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Informist, Friday, Apr. 24, 2026

By Cassandra Carvalho

MUMBAI – Prices of government bonds ended higher Friday, reversing the day's losses nearing the end of trade as crude oil prices eased intraday and traders covered short bets to balance their positions ahead of the weekend, they said. Bond prices were down most of the day on elevated Brent crude prices and short sales to make room for fresh supply of INR 320 billion at the weekly gilt auction, dealers said. 

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.87, up from INR 96.78 Thursday, and marked a reversal from the day's low of INR 96.52. Its yield ended at 6.9365%, down from 6.9498% the previous session. The yield ended the trading week 3 basis points higher. Brent crude oil futures for delivery in June were at $103.75 per barrel at 1700 IST, up from $102.97 per barrel at the end of gilt market hours Thursday, and off the day's high of $107.48 per barrel.

"Iran's FM (foreign minister) is expected in Pakistan today, that news caused oil to fall 3-4 dollars and was coupled with a short squeeze," a dealer at a private sector bank said. Citing government sources, Al Jazeera reported that an Iranian delegation led by Iran's Foreign Minister Abbas Araghchi is likely to arrive in Islamabad Friday. 

However, several bond prices ended lower and only liquid bonds reversed losses since the move in crude futures was nearing the end of gilt market hours. Traders squared off their positions across the yield curve as they did not want to hold exposure to risk ahead of weekend developments on US-Iran peace talks.

"No one will take positions on any side because in two days so much can happen," a dealer at another private sector bank said. "In one day itself Trump will say (peace) deal is made and by the end of it he'll say no deal." 

Bond prices were down most of the day as crude remained above $100 per barrel. Prices briefly fell further after the result of the weekly gilt auction was published. Some traders were disappointed after the RBI set a cut-off price of INR 99.30 on the 6.03%, 2029 bond, much lower than an Informist Poll estimate of INR 99.46. Some traders were expecting a poor cut-off price after some mutual funds--which are usually aggressive buyers of bonds maturing in under five years--did not bid aggressively for the bond due to redemption pressures, dealers said.

The indicative price of the 6.03%, 2029 bond on Thursday, at 6.15%, did not adequately price in the risk, dealers said. Expectations of a rate hike cycle beginning by the end of the financial year 2026-27 (Apr-Mar) also weighed on appetite for short-term bonds, they said. Domestic banks picked up the bond to match their liabilities, but bid at sharply higher-than-expected yields to lock-in higher returns, they said. The bond ended 23 paise lower, or 9 basis points higher Friday. Traders were largely satisfied with the cut-off price on the seven-year 6.68%, 2033 bond, as it offered a lucrative return, with a yield close to that of the 10-year benchmark bond.

The disparity in appetite for bonds across the yield curve was evident in cut-offs set on primary dealerships' underwriting commissions, dealers said. The RBI set a fee of 1.20 paise on the 2029 bond, against a poll estimate of 0.30 paisa. The cut-off on the 2056 green bond was 0.68 paisa, compared with consensus estimates of 0.90 paisa. 

"People have added long (bonds) to their books, banks and funds also, not that much but. There's no capital appreciation in short-term (bonds) so they're going for long (tenure bonds)," an investor said. "We had bid for (7.24%) 2055 bond at around 7.57% (yield), but looks like LIC (Life Insurance Corp. of India) or someone has taken it." 

The RBI set a coupon of 7.50% on the new 2056 green bond, lower than a median estimate of 7.52%. Some traders were expecting an even higher coupon of 7.54%. However, insurers bought the bond to fulfil their investment mandates in sustainable and infrastructure financing, and bid aggressively for the bond, dealers said. Most long-term bond prices ended higher after strong bidding for these tenures at the auction Friday. Supply of these bonds Friday was low, with the government issuing INR 50 billion each of the 2055 gilt and 2056 green bond.

During the day, losses in bond prices were limited due to purchases from state-owned banks, dealers said. There were no trade using the RBI's wholesale e-rupee pilot Friday. The instrument has remained out of use since February. The total turnover in the government securities market was INR 520.20 billion, slightly lower than INR 559.40 billion in the previous session.

OUTLOOK

Gilts are not traded Saturdays. Government bond prices will track developments on US-Iran talks over the weekend and the impact on Brent crude oil prices. Traders will also track the movement in the rupee against the dollar and overnight indexed swap rates.

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, especially from state-owned banks, 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. However, profit-booking, which is again expected from state-owned banks, is likely to limit any fall in the 10-year benchmark yield below 6.90%, 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: Little changed post auction result; stay down on rise in crude

India Gilts: Little changed post auction result; stay down on rise in crude

NEW DELHI--1538 IST--Prices of most government bond prices were little changed after the result of the INR 320-billion weekly gilt auction. They remained lower than Thursday's closing level. Some traders who had missed out on gilts maturing in 2033 and later at the auction covered their short sales after the auction and ahead of the weekend, briefly pushing prices to the day's high, dealers said.

The cut-off price on the 6.03%, 2029 gilt in the auction was sharply lower than what traders had expected, while the supply of the other three bonds sailed through on expected lines, dealers said. Successful bidders at the auction avoided and trimmed their holdings of the 10-year benchmark 6.48%, 2035 gilt immediately after the auction result, also avoiding a build-up of risk in their portfolios ahead of the weekend. Traders said the unpredictability of announcements on the West Asia war over the weekend had led to poor risk appetite in the second half on Friday.

"It could be RBI (Reserve Bank of India buying bonds in the secondary market), but more likely it is some short-covering or short-squeeze after auction," a dealer at a private-sector bank said. "There is no flash or fresh news that the market is reacting to and (Brent) crude is still at $107 (a barrel)."

The government sold INR 110 billion each of the 6.03%, 2029 and 6.68%, 2033 bonds and INR 50 billion each of the 7.24%, 2055 bond and a new 2056 green bond. The coupon on the new 30-year green bond was set at 7.50%, a green premium of more than 6 basis points against the 30-year benchmark gilt sold at the auction.

Long-term bonds saw firm demand for the modest supply from life insurance companies, including large state-owned and private-sector firms, dealers said. Traders from some mutual funds and banks likely missed out on the supply of the 2055 gilt, with the INR 50-billion swept in only 12 bids, with the cut-off price of INR 96.20 slightly higher than the Informist Poll median of INR 96.12. The 7.24%, 2055 gilt recovered some losses immediately after the auction result but failed to stay above its weighted average rate of INR 96.23 at the auction.

The 6.68%, 2033 bond saw firm demand from banks for its lucrative spread of around 170 basis points over the repo rate of 5.25%, dealers said. Some banks also parked the bond in their available-for-sale portfolios rather than their held-to-maturity books betting on potential capital gains as well if the West Asia war winds up quickly. Bond yields are seen near the top of their near-term trading range with some sections of the market hopeful of a peace deal between the US and Iran.

However, the three-year bond was poorly received in its first auction of 2026-27 (Apr-Mar), with its supply at auction up to INR 110 billion in Apr-Sept from INR 90 billion in the Oct-Mar borrowing calendar. While some banks invested surplus cash from the easy liquidity conditions prevailing in the financial system, they all demanded higher yields to hold the illiquid bond to maturity, dealers said.

Traders were pricing in the potential of up to 75 bps of rate hikes in FY27 in the short-term bond, which had been priced into the five-year benchmark 6.36%, 2031 bond after its auction last week. The indicative price of the 6.03%, 2029 bond on Thursday, at 6.15%, did not adequately price in the risk, dealers said. The RBI set the bond's cut-off price at INR 98.30, against the Informist Poll median of INR 98.46.

"People are more comfortable with buying 2028 bonds rather than 2029," a dealer at a state-owned bank said. "There's no scope of capital gains anyway and the reinvestment risk increases in 2029 if the rate hike cycle reverses by then and you have to invest again in a low rate cycle."

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.92–7.00% range. At 1538 IST, turnover in the gilt market was INR 387.25 billion, down from INR 452.05 billion at 1530 IST Thursday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Aaryan Khanna)

India Gilts: Remain down; 2029 bond auction seen weak, long-term to sail through

MUMBAI--1308 IST--Prices of government bonds remained down as traders refrained from building fresh positions as they awaited the result of the weekly gilt auction Friday, dealers said. The government has offered to raise INR 110 billion each through the 6.03%, 2029 and 6.68%, 2033 bonds, along with INR 50 billion each through the 7.24%, 2055 bond and a new 30-year, 2056 green bond.

Traders were uncertain of demand for the short-term 2029 and 2033 papers at the auction. Traders said appetite for the three-year 6.03%, 2029 bond could be weak amid concerns that elevated crude oil prices, driven by the West Asia war, may keep inflation high and raise chances of a rate hike in financial year 2026-27 (Apr–Mar). Some mutual funds, which usually invest in this paper, may not have bid aggressively, dealers said.

Some dealers described the 6.03%, 2029 paper as "highly risky", given its higher sensitivity to any policy tightening by the Reserve Bank of India's Monetary Policy Committee. Dealers said there was demand for the short-term papers largely from state-owned and private-sector banks for their investment books, but these investors have no urgency to buy the bond and did not bid aggressively, they said. The cut-off price on the 6.03%, 2029 bond is seen at INR 99.46, according to the median of an Informist poll of 17 market participants.

"This paper is not for traders," a dealer at a private-sector bank said. "With so much uncertainty due to the US-Iran situation, traders will stay away. If the RBI hikes rates in the coming months because of inflation, it will be bad for us (traders who bought short-term papers at the auction)." Traders also stayed away from the bond at the auction due to its limited secondary market liquidity, they said. The cut-off yield on the 2033 bond is seen similar to the last-traded yield of the 10-year 6.48%, 2035 benchmark bond at 6.95%.

The new 30-year 2056 green bond is also in focus. Traders expect firm demand, particularly from both private sector and state-owned insurers, and mutual funds, given its long-tenure and suitability for long-duration portfolios. "Investors with a mandate for such papers (green and infrastructure financing) will participate," a dealer at another private sector bank said. The RBI is likely to set a coupon of around 7.52% on the bond, according to the Informist Poll. Demand was also robust for the 7.24%, 2055 bond, as insurance companies likely bid for the paper, dealers said.

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.92–7.02% range. At 1308 IST, turnover in the gilt market was INR 173.55 billion, sharply down from INR 325.70 billion at 1330 IST Thursday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy)

India Gilts: Sharply down as Brent futures rise above $106/bbl; auction eyed

--Gilts sharply down as Brent crude above $105/bbl, ahead of gilt auction 

India Gilts: Sharply down as Brent futures rise above $106/bbl; auction eyed

MUMBAI--1010 IST--Prices of government bonds fell sharply tracking an overnight surge in crude oil prices as uncertainty lingered over further peace talks between the US and Iran, dealers said. Traders also avoided picking up bonds aggressively ahead of the INR 320-billion weekly gilt auction at 1030-1130 IST, keeping trading volumes low.

In early trade, some market participants placed short bets in the secondary market to make space for the fresh supply due at the auction, dealers said. The government is set to raise INR 110 billion each through the 6.03%, 2029 and 6.68%, 2033 bonds, along with INR 50 billion each via the 7.24%, 2055 bond and a new 30-year 2056 green bond. Banks may pick up the three-year paper to match liabilities, while banks may show interest in the seven-year bond as its "carry", or return over the repo rate, is seen attractive at the current 165 basis points. However, elevated crude oil prices could temper demand, with concerns resurfacing around a potential rate hike by the Reserve Bank of India's Monetary Policy Committee this year, dealers said.

Brent crude oil futures for June delivery rose to $106.06 a barrel at 0945 IST from $102.97 at the close of Indian market hours on Thursday, as the Strait of Hormuz remained shut, tightening global supply. Meanwhile, the 10-year US Treasury yield was 4.33%, broadly unchanged from Thursday but still exerting pressure on domestic bond prices, dealers said. 

Demand for the longer-duration bonds is expected to be firm compared with the modest supply, particularly from mutual funds and insurance companies. "There should be demand for the new green bond as well, largely from insurance companies given its long tenure," a dealer at a state-owned bank said.

However, if cut-off prices at the auction disappoint, the yield on the 10-year benchmark 6.48%, 2035 bond could move towards the 7.00% mark. Dealers also said that any announcement of a variable rate reverse repo auction could push yields higher amid concerns over tightening liquidity. A seven-day, INR 2.00-trillion VRRR auction reversed Friday, with no announcement from the RBI of a rollover yet. 

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.92–7.02% range. At 1010 IST, turnover in the gilts market was INR 74.20 billion, sharply down from INR 157.15 billion at 1030 IST Thursday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy)

India Gilts: Seen down as Brent tops $105/bbl; auction demand seen mixed

NEW DELHI – Government bond prices may fall Friday as Brent crude prices continued to rise and was above $105 a barrel, as the stalemate in West Asia between the US and Iran continued. With the sides not negotiating towards peace and the Strait of Hormuz remaining shut, traders are worried about a prolonged war that may lead to tighter monetary policy in India while also adding to fiscal burdens, dealers said. The result of the INR 320-billion weekly gilt auction will lend direction later in the day, they added. 

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open around 6.98% and is seen in a range of 6.92-7.02% during the day, dealers said. Thursday, the bond had ended at INR 96.78, or 6.9498% yield. Gilt prices have fallen for the past two days as oil prices have climbed and state-owned banks' purchases of the 10-year gilt in the 6.98-7.00% band are likely to limit further losses Friday, dealers said.

Brent crude for June delivery was at $105.86 a barrel at 0815 IST from $102.97 a barrel at the end of Indian market hours Thursday, with the key waterway remaining shut and supply of crude oil constrained. The 10-year US Treasury yield was at 4.33%, similar to the levels at the end of Indian gilt market hours Thursday. While some foreign portfolio investments across tenures had aided gilt prices over the past few days, traders from foreign banks are increasingly cutting their positions in bonds with the expected inflow likely having been completed, dealers said. Continued weakness in the rupee is likely to add to the selling, they said. 

US President Donald Trump Thursday ordered the US Navy to shoot and kill any small Iranian boats in the waters around the Strait of Hormuz as the world's largest military continues its blockade of the vital waterway. Top Iranian officials offered a message of unity after allegations from the US administration and press that the government was divided. Separately, Trump also announced a three-week extension to the Israel-Lebanon ceasefire. Israeli officials including Defence Minister Israel Katz said the country was waiting for a green light from the US to resume the war on Iran and attacks on Lebanon, according to news agency AlJazeera. 

With risks of rate hikes looming, short-term bonds on offer at the INR 320-billion gilt auction are seen out of favour and poorly bid. Though banks' portfolios have space to absorb the supply, they are likely to demand higher yields with quarterly inflation in some quarters of financial year 2026-27 (Apr-Mar) now seen above 5.5% due to the extension of the West Asia war, 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 at 1030-1130 IST.

Demand for long-term bonds is seen robust from mutual funds and life insurers as these are seen less sensitive to the upward movement in crude oil prices. Traders are currently not expecting increased supply of dated securities in FY27, with the government expected to smoothen its revenue and expenditure over the course of the fiscal year provided the conflict does not extend for several more months. With the primary concern on inflation rather than supply in the near-term, traders have favoured long-term bonds in the past few sessions in the secondary market and are likely to do so at the auction as well, dealers said.

The small supply of INR 100 billion in the 30-year segment, split between two bonds, will also lead to cut-off prices that are not sharply lower than secondary market levels, dealers said. Life insurers are looking to target the new green bond as it qualifies for regulatory norms of investing into infrastructure-linked bonds. The bond may fetch a "greenium", or green premium, of 2-5 basis points, dealers said.  (Aaryan Khanna)

End

US$1 = INR 94.2475

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

Edited by Akul Nishant Akhoury

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