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Informist, Friday, May 8, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended sharply lower Friday, wrapping up a volatile week, with no certainty about the US and Iran arriving at a peace deal and amid elevated oil prices, dealers said. Bond prices fell further towards the end of trade as dealers trimmed their bond holdings due to lack of risk appetite, with fears that the West Asia war could escalate further over the weekend.

 

The much-awaited auction of the new 10-year, 2036  bond sailed through, but bond prices were largely unchanged after the result, and were directed by the intraday movement of Brent crude prices. Even with domestic triggers such as India's headline inflation for April lined up next week, attention was on weekend developments in the Gulf region, dealers said.

 

"Cut-off came in line with expectations, and people don't want to take overnight risk," a dealer at a small finance bank said. "...The last two-three days, despite market closing at almost day's highs, the subsequent day, market is opening 12-15 paise down. If that's the case overnight, imagine what could happen in two days gap."

 

The 6.48%, 2035 bond ended at INR 96.58, sharply lower than INR 96.90 Thursday. The 10-year benchmark yield ended at 6.9809%, up nearly 5 basis points from 6.9328% the previous session. However, the bond yield ended the week 3 bps lower, after falling 10 bps on Wednesday, the most in a day since Apr 8.

 

The new 10-year, 6.94%, 2036 bond ended steady at INR 100 after hitting a high of INR 100.10 and a low of INR 99.98 after its issuance Friday. The newly-issued bond – which will eventually replace the 6.48%, 2035 bond as the 10-year benchmark – was the second-most traded paper on the Reserve Bank of India's Negotiated Dealing System–Order Matching platform.

 

Some traders also sold the off-the-run benchmark 6.48%, 2035 gilt to buy the new 2036 gilt, weighing on the former's price, as traders expected the yield spread between the two to widen. On Friday, the spread was 4 basis points, and it is seen rising to 5 bps in the near term, as a low outstanding of the new bond is likely to limit further widening, dealers said. 

 

At the INR-340-billion auction of the 6.94%, 2036 gilt, state-owned banks purchased INR 150 billion to INR 180 billion of the bond, for both their investment and trading books, dealers said. A large state-owned bank purchased around INR 50 billion of the bond, they said. Mutual funds also bought INR 60 billion to INR 80 billion of the bond, as exchange-traded gilt funds are due for rebalancing next week, dealers said. Some insurers also bid for the bond for their unit-linked insurance offerings, they said. The coupon of 6.94% on the bond was the same as the median in an Informist poll of 22 market participants.

 

Traders paid close attention to the partial allotment of competitive bids for the bond, with the 50.38% figure in line with expectations. With a weighted average yield of 6.9354% on the bond at auction, some traders were disappointed and expected a partial allotment of 30% or lower. 

 

Traders did not pay close attention to other triggers, such India's CPI inflation for April, due next week, along with the expected announcement of the RBI's transfer of surplus to the Centre for 2025-26 (Apr-Mar), and refrained from aggressive positions as they awaited developments in the West Asia war. Brent crude oil futures for July delivery remained above $100 per barrel, even as it briefly fell below this key level intraday, which led to a slight recovery in bond prices, dealers said. 

 

"Its a binary market right now – will war stop, will war not stop?" a dealer at a private sector bank said. "Now people are okay with volatility, but something (peace talks) should stabilise. If there is no stability, then market will remain unsettled."

 

The total turnover in the government securities market was INR 593.80 billion, slightly lower than INR 605.05 billion on Thursday, data from Clearing Corp. of India Ltd. showed. There was no trade using the RBI's wholesale e-rupee pilot Friday. This instrument has not been used since February.

 

OUTLOOK

Gilts are not traded Saturdays. On Monday, traders will track developments in the West Asia war and Brent crude oil prices, after the US and Iran exchanged strikes in the Gulf region overnight, dealers said.

 

Traders will also begin positioning for India's CPI inflation for April, due at 1600 IST Tuesday. According to an Informist poll of 13 economists, CPI inflation is seen rising to a 15-month high of 3.8% in April from 3.4% in March. Some traders expect a print closer to 4%. Traders expect a a larger rise in wholesale inflation due to oil supply disruptions since the Centre has not yet hiked retail energy prices. After state Assembly elections ended last week, several traders expect the Centre to announce such price hikes anytime this month.

 

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%. Further fall in the bond yield is not expected as CPI inflation is likely 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 6.90-7.05% Monday.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	96.5800	6.9809%	96.9000	6.9328%
6.33%, 2035	96.3425	6.8824%	96.6625	6.8328%
6.36%, 2031	98.6525	6.6918%	98.9375	6.6201%
6.68%, 2040	94.6400	7.2919%	95.0675	7.2411%
6.90%, 2065	91.1000	7.6163%	91.4800	7.5832%

 

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India Gilts: Dn as crude oil prices rise; auction cut-off in line with view

 

	1336 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.70	96.84	96.63	96.76	96.90
YTM (%)	6.9625	6.9423	6.9734	6.9539	6.9328

 

MUMBAI--1336 IST--Prices of government bonds remained sharply down as the Brent crude oil prices rose above the key level of $100 per barrel, dealers said. Some traders preferred the new 10-year bond over the 10-year benchmark 6.48%, 2035 bond, which weighed on its price. The appreciation of the rupee against the dollar to 94.4275 per dollar from 94.5800 helps, dealers said. 

 

"There is so much uncertainty in the market and the rise in crude oil over $100 (per barrel) is also weighing," a dealer at a public sector bank said. "Some people must be selling fresh (gilts) also." Brent crude oil futures for July delivery rose over $100 per barrel as the escalation in US-Iran war weakened the possibility of peace talks between the two warring nations, dealers said.   

 

At the gilt auction, demand was firm from across market participants, dealers said. The Reserve Bank of India set a coupon of 6.94% on the new 10-year bond, the same as market expectations and the median of an Informist poll. The RBI partially allotted around 50.38% of competitive bids received at the cut-off rate, which became the coupon for the new bond, dealers said. The partial allotment percentage was in line with expectations, they said. The RBI received over INR 1 trillion of competitive bids at the auction, data showed. The government sold INR 340 billion of a new 10-year bond at an auction Friday.

 

"Demand from public sector banks was firm," a dealer at a primary dealership said. "Every body was there (biding at auction) today (Friday)...including mutual funds, insurers, corporate houses."

 

The price of the 10-year benchmark 6.48%, 2035 bond remains under pressure as traders shifted to new 6.94%, 2036 gilt, dealers said. Traders expect the spread between the new 10-year bond and the 10-year benchmark bond to remain 2-3 basis points, dealers said. In the secondary market, the new 10-year, 2036 bond was dealt at INR 100.08 or 6.9288% yield. There were 147 trades totalling to INR 14.90 billion recorded in the new 6.94%, 2035 bond.

 

At 1336 IST, turnover in the gilt market was INR 301.95 billion, lower than INR 393.65 billion at 1330 IST Thursday, 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 6.90–7.00% range. (Janwee Prajapati)

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India Gilts: Off lows as Brent eases intraday; 2036 bond demand seen firm

 

	1151 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.77	96.79	96.63	96.76	96.90
YTM (%)	6.9524	6.9494	6.9734	6.9539	6.9328

 

MUMBAI--1151 IST--Prices of government bonds were off the day's lows as near-month Brent crude oil futures briefly fell below $100 per barrel, inching lower from $101.19 per barrel at 0900 IST, dealers said. Bond prices remained lower amid escalation in the West Asia war overnight and concerns of elevated oil prices fueling inflation, dealers said. Intraday, bond traders were more attentive to the reception of INR 340 billion of fresh supply. The government will issue a new 10-year, 2036 bond, the coupon on which is seen at 6.94%, as per the median of an Informist Poll of 22 market participants. 

 

State-owned banks were major bidders for the bond, with purchases totalling INR 100 billion to INR 150 billion for both investment and trading books, dealers said. Some of these banks may have bid for the bond at a higher coupon of 6.95%, they said. A fresh escalation in the West Asia war overnight deterred aggressive bidding, some said. Mutual funds were also seen bidding for the bond in large sizes, dealers said. Traders across market segments looked to get their hands on the new bond, and a few dealers expect a coupon of 6.93% due to the lure of a new 10-year benchmark bond. Some insurers also bid for the bond for their unit-linked insurance offerings, they said. Friday, the new 10-year, 2036 bond was quoted in a range of 6.9150-6.9300% in the WhenIssued (NewIssues) segment of the Reserve Bank of India's Negotiated Dealing System–Order Matching platform. 

 

"The (notified) size is 34,000 (INR 340 billion), that's why (some are bidding at) 6.95%. In case cut-off is 6.95%, it will be very low partial (allotment)," a dealer at a state-owned bank said. "We may get a 93-94 (6.93%-6.94% coupon), and the ratio (tendency) of getting 6.95% (coupon) is low." If the coupon is set at 6.95% with a high partial allotment at that level, bond prices may fall further after the auction result, dealers said. 

 

Elevated crude oil prices and the expected, subsequent rise in inflation weighed on gilts, dealers said. According to an Informist Poll of 13 economists, CPI inflation is seen rising to a 15-month high of 3.8% in April from 3.4% in March. Traders expect a larger rise in wholesale inflation due to oil supply disruptions since the Centre has not yet hiked retail energy prices. After state Assembly elections ended last week, several traders expect the Centre to announce such price hikes anytime this month. The possibility of such price hikes cannot be ruled out, a senior government official had said. 

 

At 1151 IST, turnover in the gilt market was INR 176.80 billion, slightly higher than INR 131.40 billion at 1130 IST Thursday, data from the RBI's NDS-OM platform showed. 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. (Cassandra Carvalho)

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India Gilts: Down as Brent back above $100/bbl; 2036 bond coupon seen 6.94%

 

	0938 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.71	96.76	96.67	96.76	96.90
YTM (%)	6.9621	6.9539	6.9674	6.9539	6.9328

 

MUMBAI--0938 IST--Prices of government bonds were down Friday as Brent crude rose back above $100 per barrel, after the US and Iran engaged in fresh strikes in the Gulf region overnight, testing the ceasefire they had agreed upon last month. Near-month Brent crude futures were $101.19 per barrel at 0900 IST after plunging to as low as $97.44 per barrel during Indian market hours Thursday.

 

Besides the geopolitical escalation, bond traders are focused on the fresh supply of INR 340 billion of a new 10-year bond at the weekly gilt auction Friday. Demand for the security, which will eventually replace the 6.48%, 2035 bond as the 10-year benchmark, is expected to be robust across market participants. State-owned banks are likely to bid for INR 100 billion of the bond, and possibly more, for both investment and trading books, dealers said. Several dealers expect the coupon on the new 2036 bond to be set at 6.94%, or 2 to 4 basis points lower than the yield on the current 10-year benchmark at the time of bidding. Some traders placed short bets on the 2035 bond to buy the new bond, betting that the yield spread between the two will widen, they said. 

 

"The fall in prices is just to do with geopolitical (developments)," a dealer at a small finance bank said. "We've seen 6.87%, 6.88% in WhenIssued, so easily coupon (on the 2036 bond) can be around 6.90%." Thursday, the new 10-year, 2036 bond traded in a range of 6.87-6.92% in the WhenIssued (NewIssues) segment of the Reserve Bank of India's Negotiated Dealing System–Order Matching platform. 

 

At 0938 IST, turnover in the gilt market was INR 49.25 billion, similar to INR 42.30 billion at 0940 IST Thursday, data from the RBI's NDS-OM platform showed. For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.90–6.99% range. Any major escalation in the West Asia war could push the yield on the 10-year bond to 7.00%, dealers said. (Cassandra Carvalho)

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India Gilts: Seen down as crude oil prices rise; auction result to lend cues

 

MUMBAI – Prices of government bonds are likely to open lower, tracking an overnight rise in crude oil prices over the $100 per barrel mark following increased uncertainty over the US-Iran peace talks, dealers said. Traders are likely to continue placing short bets ahead of the weekly gilt auction and weekend, which will weigh on bond prices, 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. The opening level will also take cues from the expected underwriting cut-offs, dealers said. Thursday, the 10-year benchmark bond ended at INR 96.90, or 6.9328% yield. Gilt prices ended mixed in the previous session, as bond prices closely tracked movements in Brent crude prices and traders assessed news reports on the possibility of a peace deal between the US and Iran. The sharp rise in the rupee helped bond prices, while short bets placed to make room for the fresh supply of the new 10-year bond at auction weighed on prices.

 

Brent crude oil futures for July delivery rose to near $102 per barrel at 0700 IST, up from $97.93 per barrel at the end of Indian trading hours Thursday. Crude oil prices rose above $100 per barrel after Iran's military said the US forces targeted an Iranian oil tanker in coastal waters and a second vessel near the United Arab Emirates' Fujairah port, with airstrikes in several cities violating the ceasefire, according to media reports. The US said it fired on Iranian targets after Iranian forces launched missiles, drones, and small boats at three US warships in the Strait of Hormuz. At 0600 IST, the benchmark 10-year US Treasury yield was 4.34%, down from 4.36% at 1700 IST Thursday.

 

Meanwhile, the Court of International Trade ruled that President Donald Trump's 10% global tariffs are illegal, following the US Supreme Court's rejection of many of his tariffs. Traders do not expect this to have any immediate impact on bond prices, dealers said.  

 

Back home, traders are likely to refrain from building aggressive positions ahead of the weekly gilt auction for the new 10-year bond results, dealers said. Traders expect the Reserve Bank of India to set the coupon on the new 10-year bond below 7%. The new 10-year, 2036 bond was traded in the when-issued market at yields ranging from 6.87% to 6.92%. Thursday, there were 34 trades worth INR 6.55 billion in the when-issued (NewIssues) segment of the Clearing Corporation of India Ltd. Traders will await the underwriting result to assess demand for the bond at auction, dealers said.

 

Traders will also track the movement of overnight indexed swap rates and the rupee, they said. (Janwee Prajapati)

 

End

 

US$1 = INR 94.48

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

 

Edited by Avishek Dutta

 

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