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Informist, Wednesday, May 20, 2026

 

By Diksha Tripathy

 

MUMBAI – Prices of government bonds ended sharply higher Wednesday, reversing losses as Brent crude oil prices fell below the psychologically crucial level of $110 per barrel intraday, dealers said. Bond prices were also supported by an intraday ease in US Treasury yields, they said. The improved risk appetite among traders, with no signs of escalation in the war in West Asia, also helped bond prices, dealers said. However, the fall of the rupee to a record low weighed on them, they said.

 

Bond prices had opened lower Wednesday as Brent crude oil prices remained above $110 per barrel. The overnight rise in US Treasury yields also weighed on bond prices in early trade, dealers said. However, both Brent crude oil prices and US yields eased during the day, helping bond prices reverse losses in the second half of the trading session, dealers said.

 

Brent crude oil prices fell below $110 per barrel after Reuters reported that Japanese oil refiners would be able to secure sufficient substitute crude and petroleum products to replace West Asia supplies through the summer, citing the head of an industry association. The report said efforts continued to procure crude oil from Saudi Arabia and the United Arab Emirates via routes bypassing the Strait of Hormuz. Separately, a Bloomberg report said India is preparing to send vessels through the Strait of Hormuz to load energy cargoes from Gulf suppliers. This would be the first such move since the Iran conflict began. Traders said the effort is positive for the debt market amid elevated oil prices, which are stoking fears of high inflation. 

 

The news reports improved market sentiment and prompted traders to buy bonds intraday at levels seen as attractive, dealers said. Total turnover in the government securities market was INR 532.85 billion, up from INR 397.10 billion Tuesday, according to data from the Clearing Corp. of India Ltd. There was no trade through the Reserve Bank of India's wholesale e-rupee pilot Wednesday. The instrument has remained unused since February.

 

The rupee's fall to a record low of 96.96 per dollar in early trade weighed on prices, dealers said. However, the rupee later recovered slightly, which lent some support to bond prices, dealers added. Some traders expect the yield on the 10-year benchmark bond to rise to 7.17% if the rupee falls to 97 per dollar. Most traders do not expect the Reserve Bank of India to support the bond market through on-screen purchases, as the central bank is likely to focus on supporting the rupee to prevent further depreciation, which in turn could help bond prices, dealers said.

 

"The 7.04-7.15% (yield on the 10-year benchmark bond) is the new range now because of high crude and rupee," a dealer at a state-owned bank said. "Crude prices came down because of the Japan-related news and that ultimately helped bond prices. But even a slight escalation can push yields higher."  

 

Bond prices did not react significantly to the cut-off yields at the weekly Treasury bill auction, despite the yields being sharply higher than expected, as the market had already factored in higher cut-offs amid low liquidity surplus in the banking system, dealers said. Traders had also expected higher cut-off yields than in last week's auction, as bond yields have begun pricing in an August rate hike following two upward revisions to retail petrol and diesel prices since Friday, dealers said. Primary dealerships and mutual funds were likely the major participants at the auction, they added.

 

The RBI set a cut-off yield of 5.52% on the 91-day T-bill, the highest since Jun 4, 2025. The cut-off yields of 5.75% and 5.98% on the 182-day and 364-day bills, respectively, were the highest in more than a year. According to an Informist poll, the cut-off yields were seen at 5.44%, 5.64%, and 5.81% for the 91-day, 182-day, and 364-day T-bills, respectively.

 

OUTLOOK

On Thursday, bond prices are seen rising, tracking a likely rise in the rupee against the dollar, after the RBI post market hours said it will conduct a $5-billion, three-year dollar-rupee buy-sell swap auction Tuesday. Traders have been awaiting measures from the central bank to support the rupee and infuse durable liquidity into the banking system.

 

Traders will also track developments related to the West Asia conflict and movements in Brent crude oil prices, dealers said. Any major escalation in the conflict could push bond yields higher from current levels. Traders will also monitor overnight indexed swap rates, they said.  

 

The yield on the 6.48%, 2035 bond is seen in the 7.04-7.15% range Thursday. Traders said purchases from state-owned banks at the 7.14-7.15% yield level, which they see as attractive, are likely to prevent the benchmark yield from breaching that level. At the lower end of the bond yield's trading range, profit-booking by traders who bought gilts when yields were above 7.10% is expected to prevent the yield from falling below 7.05%, dealers said.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	95.9550	7.0761%	95.7300	7.1101%
6.33%, 2035	95.7400	6.9769%	95.7400	6.9769%
6.36%, 2031	97.9900	6.8609%	97.8575	6.8943%
6.68%, 2040	93.8900	7.3825%	93.6500	7.4112%
6.90%, 2065	89.8500	7.7268%	89.5500	7.7537%

 

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India Gilts: Up on intraday fall in Brent crude, US yields

 

--Cut-off yield on 91-day T-bill at auction 5.5236%, highest since Jun 4 

--Cut-off yield on 182-day T-bill at auction 5.7506%, highest since May 2025 

--Cut-off yield on 364-day T-bill at auction 5.9750%, highest since Apr 2025 

 

	1515 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	95.86	95.90	95.52	95.59	95.73
YTM (%)	7.0908	7.0848	7.1422	7.1315	7.1101

 

India Gilts: Up on intraday fall in Brent crude, US yields

 

MUMBAI--1515 IST--The government bond prices rose, reversing an earlier fall, due to an intraday decline in US Treasury yields and Brent crude prices, dealers said. Earlier in the day, a large portion of purchases were from state-owned banks at 7.14% yield on the 10-year benchmark 6.48%, 2035 bond. Market sentiment remained positive as dealers expect a record transfer of surplus from the Reserve Bank of India to the Centre of at least INR 3.00 trillion for 2025-26 (Apr-Mar). The RBI's central board is likely to approve the transfer by the end of this week. 

 

"Traders are expecting a high dividend of around 3.5 lakh crore (INR 3.5 trillion) from the RBI, and after that, there will be less borrowing (not more-than-budgeted borrowing from the government), and it will support bond prices," a dealer at a state-owned bank said.

 

At 1515 IST, the yield on the 10-year benchmark US Treasury note was at 4.65%, down from 4.68% at 0900 IST. The Brent crude oil futures contract for July delivery was at $109.42 per barrel at 1515 IST, slightly down from $110.03 per barrel at 0900 IST. The rupee also recovered slightly from the record low of INR 96.9600 per dollar Wednesday. At 1430 IST, the turnover in the gilt market was INR 278.25 billion, slightly up from INR 242.45 billion at 1435 IST Tuesday, according to data from the RBI's Negotiated Dealing System–Order Matching platform.

 

Cut-off yields at the weekly Treasury bill auction were sharply higher than estimates, as the liquidity surplus in the banking system deteriorated. Primary dealerships and mutual funds were the major participants at the auction, dealers said. The RBI set a cut-off yield of 5.52% on the 91-day T-bill, the highest since Jun 4. The cut-off yields of 5.75% and 5.98% set on the 182-day and 364-day bills, respectively, were the highest in more than a year. According to an Informist Poll, the cut-off yields were seen at 5.44%, 5.64% and 5.81% for the 91-day, 182-day and 364-day T-bills, respectively. (Durgesh Nandan)

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India Gilts: Off lows as US yields, crude ease; T-bill cut-offs seen higher

 

	1303 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	95.64	95.72	95.52	95.59	95.73
YTM (%)	7.1239	7.1117	7.1422	7.1315	7.1101

 

MUMBAI--1300 IST--Prices of government bonds recovered most losses as US Treasury yields eased intraday, dealers said. Traders also bought bonds at levels seen as attractive, they said. Bond prices remained down as Brent crude oil prices remained around the psychologically crucial level of $110 per barrel for the third straight session, dealers said.

 

The 10-year US Treasury yield eased to 4.65% from 4.67?rlier and crude oil price were also marginally lower from the start of India's bond trading hours at 0900 IST, dealers said. Traders continued to have limited risk appetite and did not carry their positions, selling bonds as prices recovered, they sad added.

 

Traders expect the cut-off yields at the Treasury bill auction to be higher than that of the previous auction as they begin pricing in a rate hike in August after two price hikes for petrol and diesel since Friday, dealers said. Mutual funds are likely to have aggresively bid for T-bills at the auction as cut-off yields are seen higher. The Reserve Bank of India is likely to set a cut-off yield of 5.44% on the 91-day T-bill at the auction Wednesday, according to an Informist Poll. The cut-off on the 182-day T-bill is seen at 5.64% yield and 364-day T-bill is at 5.81% yield. After the auction, traders said cut-off yields were likely to be 5-10 basis points higher than these estimates.

 

"The cut-offs (at the T-bill auction) are likely to be higher," a dealer at a state-owned bank said. "Everyone will be bidding at factoring in the rate hike so your cut-off will be definitely higher." The three-month T-bill will mature after the August policy and some sections of the market fear a repo rate increase or monetary policy tightening beginning in June itself as the West Asia war drags on and inflation is seen more entrenched, dealers said.

 

At 1300 IST, the turnover in the gilt market was INR 198.25 billion, higher than INR 187 billion at 1230 IST Tuesday, 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 7.05–7.17% range. Any major escalation in the West Asia war could push the yield on the 10-year benchmark bond to above 7.17%, dealers said. (Diksha Tripathy)

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India Gilts: Down on high US yields, Brent crude oil prices 

 

	0925 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	95.64	95.64	95.52	95.59	95.73
YTM (%)	7.1247	7.1243	7.1422	7.1315	7.1101

 

MUMBAI--0925 IST--Prices of government bonds were down due to an overnight rise in US yields, dealers said. Prices of Brent crude oil were also above the psychologically crucial level of $110 per barrel, which weighed on bond prices, dealers said. Traders across the board trimmed positions in early trade due to fears of further escalation in the West Asia war, they said. 

 

Despite US President Donald Trump's order to pause military strikes on Iran, Brent crude oil prices have remained above $110 per barrel. Brent crude oil futures for July delivery were at $110.80 per barrel at 0925 IST, similar to $110.90 per barrel at 1700 IST Tuesday. At 0925 IST, the yield on the 10-year benchmark US Treasury note was at 4.67%, up from 4.62% at the end of Indian gilt trading hours Tuesday.

 

Bond prices were also pulled down by a sharp fall in the rupee Wednesday, dealers said. The rupee fell to a record low of 96.96 a dollar in early trade. Traders expect the yield on the 10-year benchmark 6.48%, 2035 bond to breach the crucial 7.15% level and rise to 7.17% if the rupee depreciates further to 97 a dollar, dealers said. 

 

"US yields are very high and rupee has also fallen to a record low, all that is affecting bond prices," a dealer at a state-owned bank said. "If the rupee falls to 97 (per dollar), the yield (on the 10-year benchmark bond) could go up to 7.17?cause people will be selling even more."

 

Traders trimmed risk positions Wednesday amid no signs of a peace deal between the US and Iran, which weighed on bond prices, dealers said. Any escalation in the West Asia war could push bond yields higher, they said. Dealers expect the Reserve Bank of India to support bond prices through on-screen purchases in the secondary market if the yield on the 10-year benchmark bond surges past 7.15%.                  

 

At 0925 IST, the turnover in the gilt market was INR 32.90 billion, lower than INR 44.65 billion at 0930 IST Tuesday, 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 7.05–7.17% range. Any major escalation in the West Asia war could push the yield on the 10-year benchmark bond to above 7.17%, dealers said. (Diksha Tripathy)

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India Gilts: Seen lower due to sharp rise in US ylds; oil price to lend cues

 

MUMBAI – Government bond prices are likely to open lower due to a sharp overnight rise in the yield on the 10-year benchmark US Treasury bond. Indian bond prices will track any movement in crude oil prices during the day as these traded above $110 per barrel, the same as Tuesday, dealers said. 

 

The yield on the 10-year benchmark 6.48%, 2035 bond is expected to open near 7.12% and is seen in the 7.10-7.15% range during the day, dealers said. Tuesday, the 10-year benchmark bond had ended at INR 95.73, or 7.1101% yield. Bond prices were supported Tuesday as public sector banks bought bonds at levels seen as attractive, dealers said. However, the fall of the rupee to a record low and elevated Brent crude oil prices capped gains in bond prices, dealers said. Public sector banks are likely to continue their buying from Tuesday as traders expect the yield on the 10-year benchmark bond to remain over 7.10%, dealers said. If the yield on the 6.48%, 2035 bond falls below 7.10%, it will lead to profit booking from banks, they said.

 

Brent crude oil prices remained high despite US President Donald Trump's statement he had paused a planned military strike on Iran, originally scheduled for Tuesday, citing ongoing negotiations and requests from Gulf allies, according to media reports. Trump said there was a "very good chance" of reaching a deal without military action. He also warned that Washington could carry out new strikes on Iran within days if talks break down while Tehran said it would retaliate by opening "new fronts" against the US, media reports said. 

 

Though most traders do not expect the US to attack Iran despite threats from President Donald Trump, the lack of a peace deal and a fragile ceasefire will continue to keep the market on edge, dealers said. 

 

At 0730 IST, the benchmark 10-year US Treasury yield was 4.67%. Fears of high inflation in the world's largest economy, driven by the ongoing war in West Asia, pushed the 10-year US yield to a 16-month high of 4.69% Wednesday, up from 4.62% at 1700 IST Tuesday. Indian bond prices will also track overnight indexed swap rates which are expected to rise Wednesday as US Treasury yields surged after Indian markets closed Tuesday.

 

On the domestic front, traders await the transfer of the Reserve Bank of India's surplus for 2025-26 (Apr-Mar) to the government, likely to be announced Friday. Traders expect a transfer of INR 2.7 trillion to INR 3.5 trillion. Some traders expect the transfer to be closer to INR 4 trillion, dealers said. These traders expect a cut in the RBI's contingency risk buffer to 6.5% from the 7.5% buffer it maintained in the previous financial year. A low transfer from the RBI is likely to cause a sharp fall in gilt prices as it implies the government may need to borrow more than the budgeted amount in this financial year, dealers said.

 

Traders will also track any movement of the rupee against the dollar after it fell to a record low of 96.60 per dollar Tuesday. (Janwee Prajapati) 

 

US$1 = INR 96.82

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

 

Edited by Saji George Titus

 

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