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Informist, Friday, May 15, 2026

 

By Diksha Tripathy

 

MUMBAI – Prices of government bonds ended sharply down as traders trimmed risk positions ahead of the weekend, dealers said. High Brent crude oil prices above $105 per barrel and a sharp rise in US Treasury yields from the previous session also weighed on market sentiment, they said.

 

Bond prices had, however, recovered from the day's lows after foreign banks stepped up purchases following an Informist report that the government and the Reserve Bank of India were considering proposals to slash the withholding tax rate on government bonds to attract foreign investment and help protect foreign exchange reserves. The proposals include reducing the withholding tax from the current 20% to 5%, while some stakeholders have sought a complete waiver, a senior government official said Friday.

 

Bond prices were supported as some traders covered short positions to square off books ahead of the weekend, dealers said. The benchmark 10-year 6.48%, 2035 bond ended at INR 96.03, sharply lower than INR 96.32 on Thursday. The bond's price had fallen to as low as INR 95.83. Its yield settled at 7.0644%, its highest closing level since Apr. 2, compared with 7.0203% in the previous session.

 

The yield on the benchmark 10-year bond hovered near the crucial 7.05% level throughout the week. Dealers said there were no RBI bond purchases in the secondary market to cap yields, as had been the case through secondary market open market operations in the March quarter. Instead, state-owned banks with higher risk appetite continued to help bond prices after having sold gilts aggressively to the RBI in financial year 2025-26 (Apr-Mar) and sitting on relatively lighter portfolios, dealers said. Earlier in the session Friday, the yield on the 10-year benchmark bond rose to 7.0947%, the highest since Apr. 6, before the US and Iran agreed to a ceasefire in the West Asia war. 

 

The total traded volume in government securities stood at INR 546.30 billion, sharply lower than INR 652.05 billion on Thursday, according to data from Clearing Corp. of India Ltd. There was no trade through the Reserve Bank of India's wholesale e-rupee pilot Friday. The instrument has remained unused since February.

 

A sharp rise in Brent crude oil prices weighed on bonds, dealers said. Brent crude futures for July delivery were at $108.08 per barrel at 1700 IST, up from over $105 per barrel at 1700 IST Thursday. Higher US Treasury yields also pressured domestic bond prices, dealers said. At the close of Indian gilt trading hours, the yield on the 10-year US Treasury note stood at 4.54%, its highest since May last year and significantly higher than 4.45% at 1700 IST Thursday.

 

"It was a heavy day today (Friday) with the rupee touching another record low and then recovering slightly, and crude remaining volatile, and US Treasury yields moving higher," a dealer at a state-owned bank said. "We saw buying, short covering, and selling ahead of the weekend. It was a mix of everything, which is why bond prices recovered for some time during the session." 

 

The depreciation of the rupee to a record low of 96.14 per dollar weighed on bond prices as well, dealers said. The rupee fell sharply and settled at a record closing low of 95.97 amid uncertainty on the reopening of the Strait of Hormuz and widening of India's trade deficit in April to a three-month high of $28.38 billion, dealers said. The rupee's track record as Asia's worst-performing currency in 2026 has kept foreign investors away from buying Indian equity and debt, worsening the hit to the expected widening of the current account deficit from higher crude oil prices, dealers said. 

 

"Crude and UST (US Treasury yields) were driving the market, but (the) rupee falling was another surprise that we didn't expect because there was no major trigger (overnight) actually," a dealer at a primary dealership said. "That (the rupee) fell and then our (bond) prices also fell."  

 

Bond prices also fell slightly after the cut-off price on the 6.36%, 2031 bond was lower than traders' expectations, dealers said. The government sold INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of a new 40-year bond at the auction Friday. The RBI set a cut-off price of INR 97.92 on the 6.36%, 2031 bond at the auction. Traders said the West Asia war-led pressure dampened the demand for the five-year bond at the weekly gilt auction. Traders also called it a "risky bet" amid speculation of a rate hike as early as August, especially with petrol and diesel prices being hiked, dealers said. In the face of this uncertainty, state-owned banks with a higher risk appetite picked up the 6.36%, 2031 bond at the auction to match their liabilities and park in their held-to-maturity portfolios, they said.

 

Indian Oil Corp. Ltd. hiked petrol and diesel prices by about INR 3 per litre early Friday, lower than the market expectation of INR 5-INR 10 per litre, dealers said. The immediate impact on bond prices was muted as a larger hike had been factored in. However, traders now expect higher retail inflation in subsequent months to prompt the RBI to tighten monetary policy, dealers said. The market expects oil marketing companies to hike prices further in the coming weeks and months up to an increase of INR 8 to INR 20 per litre, depending on the duration of the West Asia war and prices of crude oil in global markets. 

 

Meanwhile, the Employees' Provident Fund Organisation and insurance companies likely purchased the new, 40-year 2066 bond. The RBI set a coupon of 7.71% on the bond, largely in line with market expectations and a tad lower than an Informist poll estimate of 7.72%. The 2066 bond ended at INR 100.21 or 7.69% yield. 

 

OUTLOOK

On Monday, traders will track developments related to the West Asia war and Brent crude oil prices, dealers said. The absence of public progress in the resolution of the West Asia war during a summit between the US and Chinese presidents reduced risk appetite. Any escalation in the West Asia war over the weekend could push bond yields higher, 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 the 7.00-7.10% range Monday. 

 

Traders will also closely track the result of the INR-300-billion switch auction, wherein the government announced it would switch eight gilts with five longer-term gilts. 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. More benchmark securities were expected at the switch auction, dealers said.  

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	96.0300	7.0644%	96.3200	7.0203%
6.33%, 2035	95.9500	6.9439%	96.2000	6.9048%
6.36%, 2031	97.9775	6.8633%	98.2	6.8063%
6.68%, 2040	94.0500	7.3630%	94.3500	7.3268%
6.90%, 2065	90.1000	7.7045%	90.4275	7.6754%

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India Gilts: Off lows on value buys; down as Brent hits $109/bbl

 

--Dealers: Gilts tumble as Brent crude hits $109/bbl, US ylds rise more 

--Dealers: Gilts fall more as cut-off on 6.36%, 2031 gilt lower than view 

 

	1559 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.09	96.17	95.83	96.15	96.32
YTM (%)	7.0553	7.0432	7.0947	7.0462	7.0203

 

MUMBAI--1559 IST--Prices of government bonds slumped due to the combined effect of a rise in the price of Brent crude oil, higher US yields, and a lower-than-expected cut-off price on the 6.36%, 2031 bond at the auction, dealers said. However, prices were off the day's lows on likely purchases by state-owned banks, dealers said.

 

"Traders were expecting something positive from the US-China meeting, but it hasn't happened yet," a dealer at a public sector bank said. "And the (higher-than-expected) rise in the cut-off rate (yield) for short-term bond (the 6.36%, 2031 bond) collectively put pressure on the bond prices."

 

During the day, Brent crude oil futures for July delivery rose to a 10-day-high above $109, weighing on bond prices, up from $107.07 per barrel at 0900 IST, dealers said. Crude oil prices have remained above $100 per barrel amid supply disruptions due to the ongoing US-Iran war. Ahead of the weekend, traders were trimming positions to reduce risk in case there is further escalation in the US-Iran war, which also pushed down prices during the day, dealers said. 

 

Due to lack of a concrete peace deal between the US and Iran from the US-China meeting, sentiment turned pessimistic. The fall of the rupee to a record low of 96.1425 per dollar also pushed down bonds prices, dealers said. Uncertainty about an end to the US-Iran war and the reopening of the Strait of Hormuz persisted. 

 

On Friday, the Reserve Bank of India took the entire notified amount of INR 320 billion at the gilt auction. The Employees' Provident Fund Organisation and insurance companies purchased the new, 40-year 2066 bond, whereas only a few public sector banks purchased it, dealers said. The RBI set a coupon of 7.71% on the new 40-year bond, largely in line with market expectations and a tad lower than an Informist poll estimate of 7.72%. However, the cut-off price of the 6.36%, 2031 bond was lower than market expectations due to tepid appetite for the bond amid speculation of a rate hike cycle beginning this financial year.

 

"Banks were afraid to buy the short-term bond due to high chances of rate hike expectations in the market," the dealer said.

 

At 1559 IST, the turnover in the gilt market was INR 321.90 billion, lower than INR 490.25 billion at the same time Thursday, 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 1559 IST was INR 55.35 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 7.00–7.09%. (Durgesh Nandan)

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India Gilts: Remain dn as US ylds inch up; auction demand for 5-yr gilt weak

 

	1324 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.08	96.17	96.03	96.15	96.32
YTM (%)	7.0568	7.0432	7.0644	7.0462	7.0203

 

MUMBAI--1324 IST--Prices of government bonds remained sharply down due to an intraday rise in US Treasury yields, dealers said. Traders remained cautious and awaited the result of the weekly gilt auction Friday, they said. 

 

The government invited bids to sell INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of a new 40-year bond at the auction Friday. The West Asia war-led pressure likely dampened demand for the five-year bond at the weekly gilt auction Friday, dealers said. With the likelihood of a sharp rise in India's headline inflation print due to elevated oil prices amid the West Asia war, the Reserve Bank of India is expected to raise interest rates in the second half of the current calendar year. This might lead to higher bond yields, dealers said. Hence, traders called the five-year bond a "risky bet" in times of uncertainty.

 

Mostly state-owned banks with a higher risk appetite likely picked up the 6.36%, 2031 bond at the auction, dealers said. However, some traders expect the RBI to accept bids of less than INR 210 billion for the five-year bond at auction. According to an Informist poll, the cut-off yield on the 6.36%, 2031 gilt tender was seen at 6.87%, similar to 6.8652% at which it was traded at 1238 IST.

 

If the cut-off yield on the five-year bond is close to secondary market levels, traders will likely cover their short bets in the secondary market, placed ahead of the auction, which will lead to a rise in the bond's price, 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 1317 IST showed trades worth INR 24.75 billion in the 6.36%, 2031 gilt, up from INR 15.60 billion Thursday.

 

Insurers bid aggressively for the new 40-year, 2066 bond at the auction, dealers said. The RBI is likely to set a coupon of 7.72% on the new 40-year, 2066 bond at the auction, as per the Informist poll. 

 

"The auction should go through, but the five-year might see some tail (higher cut-off yield)," a dealer at a primary dealership said. "The demand was there from mostly PSU banks (public sector banks) for that (6.36%, 2031 paper). We will have to see cut-offs because a higher cut-off (yield on the 6.36%, 2031 bond) could push the 10-year benchmark yield to above yesterday's (Thursday's) 7.06% level."   

 

A slight intraday rise in US Treasury yields weighed on bond prices, dealers said. At 1240 IST, the yield on the 10-year US Treasury note was 4.54%, up from 4.52% at 0900 IST, and significantly higher than 4.45% at 1700 IST Thursday.

 

At 1324 IST, the turnover in the gilt market was INR 196.35 billion, sharply lower than INR 323.10 billion at 1230 IST Thursday, data from the Reserve Bank of India'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 6.98–7.07%. 

 

The 10-year benchmark bond remained near the crucial level of 7.05% yield this week. However, no intervention by the RBI is expected by traders, dealers said. Even at these levels, bond prices remain supported due to the high risk appetite of state-owned banks, which bought bonds when the yield on the 10-year benchmark bond remained near 7.05%, dealers said. 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: Sharply down on overnight rise in US yields, crude oil prices

 

--Dealers: Gilts down as 10-year US Treasury yield at nearly 1-year high 

--Dealers: Gilts fall on INR 3/ltr price hike in retail petrol, diesel 

 

	0941 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.10	96.17	96.03	96.15	96.32
YTM (%)	7.0534	7.0432	7.0644	7.0462	7.0203

 

MUMBAI--0941 IST--Prices of government bonds were sharply down due to an overnight rise in US treasury yields and Brent crude oil prices, dealers said. However, traders were cautious and refrained from placing aggressive bets before the weekly gilt auction, they said.

 

An overnight rise in US Treasury yields pulled down Indian gilt prices, dealers said. The rise comes after the International Monetary Fund warned that the wider West Asian conflict could drag down global growth and push inflation higher if disruptions continue. At 0940 IST, the yield on the 10-year benchmark US Treasury note was at over 4.52%, highest in nearly 1-year, and up from 4.45% at 1700 IST Thursday. An overnight rise in Brent crude oil prices also weighed on bond prices, dealers said. Brent crude oil futures for July delivery were near $107 per barrel at 0940 IST, up from $105 per barrel at the end of Indian trading hours Thursday. 

 

The impact of the fuel prices' hike on bond prices was muted, dealers said. Indian Oil Corp. Ltd. hiked the petrol and diesel prices by about INR 3 per litre early Friday, lower than market expectation of INR 5-INR 10 per litre, dealers said. Bond prices fell after the oil company raised retail fuel prices as it marked an onset of rise in fuel prices which lead to the expectations of higher inflation print in subsequent months, dealers said. The price hike comes amid a sharp rise in crude oil prices. Traders had expected a rise due to oil supply-related concerns stemming from the West Asia war. Traders expect the oil marketing companies to hike prices further in the coming months but in small tranches of INR 2–3 per litre to avoid a sudden shock to the customers, dealers said.  

 

"There is not much impact of the (fuel price) hikes because the market had factored that in already," a dealer at a state-owned bank said. "Today's (Friday) impact (on bond prices) is mostly due to the (rise in) UST (US Treasury yields) and to some extent crude, obviously."  

 

The pressure due to the West Asia war is likely to dampen the demand for the five-year bond at the weekly gilt auction Friday, dealers said. The government will sell INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of a new 40-year bond at the auction Friday. State-owned banks with a higher risk appetite are likely to pick up the 6.36%, 2031 bond at the auction. However, traders expect the RBI to accept bids less than INR 210 billion of the five-year bond at auction, dealers said. Traders expect the cut-off yield on the five-year bond to be nearly 3–4 basis points higher than the secondary market levels. If the cut-off yield on the five-year bond is near secondary market levels, traders might make purchases there, they said. For the new 2066 bond, insurers and pension funds are likely to bid aggressively, with traders expecting a coupon in a 7.67-7.73% range. 

 

At 0941 IST, turnover in the gilt market was INR 60.25 billion, higher than INR 27.20 billion at 0930 IST Thursday, data from the Reserve Bank of India'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 6.98–7.07% 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 down on rise in crude, retail auto fuel prices

 

MUMBAI – Government bond prices are likely to fall slightly, tracking an overnight rise in Brent crude oil prices as it continued to trade above the crucial level of $100 per barrel for over three weeks, dealers said. Moreover, the hike in retail prices of petrol and diesel is also likely to weigh on market sentiments, they said. An overnight rise in US Treasury yields is also likely to weigh on prices. Traders are also likely to remain cautious ahead of the weekly gilt auction result, which will lend cues later in the day, dealers said.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open near 7.02% and is seen in the 7.00-7.10% range during the day, dealers said. On Thursday, the 10-year benchmark bond ended at INR 96.32, or 7.0203% yield. Gilt prices ended sharply higher Thursday on short covering after a Bloomberg report said the government is considering a significant reduction in taxes paid by foreign investors on Indian bonds. However, the rise in bond prices was capped as traders booked profits.

 

Brent crude oil futures for July delivery were trading near $107 per barrel, up from the $105 per barrel at the end of Indian trading hours Thursday. Brent crude oil prices have stabilised within the $105–$108 per barrel band as US President Donald Trump said Chinese President Xi Jinping offered to help the US negotiate with Iran to reopen the Strait of Hormuz, according to media reports. Meanwhile, the US sought to extend a fragile ceasefire between Israel and Lebanon ahead of its scheduled expiry on Sunday. Israeli and Lebanese officials met in Washington for talks aimed at preserving the truce, despite renewed violence on the ground. Moreover, the International Monetary Fund warned that the wider West Asian conflict could drag down global growth and push inflation higher if disruptions continue. At 0800 IST, the 10-year benchmark US Treasury yield was 4.52%, up from 4.45% at 1700 IST Thursday.

 

Back home, Indian Oil Corp. Ltd. has hiked the petrol and diesel prices by about INR 3 per litre. The price hike comes amid a sharp rise in crude oil prices. The price of retail petrol in Delhi was hiked by INR 3 per litre, taking it to INR 97.77 per litre. The diesel price in Delhi has risen to INR 90.67 per litre from INR 87.67 per litre earlier. However, some traders expect the impact to be muted as they had expected the price hike to be near INR 5-INR 10, 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 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% Wednesday. Traders expect the cut-off on the five-year bond to be 3-4 basis points higher than secondary market levels. For the new 2066 bond, insurers and pension funds are likely to bid aggressively, with traders expecting a coupon in the 7.67-7.72% range. 

 

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

 

US$1 = INR 95.97

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

 

Edited by Avishek Dutta

 

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