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Informist, Tuesday, May 5, 2026

 

By Diksha Tripathy 

 

MUMBAI – Prices of government bonds ended slightly higher, reversing all losses, after a Bloomberg report said the Reserve Bank of India is considering the sale of foreign currency bonds through state-owned banks to shore up the supply of dollars, dealers said. Bond prices also rose because traders covered their short positions in the secondary market, they said.

 

The 10-year benchmark 6.48%, 2035 government bond ended at INR 96.33, slightly higher than INR 96.32 Monday. The yield on the bond ended at 7.0184%, above the psychologically crucial 7.00% mark for the third consecutive session, but marginally lower than 7.0194% Monday. The move to sell foreign currency bonds through state-owned banks is expected to boost the inflow of dollars, which in turn will help the rupee. Traders expect the move to be a big positive for the bond market as well, they said. 

 

Bond prices had opened sharply lower as prices of Brent crude oil and US Treasury yields rose overnight after an escalation in the West Asia war, with reports that Iran had attacked ships trying to cross the Strait of Hormuz, dealers said. Brent crude oil futures for July delivery were at $112.95 per barrel at 1700 IST, down from $113.23 per barrel at 0900 IST, but up from $111.75 per barrel at 1700 IST Monday. The yield on the benchmark 10-year US Treasury note was 4.44% at the end of Indian gilt trading hours Tuesday, slightly higher than 4.42% Monday. 

 

On Tuesday, bond prices remained under pressure as the rupee hit a record low of 95.4350 against the dollar during the day, dealers said. Traders see the fall of the rupee emerging as a new challenge for the gilt market, which is already facing the heat of high crude oil prices due to the West Asia war. 

 

"For the last few days, (bond) prices have been under pressure because of high crude (oil prices), but now we have a new problem to deal with," a dealer at a state-owned bank said. "If this (rupee depreciation) continues to happen, the yield (on the 10-year benchmark bond) can go above 7.05?sily."

 

 

The fall in bond prices during the day was limited as some state-owned banks bought bonds in the secondary market at yields seen as attractive, dealers said. The yield on the 10-year benchmark remained above the key 7.00% mark throughout the day. 

 

"PSUs (public sector banks) were buying in the secondary market, but today (Tuesday) they were not that aggressive," a dealer at a private sector bank said. "Some shorts (short positions) were also covered in the market which held the levels. But once it (the yield on the 10-year benchmark bond) breaches the 7.05% level, that's when the real chaos will begin, because at that time even they (public sector banks) will not buy."

 

Bond prices were supported as some traders who had short-sold the 10-year benchmark 6.48%, 2035 bond earlier, covered those positions ahead of the weekly gilt auction Friday, dealers said. The government will sell INR 340 billion of a new 10-year, 2036 gilt Friday. As liquidity in the current 6.48%, 2035 bond is expected to fall once the new benchmark gilt is announced and traded, traders preferred to cover bets ahead of the auction, they said. After the outstanding of an on-the-run paper tops INR 2 trillion, the government usually issues a new bond in that tenure in order to limit its one-time repayment burden. The 6.48%, 2035 bond's outstanding has reached INR 2.26 trillion, a record for a 10-year benchmark. 

 

Bond prices didn't react significantly to the results of the auction of state government securities Tuesday as the cut-off yields were largely in line with market expectations, dealers said. Five states raised INR 186 billion through the sale of bonds Tuesday. The RBI set a cut-off of 7.73% on Tamil Nadu's 10-year bond. The short-term papers at the auction saw firm demand from banks and mutual funds to add to their available-for-sale and held-to-maturity books, while insurers and pension funds bid aggressively for the longer-tenure papers, dealers said. Traders had expected the auction to sail through as the auction size was smaller than the INR 258 billion indicated in the calendar for state borrowing.

 

"The (state bond) auction result was as per the market expectations only," a dealer at a primary dealership said. "Had the cut-offs (cut-off yields) been bad (higher-than-market view), the 10-year bond yield would have reacted very sharply because that would have been a surprise given the size was lower than indicated (in the borrowing calendar for the June quarter)."        

 

The total turnover in the government securities market was INR 408.05 billion, down from INR 467.40 billion on Monday, data from Clearing Corp. of India Ltd. showed. There was no trade using the RBI's wholesale e-rupee pilot Monday. The instrument has not been used since February.

 

OUTLOOK

On Wednesday, bond prices will track developments in the West Asia war and their impact on Brent crude oil prices, dealers said. With crude oil prices above $110 per barrel, dealers now expect the yield on the 10-year benchmark to remain above 7.00%. A sharp rise in crude oil prices to above $125 per barrel could push the 10-year benchmark bond yield to 7.10%, dealers said. Traders will also track the movement of overnight indexed swap rates and the rupee, they said.

 

The yield on the 10-year benchmark is seen opening at 7.02%, dealers said. It is expected to rise to 7.05% if the US-Iran war escalates and crude prices shoot up to $115 per barrel. The yield on the 6.48%, 2035 bond is seen in a range of 6.98-7.05% Wednesday. 

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India Gilts:Recovered losses on short covering, report of foreign bond sale 

 

1621 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
					6.48%, 2035
PRICE (INR)	96.33	96.36	96.10	96.14	96.32
YTM (%)	7.0188	7.0139	7.0534	7.0466	7.0194

 

MUMBAI--1621 IST--Prices of government bonds recovered from earlier losses as traders covered some of their short bets following a report about the Reserve Bank of India mulling sales of foreign bonds through state-owned lenders, dealers said. However, concerns over disruption of global energy supplies amid the ongoing US-Iran war weighed on bond prices, they said.

 

According to a Bloomberg report, the RBI will sell foreign bonds through public sector banks, which will lead to more foreign inflows, strengthening the rupee against the dollar, dealers said. Some traders said the rise in bond prices was also due to low trade volumes.

 

"The move is expected to strengthen the rupee as this move will lead to more inflows," a dealer at a state-owned bank said. "But this is just a plan right now so we'll have to see the extent of the impact."

 

Public sector banks, mutual funds, and Employees' Provident Fund Organisations were the major participants in the auction, dealers said. The RBI set the cut-off on Tamil Nadu's 10-year bond at 7.73%, which was largely in line with market expectations. Mutual funds and insurance companies were interested in long-term state bonds whereas banks likely picked up short-term bonds at the auction, dealers said. Public sector banks bought state bonds for their available-for-sale and held-to-maturity books. Five states raised INR 186 billion through the sale of bonds Tuesday.

 

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 7.00–7.06% range. At 1621 IST, the turnover in the gilt market was INR 371.30 billion, lower than INR 448.00 billion at 1630 IST Monday, according to data from the RBI's Negotiated Dealing System–Order Matching platform. (Durgesh Nandan)

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India Gilts: Remain sharply dn as traders trim risk bets, US-Iran war weighs

 

	1249 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.16	96.20	96.10	96.14	96.32
YTM (%)	7.0444	7.0383	7.0534	7.0466	7.0194

 

MUMBAI--1249 IST--Prices of government bonds remained sharply down as traders trimmed positions amid uncertainty about an end to the US-Iran war, dealers said. However, losses were limited as state-owned banks bought gilts at levels seen attractive, they said. Traders also refrained from placing aggressive bets before the result of the auction of state government securities Tuesday, dealers said.  

 

Five states offered to raise INR 186 billion through the sale of bonds for which bids were to be submitted between 1030 IST and 1130 IST Tuesday. Traders expect the auction to sail through as the auction size is smaller than the INR 258 billion indicated in the calendar for state borrowing. The auction result will lend cues to the market later in the day, dealers said. 

 

At the auction, demand for Tamil Nadu's 10-year bond was seen firm from state-owned and private sector banks, dealers said. Banks likely bought bonds for their held-for-trading books, they said. Insurance companies and pension funds likely bid aggressively for the long-term paper at the auction to add to their investment portfolios, dealers said. The cut-off yield on Tamil Nadu's 10-year bond at the auction is seen at 7.72%, according to the median of the estimates of 13 bond dealers polled by Informist. 

 

"Overall, I think the auction will go through. That should not be a problem because the supply is small only, and it will be absorbed by the market," a dealer at a state-owned bank said. "The cut-offs (yields) will be as per market expectations."

 

Some traders placed short bets in the secondary market due to expectations of the yield on the 10-year benchmark bond rising to 7.07% levels, which weighed on bond prices, dealers said. Uncertainty related to the West Asia war is expected to push bond yields up, they said. However, the fall in prices was limited due to some buying by state-owned banks at levels seen attractive, dealers said. 

 

"Some buying is there from PSUs (public sector banks) which is holding the levels at the moment, but is not that aggressive today (Tuesday)," 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 seen in the 6.98–7.07% range. At 1249 IST, the turnover in the gilt market was INR 179.20 billion, lower than INR 249.16 billion at 1230 IST Monday, according to data from the RBI's Negotiated Dealing System–Order Matching platform. (Diksha Tripathy)

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India Gilts: Sharply down on rise in oil prices, US ylds; weak rupee weighs

 

	0948 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.18	96.19	96.11	96.14	96.32
YTM (%)	7.0414	7.0391	7.0512	7.0466	7.0194

 

MUMBAI--0948 IST--Prices of government bonds were sharply down due to a rise in Brent crude oil prices and US Treasury yields, dealers said. The uncertainty over the end of the US-Iran war amid recent escalations is likely to weigh on bond prices, they said. The depreciation of the rupee also weighed on bond prices, dealers said.

 

Brent crude oil prices remained above the psychologically crucial level of $110-per-barrel mark. The recent escalation in the West Asia war, with Iran reportedly attacking ships trying to cross the Strait of Hormuz, is likely to push up oil prices further, dealers said. At 0930 IST, Brent crude oil futures for July delivery traded at $113.17 per barrel, slightly up from $111.75 per barrel at 1700 IST Monday. 

 

The overnight rise in US Treasury yields also weighed on bond prices, dealers said. The yield on the benchmark 10-year US Treasury note was 4.44% at 0930 IST, up from 4.42% at the end of Indian gilt market hours Monday.        

 

Traders also maintained caution ahead of the auction of state government securities Tuesday, dealers said. The result of the auction is likely to lend cues to the gilt market, they said. Five states will raise INR 186 billion through the sale of bonds Tuesday. Traders expect the auction to sail through smoothly as the auction size is smaller than the INR 258 billion indicated in the calendar for state borrowing. However, if banks' poor risk appetite pushes up cut-off yields for state bonds, gilt prices may also fall, dealers said.  

 

Depreciation of the rupee against the dollar also weighed on bond prices, dealers said. The rupee fell to a record low of 95.3850 per dollar, following a rise in Brent crude oil prices and poor risk appetite due to the West Asia war, they said.   

 

"There were already a few negatives (negative factors), like crude (oil prices) and UST (US Treasury yields), now the rupee is also emerging as another negative factor," a dealer at a primary dealership said. "We will have to see how much impact it will have throughout the day (Tuesday)."   

 

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.98–7.07% range. At 0948 IST, turnover in the gilt market was INR 54.90 billion, higher than INR 22.85 billion at 0930 IST Monday, according to data from the RBI's Negotiated Dealing System–Order Matching platform. (Diksha Tripathy)

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India Gilts: Seen opening slightly lower on rise in oil prices, US yields

 

MUMBAI – Prices of government bonds are seen opening slightly down, tracking an overnight rise in crude oil prices and US Treasury yields, dealers said. The escalation in the war in West Asia pushed Brent crude oil prices higher and is expected to weigh on bond prices during the day, they said.  

 

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open around 7.02% and is seen in the 6.92-7.05% range during the day, dealers said. Market sentiment will remain under pressure amid an escalation in the US-Iran war, they said. Monday, the 10-year benchmark bond ended at INR 96.32, or 7.0194% yield. Gilt prices had ended lower amid choppy trading after Brent crude oil prices rose on reports of an escalation in the conflict, dealers said. However, the fall was limited as traders covered their short positions, with state-owned banks stepping up purchases.

 

On the war front, the US military said it destroyed Iranian small boats and intercepted multiple cruise missiles and drones, according to media reports. Iran allegedly launched these attacks on ships being transported through the Strait of Hormuz Monday under US President Donald Trump's "Project Freedom" initiative. The United Arab Emirates and South Korea also reported strikes on ships in the crucial channel on Monday. Following the escalation, the Brent crude oil price for July delivery rose to over $113 per barrel at 0640 IST, up from over $111 per barrel at the end of Indian trading hours Monday. At 0640 IST, the benchmark 10-year US Treasury yield was 4.44%, up from 4.42% at 1700 IST Monday.

 

Back home, five states will raise INR 186 billion through bond issuances, which is lower than the INR 258 billion indicated in the borrowing calendar for the June quarter. Traders expect the auction to sail through smoothly as the supply quantum is small. Traders will likely cover their short positions in the 6.48%, 2035 bond after the Reserve Bank of India announced a new 10-year benchmark gilt at the weekly auction on Friday, dealers said. Public sector banks will likely continue their buying momentum after they net bought INR 45.63 billion Monday at levels seen as attractive, dealers said. Apart from the auction result, traders will also track any significant movement in overnight indexed swap rates and the rupee against the dollar.  (Janwee Prajapati)

 

US$1 = INR 95.28

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

 

Edited by Avishek Dutta

 

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