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Informist, Thursday, May 7, 2026

By Diksha Tripathy and Aaryan Khanna

MUMBAI – Prices of government bonds ended a volatile Thursday on a mixed note. Traders placed short bets to make room for fresh supply of the new 10-year bond that will be auctioned Friday, dealers said. Through the day, bond prices closely tracked the movement in Brent crude prices and traders assessed news reports on the possibility of a peace deal between the US and Iran. The sharp rise of the rupee helped the 10-year benchmark 6.48%, 2035 gilt end down but off lows but most other liquid bonds ended steady or slightly higher.

The 6.48%, 2035 bond ended at INR 96.90, down from INR 96.97 Wednesday. The bond's price had opened lower at INR 96.81 and fell to as low as INR 96.72 due to the overnight rise in crude oil prices to above $100 per barrel. The 10-year benchmark gilt then reversed all losses during the day and rose to INR 97.08 on reports that Iran was willing to make concessions on its nuclear programme to secure a peace deal with the US, dealers said. The 10-year benchmark yield ended at 6.9328%, up from 6.9219% Wednesday.

Some traders sold bonds to make room in their portfolios for the new 10-year, 2036 gilt that will be sold Friday. Standalone primary dealers had been covering short positions aggressively on news that the US and Iran were close to a peace deal and hence had to sell bonds on the eve of the auction, dealers said. These traders covered short sales in the first half of trade Thursday as well, dealers added. Primary dealers bought INR 42.44 billion of gilts on a net basis Wednesday, according to Clearing Corp. of India data. The Reserve Bank of India will Friday auction INR 340 billion of the new 10-year bond.
 

The underlying focus of the market was the situation in West Asia. "Market is discounting all other factors at this moment, except for crude (oil price) and, to some extent, the rupee also," a dealer at a private-sector bank said. "If you see, the market did not react to the variable rate repo announcement or anything else. Any other factors at this point are not at all relevant to the market, I think." 

Brent crude oil futures for July delivery fell to the day's low of $97.44 per barrel, down from $102.13 per barrel at 0900 IST and marginally down from $98.10 per barrel at 1700 IST Wednesday. News agency Al-Arabiya reported that the US and Iran have agreed to ease the blockade of the Strait of Hormuz which would open up the channel to traffic. The Brent crude July contract was at $97.99 a barrel at the end of Indian market hours Thursday.  

Despite the positive newsflow, the total traded volume of government securities fell sharply Thursday to INR 605.65 billion from INR 842.70 billion Wednesday, data from Clearing Corp. of India Ltd. showed. Dealers said volumes fell as traders remained on the sidelines after initially reacting to the Al-Arabiya news report and awaited official confirmation of a peace deal between the US and Iran.

The new 10-year, 2036 bond was also traded in the when-issued market in a range of 6.87-6.92% yield. At 1700 IST, there were 34 trades worth INR 6.55 billion on the the WhenIssued (NewIssues) segment of the CCIL. There was no trade using the RBI's wholesale e-rupee pilot Thursday. This instrument has not been used since February.

"(The) RBI will keep it (the coupon on the new 10-year bond) below 7.00% only," a dealer at a private-sector bank said. "They (RBI) don't look very comfortable with that (7.00%) level, and they want the yields to remain below that (7.00%)."                                     

Traders said if the current situation persists and there are no major signs of escalation in the US-Iran war, the RBI will keep the coupon of the new 10-year bond near 6.90%. However, any escalation in the West Asia war would increase the chances of a coupon near 7.00% on the new bond, but it is unlikely the RBI will accept a cut-off yield above that level, they said. The demand at the auction is seen firm across the board as the 10-year is one of the most liquid segments in the gilt market, dealers said.    

The recovery of bond prices was limited as some traders unwound the positions they had built Wednesday when when oil prices had risen. Bond prices were supported Thursday as the rupee rose sharply against the dollar the second consecutive day on hopes of the US-Iran peace deal, dealers said. The rupee settled at 94.2500 Thursday, its highest level in almost 10 days and 36 paise lower from Wednesday. Bond prices also rose as state-owned banks bought bonds at levels seen attractive as the yield on the 10-year benchmark bond was capped at 6.95%, dealers said. 

OUTLOOK

Friday, bond prices will closely track the results of the weekly gilt auction, dealers said. Traders who had earlier short sold the 10-year benchmark gilt will likely cover their short positions ahead of the auction, they said. This will help bond prices, dealers added. 

Bond prices will also track developments in the West Asia war and Brent crude oil prices, dealers said. Any major sign of an end to the war could pull Brent crude oil prices to near $90 a barrel, which may prompt the 10-year benchmark gilt yield to fall to 6.85%. A further fall in the bond yield is not expected as CPI inflation is expected to remain high through the year, which will prompt traders to take profits at that yield level, dealers said. However, any sign of escalation in the West Asia war could push the 10-year bond yield back above 7.00%, dealers said. Traders will also track the movement of overnight indexed swap rates and the rupee, they said. The yield on the 6.48%, 2035 bond is seen in a range of 6.90-7.00% Friday.

India Gilts: In thin band; short sales before auction offset oil price fall

MUMBAI--1535 IST--Most government bond prices were in a thin band, after recovering losses earlier, as short sales before the new 10-year gilt auction Friday offset any rise in prices due to an intraday fall in Brent crude futures, dealers said. The appreciation of the rupee against the dollar and a fall in US yields supported a brief rise in bond prices Thursday, and some traders are optimistic that the Strait of Hormuz will be reopened, they said.

"The market is churning, so there is no one-side buying or selling going on," a dealer at a private sector bank said.

Brent crude oil futures for July delivery fell below $100 a barrel, from an intraday high of $102.55. Traders do not expect Brent to rise above the $100 mark during Indian market hours Thursday, they said. However, they are unsure of the trajectory of bond prices Thursday. The yield on the 6.48%, 2035 bond is not expected to fall below 6.90% during the day and is likely to be steady, they said.

At 1535 IST, the turnover in the gilt market was INR 531.75 billion, slightly lower than INR 587.50 billion at 1535 IST Wednesday, as per 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 a range of 6.90–6.95%. 

Banks bought liquid bonds after Brent crude fell below $100 per barrel. Several traders are optimistic about an end to the West Asia war. If the Strait of Hormuz reopens, crude oil prices are seen at $80-$85 per barrel, upon which the 10-year benchmark bond yield is likely to fall to 6.80-6.85%, dealers said. If there are no significant developments on US-Iran peace talks, the 10-year benchmark yield will be around 6.90-7.00%, dealers said.  (Durgesh Nandan)

India Gilts: Recover all losses as Brent falls below $100/bbl, rupee surges

--Dealers: Gilts reverse losses, rise on jump in rupee, sharp fall in crude 

MUMBAI--1315 IST--Prices of the most-traded government bonds recovered all losses and rose slightly tracking a sharp intraday fall in crude oil prices and a jump in the rupee, dealers said. Brent crude oil futures for July delivery fell to under $100 a barrel on several media reports that the US and Iran were moving closer to a peace deal. 

Brent crude oil futures for July delivery fell to as low as $97.44 per barrel from $102.13 per barrel at 0900 IST and were at $98 a barrel at 1305 IST. Oil prices fell on reports that Iran was willing to make concessions on its nuclear programme to secure a peace deal. An agreement to open the Strait of Hormuz would ease supply chains and ease imported inflation into India, dealers said. The rupee also gained 0.4% against the greenback, surging to 94.21 a dollar, highest since Apr. 27.

"Crude oil is down and rupee has also risen sharply," a dealer at a private-sector bank said. "The (gilt) market is reacting to these two factors rather than any primary sourcing as these are good enough to lead to a positive impact for us."

At 1315 IST, turnover in the gilt market was INR 383.00 billion, up from INR 307.50 billion at 1230 IST Wednesday, data from the RBI's Negotiated Dealing System–Order Matching platform showed. For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.85–6.98% range as traders are hopeful of an end to the war in West Asia even if there is a temporary escalation. (Aaryan Khanna)

India Gilts: Down as Brent crude oil prices rise above $100/bbl

MUMBAI--0940 IST--Prices of government bonds were down Thursday as Brent crude oil prices again rose above $100 per barrel after US President Donald Trump issued a warning to Iran about bombing the nation if no peace deal is reached, dealers said. However, bond prices were supported by an overnight fall in US Treasury yields, they said. 

The 10-year, benchmark 6.48%, 2035 bond opened 16 paise lower from Wednesday and then briefly recovered some losses as some traders bought bonds at levels seen attractive, dealers said. Bond prices are likely to remain under pressure during the session Thursday as traders will make space in their portfolios ahead of the weekly gilt auction for a new 10-year bond Friday, dealers said. The government will sell INR 340 billion of a new 10-year bond through auction Friday. 

Brent crude oil July futures were at $102.05 per barrel at 0940 IST, up around $4 from $98.10 per barrel at the end of Indian gilt trading hours Wednesday. Reports that Tehran has made a new website to control the Strait of Hormuz have also resulted in a rise in oil prices. The yield on the 10-year US Treasury note was 4.36% at 0930 IST, down from 4.44% at 1700 IST Wednesday, which limited losses in bond prices.  

At 0940 IST, turnover in the gilt market was INR 42.30 billion, significantly lower than INR 107.35 billion at 0946 IST Wednesday, data from the RBI's Negotiated Dealing System–Order Matching platform showed. Several traders were on the sidelines as they awaited further developments on US-Iran peace talks, they said. 

"The (bond) prices will keep fluctuating throughout the day," a dealer at a state-owned bank said. "But today (Thursday), 10-year (bond price) will remain under pressure due to the (weekly gilt) auction. Traders will cut some positions to make room for fresh supply."                      

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, any major escalation in the West Asia war could push the yield on the 10-year bond to 7.00%, dealers said. (Diksha Tripathy)

India Gilts: Seen lower as crude oil prices rise; new 10-yr bond auction Fri

MUMBAI – Prices of government bonds are likely to open lower Thursday, tracking an overnight rise in Brent crude oil prices above the crucial $100 per barrel mark, dealers said. However, an overnight fall in US Treasury yields will help bond prices, they said. Later in the day, traders will likely make space in their portfolio ahead of the weekly gilt auction for the new 10-year bond Friday, dealers said.

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open near 6.94% and is seen in the 6.90-7.00% range during the day, dealers said. Wednesday, the 10-year benchmark bond ended at INR 96.97, or 6.9219% yield. Gilt yields had ended sharply lower as prices of Brent crude oil slumped to a two-week low after a news report that the US and Iran were close to an agreement to end the war in West Asia, dealers said. Bond yields also fell as traders covered short positions along with fresh purchases.

Brent crude futures for July were trading above $101 per barrel at 0730 IST, after slipping to $98.09 per barrel for the first time since Apr 22 by the close of Indian trading hours Wednesday. Brent crude futures climbed past that crucial level after Indian market hours on US President Donald Trump's comment about bombing Iran if a deal was not reached. Reports that Tehran has made a new website to control the Strait of Hormuz also resulted in oil prices rising. Oil prices had fallen sharply to two-week lows Wednesday as hopes rose for a potential end to the war in West Asia, following reports that the US and Iran were close to an initial peace deal. At 0730 IST, the benchmark 10-year US Treasury yield was 4.35%, down from 4.42% at 1700 IST Wednesday.

Any indication that the war may end soon could drag Brent crude for July delivery down to $90 a barrel, which may push the 10-year benchmark gilt yield toward 6.85%, dealers said. They don't expect the bond's yield to fall further, since CPI inflation is likely to stay elevated through the year, prompting traders to book profits around that level. Public sector banks are likely to continue their selling momentum from Wednesday, after they net sold nearly INR 97 billion worth of gilts as they booked profits on bonds bought when the yield on the 10-year benchmark bond rose above 7%, dealers said.

Traders covered their short positions as they considered current yields attractive if the war ends soon, dealers said. They were also looking to cover short bets in the 10-year benchmark gilt as it is going off the run, with the government selling INR 340 billion of a new 10-year, 2036 gilt at auction Friday. However, some traders are likely to place short bets as the yield on the 10-year benchmark bond seems attractive, dealers said. A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 0730 IST showed trades worth INR 164.63 billion in the 6.48%, 2035 gilt, slightly down from INR 166.20 billion Wednesday. Traders expect the Reserve Bank of India to set a coupon below 7.00% on the new bond, dealers said.

Traders will also track the movement of overnight indexed swap rates and the rupee, they said. There are no scheduled domestic triggers on Thursday. (Janwee Prajapati)

US$1 = INR 94.25

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

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