950

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

Edited by Akul Nishant Akhoury

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