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Informist, Thursday, May 14, 2026

 

By Diksha Tripathy

 

MUMBAI – Prices of government bonds ended sharply higher Thursday after a Bloomberg report said the government is considering a significant reduction in taxes paid by foreign investors on Indian bonds, dealers said. The Reserve Bank of India has recommended the move, which is being "seriously considered by the Finance Ministry" to attract higher foreign inflows and curb the depreciation of the rupee, Bloomberg reported, citing people familiar with the matter. Risk appetite improved amid no signs of escalation in the West Asia war, which prompted traders to buy bonds at levels seen attractive, dealers said. However, the rise in bond prices was capped as traders booked profits, given the rise in bond prices after falling most of this week, they said. 

 

The benchmark 10-year 6.48%, 2035 bond ended at INR 96.32, sharply higher than INR 96.13 Wednesday. Its yield ended at 7.0203%, against 7.0493% in the previous session. The benchmark yield closed above the psychologically crucial 7% mark for the fourth consecutive session Thursday. The yield hit 7.0614?rlier in the session, the highest since Apr. 30.

 

The total traded volume of government securities stood at INR 655.80 billion, sharply higher than INR 484.10 billion on Wednesday, according to data from Clearing Corp. of India Ltd. Dealers attributed the rise in volumes to improved market sentiment amid the absence of any fresh escalation in the West Asia conflict. There was no trade using the Reserve Bank of India's wholesale e-rupee pilot Thursday. The instrument has not been used since February.

 

Bond prices had opened higher, as Brent crude oil prices eased overnight. Brent crude oil futures for July delivery were at $105.45 per barrel at 1700 IST, broadly similar to $105.87 per barrel at 0900 IST, and lower than nearly $108 per barrel at the close of Indian gilt market hours Wednesday. Dealers said the lack of adverse global cues kept crude oil prices largely stable through the day.

 

"Crude (oil price) is what the market is tracking these days," a dealer at a state-owned bank said. "Even a slight rise or fall (in Brent crude oil price) is impacting the market. Yesterday (Wednesday) we also saw that and today (Thursday) also. If they (oil prices) are stable, market will be stable."  

 

The recovery of the rupee following the Bloomberg report supported bond prices, dealers said. The Indian currency rose to 95.5950 a dollar during the day. The optimism over potential foreign inflows partially offset the impact of higher than expected wholesale inflation data in the bond market, dealers said.  

 

India's wholesale inflation rose to a 42-month high of 8.30% year-on-year in April, driven by a sharp increase in fuel and power inflation amid the energy crisis triggered by the West Asia conflict. The headline print was significantly above the 5.5% estimate in an Informist poll. Traders expect wholesale inflation to rise further as crude oil prices have remained above $100 per barrel. Wholesale fuel and power inflation surged to a 42-month high of 24.71% in April, reflecting the severe impact of the West Asia energy crisis. Economists had estimated fuel and power inflation at around 4-6% for April, compared with 1.05% in March. 

 

The headline inflation print for the coming months is likely to be higher with high chances of a retail fuel price hike later in May, dealers said. This has advanced bets of a 25-basis-point interest rate hike by the RBI's Monetary Policy Committee to as early as August, they said. Traders were earlier expecting the interest rate hikes to begin from December. 

 

"If this situation (the US-Iran war) persists, rate hikes will begin very soon," a dealer at a primary dealership said. "Crude has been above $100 (per barrel). If it continues in May also, then we may see a hike in August. The war is keeping everyone on their toes, even the RBI."

 

Market sentiment was largely positive throughout the day with no major signs of escalation in the US-Iran war, dealers said. US President Donald Trump and Chinese President Xi Jinping discussed reopening ‌the Strait of Hormuz amid the global energy crisis, according to media reports. Traders expect a positive outcome from the US-China talks which would help bond prices, dealers said.

 

OUTLOOK

On Friday, traders will track developments related to the West Asia war and Brent crude oil prices, dealers said. The absence of a peace deal between the US and Iran kept Brent crude oil prices above $100 per barrel Thursday. Any overnight escalation in the West Asia war could push bond yields higher, dealers said. 

 

Traders will closely track the result of the weekly gilt auction Friday when the government will sell INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of a new 40-year 2066 bond. State-owned banks with a higher risk appetite are likely to pick up the five-year bond at the auction, dealers said. The 6.36%, 2031 bond ended at INR 98.20, up from INR 98.10, while its yield ended at 6.8063%,against 6.8313% Thursday. For the new 2066 bond, insurers and pension funds are likely to bid aggressively, dealers said. Traders expect the coupon on the new 40-year bond to be in the range of 7.67-7.72%. 

 

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 the 6.98-7.10% range Friday. 

 

On Monday, traders will track the result of a switch auction, wherein the government announced it would switch eight gilts worth INR 300 billion with five longer-term gilts. Some traders expect the auction on Monday to be partially switched as the securities announced are similar to those at earlier auctions, and banks do not hold many of these source securities since they have been switched already. Had the government included the 6.33%, 2035 gilt and other previous benchmark securities as destination securities at the auction, these would have found demand from traders, dealers said.  

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	96.3200	7.0203%	96.1275	7.0493%
6.33%, 2035	96.2000	6.9048%	96.0800	6.9233%
6.36%, 2031	98.2000	6.8063%	98.1000	6.8313%
6.68%, 2040	94.3500	7.3268%	94.0800	7.3590%
6.90%, 2065	90.4275	7.6754%	90.2000	7.6956%

 

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India Gilts: Sharply up on improved risk appetite; traders take profits

 

	1600 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.35	96.45	96.03	96.17	96.13
YTM (%)	7.0154	7.0007	7.0637	7.0429	7.0493

 

MUMBAI--1600 IST--Prices of government bonds rose sharply as traders continued buying at levels seen to be attractive, dealers said. Market sentiment remained positive with no signs of escalation of the conflict in West Asia and Brent crude oil prices remaining near $105 per barrel, they said. However, some traders took profits which weighed on bond prices, dealers said.

 

Traders took profits after bond prices surged on a Bloomberg report that the government was considering a significant reduction in taxes paid by foreign investors on Indian bonds, dealers said. The news also diluted the impact of the higher-than-expected wholesale inflation data for April, they said. WPI inflation came in at 8.30% year-on-year, against 3.88% in March. An Informist Poll had pegged April WPI inflation at 5.5%.

 

Traders also maintained caution ahead of the weekly gilts auction Friday, when the government will sell INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of a new 40-year government security. Demand at the auction is seen firm from banks and insurers, dealers said. Traders expect the coupon on the new 40-year bond to be in the range of 7.67-7.72%.

 

Market sentiment remained positive as Brent crude oil futures for July delivery remained near $105 per barrel at 1600 IST, similar to $105.87 per barrel at 0900 IST. The uncertainty about the end of the US-Iran war and reopening of the Strait of Hormuz have kept Brent crude oil price above $100 per barrel.

 

"Currently, the market is only tracking crude price very neck to neck... we (yield on 6.48%, 2035 bond) went to 7.02?cause of crude," a dealer at a primary dealership said. "Even a higher WPI was not a big surprise. Some of its impact was also diluted due to the Bloomberg news."

 

At 1600 IST, the turnover in the gilts market was INR 597.10 billion, up from INR 443.90 billion at 1630 IST Wednesday, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching platform showed. Trading volume in the new 10-year 6.94%, 2036 bond till 1530 IST was INR 96.70 billion, as per data from Clearing Corp. of India Ltd.

 

For the rest of the day, the yield on the 10-year benchmark bond is seen in the range of 7.00–7.07%.  (Durgesh Nandan)

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India Gilts: Off highs; up on report govt mulls tax cut on FPIs' bond invest

 

	1317 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.21	96.45	96.03	96.17	96.13
YTM (%)	7.0369	7.0007	7.0637	7.0429	7.0493

 

MUMBAI--1317 IST--Prices of government bonds were off the day's highs after data released showed higher than expected wholesale inflation in India last month, dealers said. Traders also booked profits, which weighed on bond prices, they said. Bond prices had surged on a report that the Centre was considering a significant reduction in taxes paid by foreign investors on Indian bonds, dealers said.

 

The Reserve Bank of India has recommended the move, which is being "seriously considered by the Finance Ministry" to attract higher foreign inflows and curb the depreciation of the rupee, Bloomberg reported, citing people with knowledge of the matter. Recovery of the rupee following the report, along with a slight intraday fall in Brent crude oil prices, supported bond prices, dealers said.

 

As bond prices rose, traders rushed to book profits, dealers said. State-owned banks, which likely bought bonds when the yield on the 10-year benchmark 6.48%, 2035 bond was around 7.05%, sold bonds when prices rose, they said. Some traders also covered short positions in the market as they expect yields to decline further. 

 

"(Bond) prices went up due to that flash about tax cuts on foreign investments," a dealer at a private sector bank said. "This was the time when PSUs (public sector banks), which had bought earlier in the day, came out to sell."

 

A higher-than-expected WPI inflation print for April weighed on bond prices, dealers said. WPI inflation came in at 8.30% year-on-year, against 3.88% in March. An Informist poll had pegged April WPI inflation at 5.5%. Traders attributed the rise in WPI inflation to higher fuel prices. Fuel and power inflation surged to 24.71% on year in April from 1.05% in March. Most dealers expect wholesale inflation for May to come in higher than April, with no end in sight to the US-Iran war, they said. Traders expect the RBI's Monetary Policy Committee to raise interest rates as early as August if the West Asia conflict persists and crude oil prices remain elevated above $100 per barrel.

 

An intraday fall in crude oil prices also supported bond prices, dealers said. Brent crude oil for July delivery fell slightly to around $105 per barrel from over $106 per barrel at 0900 IST, and up nearly $3 from 1700 IST Wednesday. At 1317 IST, the turnover in the gilt market was INR 367.85 billion, sharply higher than INR 253.90 billion at 1330 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 range of 7.00–7.10%. Any major escalation in the West Asia war could push the yield on the 10-year benchmark bond to above 7.10%, dealers said.  (Diksha Tripathy)

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India Gilts: Tad up on overnight fall in oil prices, caution before WPI data

 

	0945 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.15	96.25	96.15	96.17	96.13
YTM (%)	7.0460	7.0316	7.0460	7.0429	7.0493

 

MUMBAI--0945 IST--Prices of government bonds were slightly up owing to an ease in prices of Brent crude oil, dealers said. Bond prices were also supported on improved risk appetite with no escalation in the West Asia war, they said. However, the depreciation of the rupee to 95.83 per dollar capped gains in bond prices, dealers added.

 

In early trade, state-owned banks likely bought bonds at levels seen as attractive, continuing their buying momentum from the past four sessions, dealers said. Till Wednesday, public sector banks had bought bonds worth nearly INR 160 billion, data from the Clearing Corp. of India Ltd. showed. 

 

"7.05% (yield on the 10-year benchmark 6.48%, 2035 bond) is a very good support level," a dealer at a state-owned bank said. "Public sector banks have been buying at 7.05% level for the past few days."

 

Brent crude oil futures for July delivery fell to over $105 per barrel at 0930 IST, down from nearly $108 per barrel at the end of Indian market hours Wednesday. However, oil prices have stayed above $100 per barrel amid uncertainty about the end of the US-Iran war, dealers said. Traders expect some positive news on de-escalation of the West Asia war amid US President Donald Trump's visit to China, they said. US yields had also risen overnight but fell in early trade, which helped Indian bond prices, dealers said. The yield on the 10-year benchmark US treasury note was at 4.47%, unchanged from 1700 IST Wednesday. However, overnight the yield had risen to 4.50% IST Wednesday after the end of Indian gilt market hours.  

 

At 0945 IST, turnover in the gilt market was INR 38.30 billion, lower than INR 68.80 billion at 0930 IST Wednesday, data from the Reserve Bank of India's Negotiated Dealing System–Order Matching platform showed. Some traders shifted from the 10-year benchmark 6.48%, 2035 bond to the new 10-year 6.94%, 2036 bond, which also weighed on the prices of 6.48%, 2035 bond, dealers said. The new 10-year bond had a total secondary market trade volume of INR 14.35 billion at 0945 IST.

 

Some traders remained on the sidelines and refrained from placing aggressive bets as they awaited India's WPI inflation data for April. India's WPI inflation is seen rising to a 41-month high in April, mainly because of a jump in energy prices in the wake of the US-Iran war. According to an Informist poll of 11 economists, WPI inflation is expected to have risen to 5.5% in April from 3.88% in March. A higher-than-expected print could bring down bond prices, dealers 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. Any major escalation in the West Asia war could push the yield on the 10-year benchmark bond to above 7.07%, dealers said.  (Diksha Tripathy)

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India Gilts: Seen tad up on ease in crude oil prices; WPI inflation eyed

 

MUMBAI – Government bond prices are likely to open slightly higher Thursday, tracking an ease in overnight prices of Brent crude oil futures and a lack of escalation in the West Asia war, dealers said. However, Brent crude continued to trade above the crucial $100 per barrel level, which will weigh on market sentiment. Some traders will likely make space in their portfolios for the fresh supply of gilts at the weekly gilt auction Friday, which will weigh on the bond prices, they said. Traders will also track wholesale price inflation data for April, scheduled to be released at 1200 IST Thursday. 

 

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open near 7.04% and is seen in the 7.04-7.10% range during the day, dealers said. Public sector banks are likely to continue their buying momentum from the previous trading session, as the yield on the 10-year benchmark bond has remained above the key 7% level this week, which will limit the fall, dealers said. Public sector banks net purchased gilts for four consecutive sessions, bringing their net purchases in the secondary market to nearly INR 160 billion. 

 

On Wednesday, the 10-year benchmark bond ended at INR 96.13, or 7.0493% yield. Gilt prices ended lower Wednesday, tracking a rise in Brent crude oil prices and depreciation of the rupee. The fall was limited as state-owned banks bought bonds at levels seen as attractive. 

 

Brent crude oil futures for July delivery fell to over $105 per barrel, down from nearly $108 per barrel at the end of Indian market hours Wednesday. Crude oil prices remained stable due to the absence of a major escalation in West Asia. US President Donald Trump arrived in China for a two-day visit, where he is expected to discuss the West Asia conflict, as well as trade and economic issues, according to media reports.

 

Back home, WPI inflation is expected to have risen to 5.5% in April from 3.88% in March, according to an Informist poll. The estimates in the poll ranged from 4.4% to 7.9%. The commerce ministry will release WPI data for April at 1200 IST Thursday. Traders expect a sharper rise in wholesale prices as energy prices in India have risen, though retail prices have been kept unchanged. 

 

The government will sell INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of a new 2066 bond at the auction Friday. Traders expect the Reserve Bank of India to set a higher cut-off on the 5-year bond, as the supply of short-term bonds weighed amid ongoing geopolitical tensions, they said. The yield curve will likely become flatter, they said.

 

The Reserve Bank of India on Wednesday announced, post-market hours, that it would switch eight gilts worth INR 300 billion with five longer-term gilts through an auction Monday. Banks hold most of the source securities announced in the switch auction, dealers said. However, dealers were not keen on adding longer-tenure destination securities to their portfolios, they said. Traders would have preferred the 6.33%, 2035 gilt at the auction, dealers added.  (Janwee Prajapati)

 

US$1 = INR 95.76

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

 

Edited by Avishek Dutta

 

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