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Informist, Tuesday, Apr. 28, 2026

By Diksha Tripathy

MUMBAI – Prices of government bonds slumped Tuesday as Brent crude oil futures for delivery in June surged above the crucial level of $110 per barrel, dealers said. A rise in overnight indexed swap rates also weighed on bond prices, they said. However, purchases from banks in the secondary market at levels seen to be attractive and the cut-off yields at the state bond auction being in line with traders' views limited the fall, dealers said.

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.56, down sharply from INR 96.84 Monday. Its yield ended at 6.9837%, up from 6.9418% at the end of the previous session. Brent crude oil futures for delivery in June were at $111.75 per barrel at 1700 IST--the highest level since Apr. 7--and up significantly from $105.99 per barrel at the end of gilt market hours Monday. The lack of a conclusive peace deal to end the US-Iran war and fears of constrained oil supply with no sign of the Strait of Hormuz being reopened soon pushed crude oil prices up and increased fears of India's inflation rising, dealers said. 

"There is no positive sentiment in the market at this point because there is no positive development (in the West Asia war)," a dealer at a primary dealership said. "Even if they (leaders of the US and Iran) meet and there is some development, it's happening in isolation. There is no outcome. There is a fear of (oil) supply disruption and that has started reflecting in (oil) prices."

OIS rates rose intraday, which also pulled down bond prices. The one-year OIS rate ended 9 basis points higher at 5.97% while the five-year OIS rate ended at 6.60%, up 11 bps from the previous session. Traders attributed the rise in rates to paying from offshore market participants. Domestic players remained on the sidelines in the OIS market Tuesday amid uncertainty on the movement of rates, dealers said.

The fall in gilt prices was limited by likely purchases by state-owned and private-sector banks in the secondary market as the yield on the 10-year benchmark 6.48%, 2035 bond neared the crucial 7.00% mark, dealers said.

"Ninety-eight (6.98% yield on 10-year benchmark bond) is a pretty good level for PSUs (public-sector banks) to buy," a dealer at a private-sector bank said. "Anytime it (the yield on the 10-year bond) hits the 98 (6.98%) level, banks turn active (start buying in the secondary market)." 

Bond prices changed little after the result of the auction of state government securities Tuesday, the outcome of which was in line with the expectations of traders. The cut-off yields on states' 10-year bonds were set at 7.68-7.72%, similar to the median estimate in an Informist Poll. State-owned banks and private-sector banks placed aggressive bids at the auction to replenish their held-to-maturity books, dealers said. Insurance companies and provident funds also bid at the auction for long-term paper, they said. Demand for Uttarakhand's three-year paper at the auction was robust, dealers said. The RBI set the cut-off on the three-year bond at 7.08% against a median estimate of 7.20%.

Seven states raised INR 143.46 billion through bonds against the notified amount of INR 145.00 billion. Uttarakhand accepted a partial amount of INR 3.46 billion in the 10-year security against the notified amount of INR 5.00 billion, the RBI said in a release. 

The total turnover in the government securities market was INR 453.45 billion, similar to INR 441.95 billion Monday, data from Clearing Corp. of India Ltd. showed. There was no trade using the RBI's wholesale e-rupee pilot Tuesday. The instrument has been out of use since February. 

OUTLOOK

Wednesday, bond prices will track any development in the US-Iran peace talks and its impact on Brent crude oil prices, dealers said. Traders will also track the movement of overnight indexed swap rates, they said.

With oil prices hovering around $110 a barrel, the yield on the 10-year benchmark is seen opening at 6.98%, dealers said. The yield on the benchmark 10-year 6.48%, 2035 bond is seen in a range of 6.93-7.02%. 

India Gilts:Fall more as Brent tops $110/bbl; appetite for state bonds mixed

MUMBAI--1509 IST--Prices of government bonds fell more as Brent Crude futures for June delivery surged past $110 a barrel intraday, dealers said. The fall was limited in early trade despite the overnight rise in oil prices and US Treasury yields as banks considered the prevailing levels on gilts lucrative, but their purchases slowed as crude oil continued to climb, they said.

Brent Crude futures for June delivery rose to $111.86 per barrel at the day's high, the highest since Apr. 6. The contract was at $110.87 a barrel at 1435 IST, up sharply from $105.96 per barrel at the close of gilt trading hours Monday. Traders attributed the rise in crude oil prices to uncertainty over the US-Iran war and lack of any positive developments on the peace talks between the two sides. The yield on the benchmark 10-year US Treasury note also rose intraday to 4.37% at 1340 IST, up slightly from 4.35% at 0900 IST, which pulled bond prices down further, dealers said. 

Seven states raised INR 143.46 billion through bonds, against the notified amount of INR 145.00 billion. Bond prices changed little after the auction result. The cut-off yield on the 10-year state bonds was set at 7.68-7.72%, similar to the median estimate in an Informist Poll. Demand for Uttarakhand's three-year bond was robust, with the cut-off at 7.08% against the 7.20% median estimate. State-owned banks and private-sector banks were keen to replenish their held-to-maturity books at the auction, dealers said. Insurance companies and the Employees Provident Fund Organisation also bid at the auction for long-term paper, they said.

"It (state bond auction) was okayish only, I won't say good," a dealer at a primary dealership said. "If you take last week's auction, crude was below $100 (per barrel) and there were some positive news inflows also about peace talks, but that has entirely changed now."

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the range of 6.90–7.00%. At 1435 IST, turnover in the gilt market was INR 324.20 billion, against INR 379.65 billion at 1430 IST Monday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy and Durgesh Nandan)

India Gilts: Sharply dn on rise in oil prices, US yields; 15-yr bond slumps

MUMBAI--1005 IST--Prices of government bonds were down Tuesday on an overnight rise in crude oil prices and US Treasury yields, dealers said. Traders also refrained from placing aggressive bets ahead of the auction of state government securities at 1030-1130 IST, they said. Meanwhile, the price of the 15-year 6.68%, 2040 gilt slumped ahead of its fresh supply at the weekly gilt auction Thursday, dealers said.  

Brent crude oil futures for June delivery neared the crucial level of $110 per barrel at 0947 IST, up from $105.96 per barrel at the close of Indian financial market hours Monday, with no peace talks between the US and Iran. Traders will closely track any developments related to the West Asia war, they said.

An overnight rise in US Treasury yields also weighed on Indian bond prices. The yield on the benchmark 10-year US treasury note was at 4.35% at 0930 IST, up from 4.31% at 1700 IST Monday. With the Federal Open Market Committee rate decision scheduled Wednesday, traders in India will also assess US Federal Reserve Chair Jerome Powell's commentary on inflation emanating from the closure of the Strait of Hormuz since early March. The US rate-setting panel is widely expected to hold rates but Powell's commentary in potentially his last meeting as Fed Chair will be closely watched, dealers said. 

Traders refrained from placing aggressive bets ahead of the state bond auction Tuesday. Seven states will raise INR 145 billion through the sale of bonds. Demand at the auction is seen firm from state-owned banks, insurers and mutual funds to add these bonds to their investment books, dealers said. State-owned banks and mutual funds currently prefer state bonds over gilts of similar maturity as they offer attractive returns over gilt yields, they said.

Most traders expect the spread of states' 10-year bond cut-offs over the 10-year benchmark 6.48%, 2035 gilt to fall slightly from last week's 75 basis points. However, muted demand and higher-than-expected cut-off yields at the auction could push the 10-year gilt yield to the psychologically crucial 7.00% mark, dealers said. 

"We'll have to wait for the (state-bond) auction (result) to see how the market behaves. But, the expectation is that the auction will go through smoothly because of its small (lower-than-indicative) size," a dealer at a private-sector bank said.   

The 6.68%, 2040 bond price slumped as compared to those of other tenures ahead of its fresh supply at the weekly gilt auction Thursday, dealers said. The government will sell INR 170 billion of the 15-year benchmark bond Thursday.

The fall in bond prices was limited when the yield on the 10-year benchmark gilt topped 6.95% level, which is seen attractive, dealers said. However, traders are expected to place short bets before the gilt auction Thursday in the secondary market in a holiday-shortened week which could build some pressure in the second half of the session Tuesday, they said. Money markets are shut Friday for Maharashtra Din and Buddha Purnima.

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.90–7.00% range. At 1005 IST, turnover in the gilt market was INR 79.90 billion, higher than INR 47.90 billion at 0930 IST Monday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.  (Diksha Tripathy)

India Gilts:Seen lower as oil prices rise; losses may be limited on bks' buy

NEW DELHI – Government bond prices are seen opening slightly lower Tuesday due to an overnight rise in Brent crude oil futures and US Treasury yields as the US-Iran stalemate continued, with physical oil supply remaining constrained. However, some traders may opt to pick up gilts when prices fall as they remain upbeat about a peace deal, with a lower sensitivity to headlines about the West Asia war after weeks of uncertainty.

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open around 6.96% and is seen in a range of 6.92-7.02% during the day, dealers said. Friday, the bond had ended at INR 96.84, or 6.9418% yield. Gilts ended off lows Monday on intraday short covering by the close of trade as crude oil prices eased from recent highs. Losses are similarly expected to be limited Tuesday as banks consider the 10-year gilt yield above 6.95% as lucrative, dealers said. 

Meanwhile, Tehran floated a new proposal to unblock the Strait of Hormuz by both sides without negotiating on its nuclear programme as Foreign Minister Abbas Seyyed Araghchi completed a regional tour of Pakistan, Oman, and Russia. Reports said US President Donald Trump and his team were evaluating the proposal but did not like it, with the White House saying it would be wrong to say the US was "considering" the proposal. Gilt dealers said they were no longer closely tracking source-based headlines on the war as closely due to the inaccuracy of reports in the last few days and would await official statements before taking large bets.

With no signs of in-person negotiations, Brent crude futures for June delivery rose to $109.40 a barrel at 0820 IST, from $105.96 a barrel at the end of Indian market hours Monday. Typically, a rise in crude oil prices increases the risk of imported inflation in India and puts more pressure on the Reserve Bank of India to withdraw accommodative monetary policy.

Meanwhile, the 10-year US Treasury yield also rose to 4.35% in early Asian trade from 4.31% at 1700 IST Monday ahead of the US Federal Open Market Committee's rate decision Wednesday. Higher crude prices and heavy supply also pushed up US yields, potentially limiting its impact on gilt prices, dealers said. A rise in US Treasury yields narrows the interest rate differential between the haven asset and emerging market debt, making the latter less appealing to foreign investors.

The 6.68%, 2040 gilt is expected to underperform the 10-year benchmark gilt ahead of its fresh supply at the weekly gilt auction Thursday, dealers said. The government will sell INR 170 billion of the 15-year benchmark and INR 120 billion of the 7.43%, 2076 gilt at auction this week.

However, demand for state bonds at the auction Tuesday is expected to be robust as the proposed issuance is lower than expected. Seven states will raise INR 145 billion through the sale of bonds at 1030-1130 IST, against INR 255 billion in the Apr-Jun indicative calendar pencilled in for this week. The auction result may lend some direction to gilt prices in the secondary market but the effect is unlikely to be large due to the modest supply, dealers said.  (Aaryan Khanna)  End

US$1 = INR 94.54

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

Edited by Rajeev Pai

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