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Informist, Wednesday, Apr. 29, 2026

By Diksha Tripathy 

MUMBAI – Prices of government bonds ended off the day's lows in a choppy trade Wednesday as traders covered short bets and state-owned banks made purchases in the secondary market at levels seen lucrative, dealers said. However, an intraday rise in Brent crude for June delivery, which neared $115 per barrel, weighed on bond prices, they said.

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.50, down from INR 96.56 Tuesday. Its yield ended at 6.9928%, the highest closing level since Apr. 7 and up from 6.9837% at the end of the previous session. The benchmark yield briefly topped the psychologically crucial 7% mark intraday for the first time since Apr. 10. Bond prices had opened lower, rose, then fell as oil prices ticked up, before recovering some losses by the close--on the whole showing firm appetite for bonds by investors, dealers said.  

Brent crude oil futures for delivery in June were at $114.64 per barrel at 1700 IST, significantly up from $111.75 per barrel at the end of gilt market hours Tuesday. During the day, the contract went to as high as $115.43 per barrel, marking its highest level since Mar. 31. Crude prices rose after US President Donald Trump posted a graphic depicting him with a gun and the phrase, "No more Mr. Nice Guy", seen as a warning to Iran that the US would resume military strikes if a deal is not struck. Reports that the US also plans to expand its blockade of Iranian ships and ports also led to traders fearing that a peace deal was not forthcoming, dealers said.

"Throughout the day, crude  prices were up, the currency fell and there was only negative sentiment in the market," a dealer at a state-owned bank said. "Also, there is an auction (on Thursday) as well, so people were taking positions before that and this is expected to continue in early trade tomorrow (Thursday)."

The government will sell INR 170 billion of the 6.68%, 2040 bond and INR 120 billion of the 7.43%, 2076 bond Thursday, rather than the usual Friday, when Indian financial markets are shut for Maharashtra Day and Labour Day. Demand at the auction is seen firm with banks buying the 15-year benchmark gilt to add to their trading portfolios, dealers said.

Traders are also looking to cover their short sales in the 2040 bond as its yield is seen sustaining near 7.35%, dealers said. The gilt ended at INR 94.17 or 7.3475% yield Wednesday. A proxy for tracking short sales in a particular bond is the quantum of outstanding trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data on Wednesday showed trades worth INR 100.49 billion in the gilt, up from INR 88.39 billion Tuesday. 

"Around INR 80 billion will be covered (bought at the weekly gilt auction) by state-owned banks only," a dealer at a private-sector bank said. "The rest will be easily covered by private-sector banks and other investors since it's a fairly liquid paper."

The depreciation of the rupee also pulled down bond prices Wednesday. The rupee fell sharply against the dollar and ended at a record closing low of 94.8450 on likely dollar purchases by oil marketing companies and foreign portfolio investors, dealers said. Traders will closely track any further fall in the Indian unit, they said. State-owned banks likely sold dollars on behalf of the Reserve Bank of India to limit the fall in the rupee, foreign exchange market dealers said. 

"Rupee is emerging as a new concern for the (gilt) market now," another dealer at a private-sector bank said. "You see, despite RBI (Reserve Bank of India) measures, it is not that stable and if it continues to fall that impact will certainly be seen on bond prices." The regulator has introduced and then partly retracted directions since late March curbing speculative activity in the rupee, particularly through the non-deliverable forward market.   

The fall in bond prices was limited as traders covered short bets and state-owned banks made purchases with the yield on the 10-year benchmark 6.48%, 2035 bond approaching 7.00%, dealers said. With no signs of the Strait of Hormuz reopening, traders expect the yield on the 10-year benchmark bond to rise further.

"Even at higher yields, buying would come from banks as it is just the beginning of this financial year (FY27) and they have adequate risk appetite," a dealer at a primary dealership said.

The total turnover in the government securities market was INR 474.80 billion, similar to INR 450.50 billion Tuesday, data from Clearing Corp. of India Ltd. showed. There was no trade using the RBI's wholesale e-rupee pilot Wednesday. The instrument has been out of use since February.

OUTLOOK

On Thursday, 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 Brent crude oil prices near $115 a barrel, which is seen as the new crucial level after the West Asia war, the yield on the 10-year benchmark is seen opening at 6.99%, dealers said. It is expected to go up to 7.02% before the weekly gilt auction. The auction result will lend further cues to the market, they said. The yield on the benchmark 10-year 6.48%, 2035 bond is seen in a range of 6.90-7.05%.

Traders will also track comments on inflation by US Federal Reserve Chair Jerome Powell following the Federal Open Market Committee's rate decision, scheduled at 2330 IST Wednesday. The committee is expected to keep the fed funds target rate unchanged at 3.50-3.75%.

India Gilts: Off lows; banks step up buys as 10-year benchmark yield tops 7%

MUMBAI--1620 IST--Prices of government bonds were off lows as state-owned banks likely stepped up purchases of the 10-year benchmark 6.48%, 2035 gilt as its yield topped the psychologically crucial 7.00% mark, dealers said. This was the first time the benchmark yield rose above 7.00% since Apr. 10 and came after Brent crude futures topped $115 a barrel for the first time this month.

After hitting an intraday high of $115.43 a barrel, Brent crude oil futures for June delivery eased to $114.43 a barrel, still sharply up from the previous closing and weighing on gilt prices. Uncertainty about a US-Iran peace deal and reopening of the Strait of Hormuz resurfaced after US President Donald Trump posted a warning to Iran on the resumption of military strikes, pushing up crude, dealers said.

Traders were reluctant to build fresh positions ahead of the weekly gilts auction Thursday and extended weekend, dealers said. The government will sell INR 170 billion of the 6.68%, 2040 gilt and INR 120 billion of the 7.43%, 2076 gilt at auction Thursday. However, the 2040 bond was slightly higher after a sharp fall on Tuesday.

"...There is no view, the market is very jittery," a dealer at a private-sector bank said. "We have an auction tomorrow (Thursday) and a long weekend which is very scary with Trump. We can easily see a 10 basis point movement in any direction if there is any development in Middle East."

Market participants remained on the sidelines as they were cautious ahead of the weekly gilts auction Thursday. Traders expect the large supply of 6.68%, 2040 gilt to weigh on its cut-off prices at the auction. Traders expect the cut-off yield on the 6.68%, 2040 gilt to be 3-5 basis points higher than the market level, 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.

Banks are likely to place bids for the 15-year bond while demand is likely to be firm for the 7.43%, 2076 bond from insurance companies, dealers said. Some traders expect the cut-off on the 6.68%, 2040 bond to be set 3-5 basis points higher than the current market prices. Mutual funds are likely to remain on the sidelines near the end of the month due to redemption pressure, dealers said. This segment of market participants turned net buyers of gilts Tuesday after being net for five consecutive sessions, data from the Clearing Corp. of India showed.

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.93–7.02% range. At 1612 IST, turnover in the gilt market was INR 422.10 billion, slightly higher than INR 404.45 billion at 1630 IST Tuesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform. (Janwee Prajapati)

India Gilts: Reverse gains, fall as crude surges on Trump warning to Iran

MUMBAI--1330 IST--Government bond prices reversed gains and fell as Brent crude futures topped $113 a barrel for the first time in nearly a month, dealers said. The 10-year benchmark 6.48%, 2035 bond outperformed as traders covered short bets near psychologically crucial levels considered attractive, dealers said.

Brent crude for June delivery rose to $113.21 a barrel at 1330 IST, hitting an intraday high last seen on Mar. 31, and up from $110.92 per barrel at 0900 IST. Crude prices rose after US President Donald Trump posted a graphic depicting him with a gun and the phrase, "No more Mr. Nice Guy", seen as a warning to Iran on resumption of military strikes. 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. The intraday rise led to the five-year overnight indexed swap rate reversing a fall and rising to the day's high of 6.62%, from a low of 6.57% earlier in the day. The movement in gilt prices Wednesday was closely following OIS rates, dealers said.

Moreover, state-owned banks likely covered short bets in the secondary market as the 10-year benchmark yield topped the 6.98% level, with no signs of de-escalation in the West Asia war, dealers said. Traders also made fresh purchases at levels seen attractive as they expect firm demand for the 6.48%, 2035 bond near 7.00% yield from investors, dealers said.

"There is some support in the market which is holding the levels. PSUs (state-owned banks) are short covering (covering short positions) and there is some fresh buying also," a dealer at a primary dealership said. "I think the RBI has again turned active, at least in the rupee market, and there is speculation that it will support this (gilt) market, too, and that is another reason why people are buying."

The speculation of support from the RBI in the gilt market was fuelled by purchases from the 'Others' category of market participants, which includes insurers, pension funds and the central bank, dealers said. The 'Others' category net bought bonds worth INR 17.17 billion in the secondary market Tuesday, according to data from Clearing Corp. of India Ltd. State-owned banks' dollar sales, likely for the RBI, were limiting the loss in the rupee Wednesday, dealers said. The domestic unit was down 0.2% at 94.77 against the dollar at 1337 IST.

Separately, the RBI set the cut-off for the 91-day Treasury bill at 5.2599% Wednesday, up from 5.2150% last week and similar to an Informist poll median of 5.25%. The cut-off yield rose from the previous week as mutual funds were facing redemption pressures on their liquid schemes at the end of the month and overnight money market rates had also trended higher over the past few days, dealers said. 

Trade volumes are expected to remain low Wednesday as traders began travelling for the annual meeting of the Fixed Income Money Market and Derivatives Association of India over the weekend in Amsterdam, dealers said. At 1330 IST, turnover in the gilt market was INR 254.45 billion, slightly lower than INR 267.00 billion at the same time Tuesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform. For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.93–7.02% range. (Diksha Tripathy and Durgesh Nandan)

India Gilts: Steady; volumes low on lack of fresh cues, traders on sidelines

MUMBAI--1000 IST--Prices of government bonds were steady Wednesday amid lack of fresh cues from the US-Iran war, dealers said. Bond prices had fallen briefly in early trade as Brent crude futures were above the key level of $110 per barrel, but traders remained on the sidelines as they had already priced in that level of oil prices, they said.

Brent crude oil futures for June delivery traded at $111.20 per barrel at 1000 IST, as against $111.75 per barrel at the close of Indian financial market hours Tuesday. Brent oil prices had cooled down slightly after US President Donald Trump Tuesday said Iran had asked Washington to lift the blockade on the Strait of Hormuz, in what was seen as some forward movement in the West Asia stalemate.

However, with no certainty about peace talks between the two warring nations, high Brent crude prices are expected to push up inflation in India and potentially lead to tighter monetary policy, dealers said. Still, likely receiving from domestic mutual funds pulled down the five-year overnight indexed swap rate to 6.59% from 6.62% earlier, helping gilt prices recover. A slight fall in US Treasury yields overnight also supported proces, dealers said.

"Market will largely be in a similar range throughout the day (Wednesday), but any negative news from the (US-Iran) war could push the yield (on the 10-year benchmark 6.48%, 2035 bond) to 7.00%," a dealer at a primary dealership said. 

Traders looked ahead to the decision of the US Federal Open Market Committee after its two-day meeting, at 2330 IST. Traders will track comments from Federal Reserve Chief Jerome Powell to get an idea of how sticky inflation is in the world's largest economy, dealers said. The US rate-setting panel is expected to keep rates steady.

The rupee's fall did not have a significant impact on gilt prices. The domestic unit fell to 94.7525 a dollar from Tuesday's close of 94.5400 per dollar, with losses limited by state-owned banks' dollar sales, likely for the Reserve Bank of India.

"Even I am a bit surprised that the market is not reacting to the rupee," a dealer at a private-sector bank said. "The pressure is building up and the rupee is back to near 95 (a dollar), the same level before the RBI brought in measures to protect it."

Trade volumes are expected to remain low Wednesday as traders began travelling for the annual meeting of the Fixed Income Money Market and Derivatives Association of India over the weekend in Amsterdam, dealers said. At 1000 IST, turnover in the gilt market was INR 60.05 billion, lower than INR 92.20 billion at 1030 IST Tuesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform. For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.93–7.02% range. (Diksha Tripathy)

India Gilts: Seen steady on lack of major developments in West Asia war

MUMBAI - Government bond prices are likely to open steady Wednesday as Brent crude oil prices remained largely at similar levels since the end of Indian trading hours Tuesday due to no significant development in the West Asia war, dealers said. Banks are likely to pick up bonds as they consider the 10-year benchmark bond yield near the key level of 7.00% attractive, they said. However, some traders are likely to make some space in their portfolios ahead of the fresh supply at the weekly gilt auction Thursday, which will likely weigh on prices, dealers said. 

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 6.93-7.02% during the day, dealers said. Tuesday, the bond had ended at INR 96.56, or 6.9837% yield. Gilt prices slumped Tuesday as Brent crude oil prices surged above the psychological level of $110 per barrel. Moreover, a rise in overnight indexed swap rates also weighed on bond prices. Traders will closely track any movement in swap rates throughout the day, dealers said. Brent crude oil futures for delivery in June were at over $111 per barrel at 0700 IST, similar to the levels at the end of Indian trading hours Tuesday.

With a US-Iran peace deal and reopening of the Strait of Hormuz not in sight, most traders are likely to refrain from building any view-based positions, dealers said. Traders will keep a close watch on Brent crude prices as reserves run down and supply remains blocked. Traders will also weigh the United Arab Emirates' decision to exit the Organisation of the Petroleum Exporting Countries and its allies from May 1, and its impact on oil supply to India.

Some traders are also focused on the US Federal Open Market Committee's rate decision and commentary, due Wednesday, which could sway offshore activity in India's OIS market, dealers said. Traders expect the US rate-setting panel to keep rates on hold. Fed fund futures are pricing in no change to the federal funds rate as inflation in the world's largest economy stays sticky, according to the CME FedWatch tool.

Domestically, some traders expect the Reserve Bank of India's Monetary Policy Committee to speed up its rate-hike cycle to stem the decline of the rupee against the dollar, with the West Asia conflict entering its third month this week, they said. Traders will also watch whether the Centre passes on the recent surge in crude oil prices to consumers through higher retail petrol and diesel prices. 

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. However, traders expect the participation to remain subdued as they are likely to remain away for the Fixed Income Money Market and Derivatives Association of India meeting, they 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. At the T-bill auction Wednesday, traders expect the cut-offs yields to be at similar levels to previous week's auction. The government will sell INR 120 billion of the 91-day T-bill, INR 60 billion each of the 182-day T-bill and 364-day T-bill at its auction. (Janwee Prajapati)

US$1 = INR 94.85

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

Edited by Akul Nishant Akhoury

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