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Informist, Thursday, Apr. 23, 2026

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended sharply down Thursday, falling for the second consecutive session, as Brent crude oil futures for June delivery rose past the key $100-per-barrel mark, dealers said. A fall in the rupee against the dollar and a rise in US Treasury yields weighed further on gilts. Traders trimmed their exposure to risk as sentiment soured and primary dealerships placed short bets to make room for auction of INR 320 billion worth of four gilts Friday, they said. However, the losses were limited due to purchases from state-owned banks, they said.

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.78, down from INR 96.96 Wednesday. Its yield ended at 6.9498%, up from 6.9225% the previous session. Brent crude oil futures for delivery in June were at $102.97 per barrel at 1700 IST, up from $99.38 per barrel at the end of gilt market hours Wednesday. The rupee ended at 94.1050 per dollar, from 93.7950 at Wednesday's close. Traders fear that the local currency is on track to hit the key 95-per-dollar mark if crude prices remain elevated.

"We are in a range, at 6.95-6.97% (yield on the 10-year benchmark 6.48%, 2035 gilt), I feel that at this level PSU (state-owned banks') buying will come in," a dealer at a state-owned bank said. "But because of the war there is uncertainty, because of that whoever was long (on gilts), even foreign (banks), they are cutting positions at this level of 95 (6.95% yield on the 10-year benchmark)." 

Appetite for risk faded further this week as geopolitical conditions worsened overnight. Oil prices hit the highest in nearly two weeks after Iran's Islamic Revolutionary Guard Corps attacked two ships in the Strait of Hormuz, shortly after US President Donald Trump extended the ceasefire with Iran. The rupee fell tracking the rise in crude prices, and amid concerns over the local unit's possible depreciation after the Reserve Bank of India partially rolled bank some curbs it had imposed on trading in the non-deliverable forwards market earlier this month, dealers said. After falling in early trade, bond prices largely traded in a thin band, and trade volumes were firm. Dealers refrained from aggressive bets on either side of trade amid uncertainty over a US-Iran peace deal, they said. The total turnover in the government securities market was INR 559.40 billion, slightly higher than INR 492.50 billion in the previous session.

"Volumes are good but the (price) level is not changing. Earlier people used to carry their short positions for two to three days. Now what is happening is that everyone is holding one position and squaring off on the same day and buying or selling within the same day because you never know what Trump is going to say next," a dealer at another state-owned bank said. 

Activity from foreign banks and foreign portfolio investors in gilts was subdued Thursday compared with earlier this week, dealers said. Losses in bond prices were limited earlier this week due to purchases by foreign portfolio investors. As of 1730 IST, foreign portfolio investors net purchased gilts worth INR 1.45 billion through the fully accessible route Thursday, as per data from Clearing Corp. of India. They have net purchased gilts worth INR 25 billion through this method between Monday and Wednesday, while foreign banks have net bought gilts worth INR 57.56 billion in the same period, data shows.  

Bond prices recovered some losses intraday after the Ministry of Petroleum and Natural Gas said there is no proposal to hike retail prices of petrol and diesel. However, the relief is seen short-lived, and traders fear that the Centre will pass on the recent rise in crude prices to consumers once state assembly elections scheduled for this month are completed, they said. Such a move by the Centre could stoke inflation, and quicken the pace of a rate hike cycle by the RBI's Monetary Policy Committee.

Traders had mixed views on the minutes of the MPC's April meeting, which were released post market hours Wednesday. Most traders felt the minutes were neutral, with RBI Governor Sanjay Malhotra being the most cautious of the members, they said. Some traders said the minutes indicated the RBI panel was slightly less inclined to hike rates soon than traders had expected, while others said it outlined more risks from the West Asia war than at the policy meeting outcome. However, interpretations of the minutes did not reflect in bond prices Thursday, with greater focus on current developments around US-Iran peace talks. 

"People were waiting to see whether the dovishness was just in presentation, but it shows in minutes as well," a dealer at a private-sector bank said. "The minutes actually speak about the risks they see from the war. Overall though, it still looks like RBI is just looking through the war for now."

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

OUTLOOK

Government bond prices are seen opening lower Friday if Brent crude oil prices remain above $100 per barrel overnight. Additionally, traders may place short bets on gilts to make room for fresh supply, they 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 both the long-term gilts is seen robust from insurance companies and pension funds. These investors may purchase the green bond to fulfill their investment mandates in sustainable and infrastructure funding, dealers said. However, the coupon on the green bond is seen at least 4-5 basis points higher than a gilt of comparable maturity, instead of the "greenium" or lower yields investors are expected to pay for green financing. The average primary market greenium on Indian sovereign green bonds since 2023 has been 2 bps, as per a research report from CCIL. 

Demand for the short-term 2029 and 2033 bonds is seen more uncertain. State-owned banks are seen bidding for the bonds but at yields which are 3-4 bps higher than secondary market yields. The cut-off yield on the 2033 bond is seen close to that of the 10-year benchmark bond. Mutual funds, which have turned net sellers this week, may also not bid aggressively for short-term bonds, dealers said. 

Traders will also track the movement in the rupee against the dollar and fresh headlines emerging from developments on US-Iran peace talks.

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 7.00%, with traders 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 6.90-7.05%.

India Gilts: Remain sharply down on short selling ahead of auction Fri

MUMBAI--1615 IST--Prices of government bonds remained sharply down as traders placed short bets in the secondary market to make room for fresh supply ahead of the weekly gilts auction Friday, dealers said. 

Primary dealerships likely reduced their long positions and short-sold the benchmark 10-year 6.48%, 2035 gilt, dealers said. Traders also trimmed exposure to risk as they expect the yield on the 10-year benchmark gilt to go up to 7.00% if crude oil prices remain above $100 per barrel for a week and cut-off prices at the weekly gilts auction are lower than expectations, they said.

Demand at the auction from insurers and banks for their investment books is seen to be firm, dealers said. The government will sell INR 110 billion each of the 6.03%, 2029 bond and the 6.68%, 2033 gilt and INR 50 billion each of the 7.24%, 2055 bond and a new 30-year 2056 green bond at the auction. The three-year and seven-year bonds will see robust demand from both state-owned and private-sector banks, dealers said.   

"Demand for the 30-year green bond will be quite high from state insurers (state-owned insurance companies) and private insurers (private-sector insurance companies) as they get some relaxation on their overall portfolios. They (insurers) can categorise these bonds as their infrastructural commitments," a dealer at a primary dealership said.         

The one-year and five-year overnight indexed swap rates also remained high. At 1615 IST, the one-year and five-year OIS rates were up 7 basis points each at 5.90% and 6.49%, respectively. Offshore traders and private-sector banks were largely on the paying side in the OIS market on expectations of higher interest rates due to developments related to the war in West Asia.

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.92–6.98% range. At 1615 IST, turnover in the gilts market was INR 500.00 billion, up from INR 447.95 billion at 1630 IST Wednesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy)

India Gilts: Remain sharply down as oil prices rise; PSU bks' buys cap losses

MUMBAI--1330 IST--Prices of government bonds remained sharply down tracking a rise in crude oil prices. However, losses were limited due to purchases by state-owned banks, dealers said. 

Trade volumes in the market were firm with public sector banks picking up gilts in the secondary market to match their liabilities and add bonds to held-to-maturity portfolios, dealers said. The benchmark 10-year 6.48%, 2035 gilt saw buying interest, largely because of its liquidity, with some state-owned banks taking positions for trading gains, dealers said. Public sector banks were the largest net buyers of government bonds Wednesday with purchases worth INR 34.50 billion, according to data from Clearing Corp. of India Ltd. A few traders said that foreign banks also took positions in the secondary market, which further lent support to bond prices. 

"PSUs (public sector banks) are building positions at this point. So, even if the yield (on the 10-year benchmark 6.48%, 2035 bond) goes up to 7.00%, they will average it (bond prices) out. It is a good opportunity for them," a dealer at a state-owned bank said.    

Losses on bond prices were also limited after the oil ministry dismissed reports of a potential increase in fuel prices following the conclusion of state assembly elections. Responding to the speculation, the Ministry of Petroleum and Natural Gas said there was no such proposal under consideration, calling the reports "misleading" and aimed at creating panic.

Meanwhile, a rise in overnight indexed swap rates weighed on bond prices. The one-year OIS rate was up 4 basis points at 5.87%, while the five-year OIS rate rose 6 basis points to 6.48% as of 1327 IST. Traders were largely on the paying side, factoring in the possibility of higher interest rates amid expectation of a rise in inflation in the coming months due to high crude oil prices.

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.92–6.98% range. However, dealers said any escalation in tensions in West Asia could push crude oil prices higher, which in turn may push the 10-year benchmark yield towards the 7.00% mark. At 1330 IST, turnover in the gilt market was INR 346.30 billion, higher than INR 294.80 billion at 1330 IST Wednesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy)

India Gilts: Sharply down on rise in oil, US ylds; MPC minutes seen neutral

--Gilts sharply down as Brent crude tops $100/bbl, US ylds rise overnight 

MUMBAI--1015 IST--Prices of government bonds fell sharply tracking an overnight surge in crude oil prices and US Treasury yields, dealers said. Traders also considered the Monetary Policy Committee having a "neutral-to-dovish" tone in the minutes of its April meeting released by the Reserve Bank of India after market-hours Wednesday.

Brent crude oil futures for June delivery rose past $103 per barrel at 0945 IST, compared with $99.38 per barrel at 1700 IST on Wednesday, marking their highest level since Apr. 7. The spike in oil prices has been driven by lingering uncertainty over the continuity of ceasefire between the US and Iran. Traders expect crude oil prices to remain elevated until there is clarity on a comprehensive peace agreement between the US and Iran. Dealers said if average crude oil prices stay in the $95–$100 per barrel range, the MPC could consider a rate hike in the second half of financial year 2026-27 (Apr-Mar).

"If crude prices remain elevated, the impact could be significant, especially from Q4 FY27 onwards. That is when we may see a shift in the policy trajectory," a dealer at a state-owned bank said.

Some traders also see a possibility of the policy stance shifting to "withdrawal of accommodation" as early as June if CPI inflation forecasts approach 6% in some quarters, the upper limit of the RBI's 2-6% tolerance band. Dealers noted that the government has so far not passed on the rise in crude oil prices to retail fuel consumers, but expect this to change after the completion of the state assembly elections this week, potentially pushing inflation higher in the coming months.

In the MPC minutes, members largely characterised the impact of the West Asia war as a supply shock and indicated limited urgency for policy intervention. RBI Executive Director Indranil Bhattacharyya said that as long as inflation expectations remain anchored, it is preferable to look through such shocks, as pre-emptive tightening could hurt growth without meaningfully easing inflation. He added that it would be prudent to wait for more data before taking any decisive policy action, a common sentiment among the MPC members.

A rise in US bond yields also weighed on Indian bond prices. The yield on the benchmark 10-year US Treasury note rose to 4.32% at 0945 IST from 4.27% at 1700 IST Wednesday.

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 6.92–7.00%. At 1015 IST, turnover in the gilt market was INR 129.65 billion, lower than INR 157.25 billion at 1030 IST Wednesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy)

India Gilts: Seen down as Brent crude tops $100/bbl after 2 wks, US ylds up

NEW DELHI – Government bond prices may open lower Thursday as Brent crude futures topped $100 a barrel after two weeks of a ceasefire between the US and Iran, dealers said. Rise in US Treasury yields is also likely to weigh. Losses may be limited by state-owned banks' purchases at levels they consider lucrative, despite there being no progress on negotiations towards a lasting peace deal between the warring parties.

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open around 6.94% and is seen in a range of 6.88-6.97% during the day, dealers said. Wednesday, the bond had ended at INR 96.96, or 6.9225% yield. Bond prices had fallen Wednesday as risk appetite of traders was hit due to the lack in progress on a deal between the US and Iran and uptick in crude oil prices, dealers said.

US President Donald Trump has reportedly extended the ceasefire for three to five days from Wednesday's deadline, citing a fractured political leadership in Iran, and said the next round of talks towards a peace deal could take place as early as Friday. Iranian President Masoud Pezeshkian said Tehran welcomes dialogue and agreement but the US' threats on civilian leadership and infrastructure, as well as the naval blockade of Iranian ports, are obstacles to the negotiations. On Wednesday, Iran also seized two tankers looking to transit the Strait of Hormuz without coordinating with its military.

Brent crude futures for June delivery rose to $103.11 a barrel at 0808 IST, up from $99.38 a barrel at the end of Indian market hours and at its highest level since Apr. 7. Meanwhile, the 10-year US Treasury yield rose to 4.32% on Thursday from 4.27% at 1700 IST Wednesday. Foreign banks, which have been net buyers of gilts in the last three sessions, may slow down the rate of their purchases as offshore triggers have turned adverse, dealers said.

Meanwhile, state-owned banks have a significant appetite for gilts as they have not replenished their portfolios in a big way following the Reserve Bank of India's bond purchases in financial year 2025-26 (Apr-Mar) and the redemption of three gilts worth INR 1.56 trillion so far in April, dealers said. They are likely to step up purchases of the 10-year benchmark 6.48%, 2035 bond as its yield approached the psychologically crucial 6.95% mark. State-owned banks were top net buyers on Wednesday as prices fell, picking up INR 34.50 billion of gilts. Some traders may also pick up bonds near the key level as a peace deal is seen inevitable, even if it is delayed, dealers said.

Separately, the minutes of the RBI Monetary Policy Committee's April meeting showed the members were not inclined to move quickly on rates as they assessed the impact of the war in West Asia on the Indian economy. Most traders termed the comments in the minutes "neutral" or "dovish", with the latter especially referring to the minutes of external member Ram Singh. RBI members were seen focused on limiting the second-round effects of the war on CPI including curbing a rise in inflation expectations, which were not seen evident as of the latest policy meeting on Apr. 6-8, according to Executive Director Indranil Bhattacharyya.

"Slightly hawkish compared to policy I felt," a dealer at a private-sector bank said. "Policy gave indication that hiking won't be anytime soon. While minutes indicate that people discussed that."  (Aaryan Khanna)

End

US$1 = INR 94.1050

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

Edited by Tanima Banerjee

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