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Informist, Friday, May 29, 2026

 

By Diksha Tripathy

 

MUMBAI – Prices of most government bonds ended higher Friday on hopes of a peace deal between the US and Iran, which kept Brent crude oil prices at their lowest in over a month, dealers said. However, the 10-year benchmark 6.48%, 2035 bond ended lower as traders sold the paper to make room for the fresh supply of newer 10-year 6.94%, 2036 paper scheduled for auction next week, they said.

 

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.44, lower than INR 96.49 Wednesday. Its yield settled at 7.0037%, compared with 6.9960% at the previous close. Despite Friday's weakness, the benchmark yield remained below the psychologically crucial 7.05% level through most of the week, offering some relief to traders after sustained pressure over the past two weeks. Indian money markets were closed on Thursday for Id-ul-Zuha.

 

"It was good, actually a relatively better week for the traders," a dealer at a small finance bank said. "Oil prices came down, rupee has sharply recovered, so we are ending on a good note." Though prices of some gilts had risen intraday tracking crude oil prices, traders trimmed their bond holdings to limit risk before the weekend. 

 

Bond prices opened higher Friday after near-month Brent crude oil futures fell below $95 per barrel and even traded around $92 per barrel, its lowest since mid-April. However, crude oil prices later rose intraday to nearly $94 per barrel, weighing on sentiment. Some traders booked profits at attractive levels, further keeping the rise in bond prices in check.

 

Amid hopes of a peace agreement between the US and Iran to end the war in West Asia, traders expect the 6.48%, 2035 bond's yield to remain near the 7% mark, where it largely traded throughout the week. However, lack of clarity from both the US and Iran on a final agreement, along with lingering bets of a possible rate hike by the Reserve Bank of India's Monetary Policy Committee next week, kept market participants cautious, dealers said.

 

The benchmark 10-year bond also remained under pressure as traders likely sold the paper and bought the 15-year bond at the weekly gilt auction, dealers said. The widening spread between the two securities supported demand for the 6.68%, 2040 bond. Bond prices erased gains after the auction, where the government had invited bids to sell INR 170 billion of the 6.68%, 2040 bond and INR 110 billion of the 7.43%, 2076 bond.

 

The cut-off yield on the 7.43%, 2076 bond was set higher than market expectations, which weighed on secondary market prices for long-term bonds, dealers said. The Reserve Bank of India set a cut-off price of INR 96.44 of the 50-year benchmark gilt, equivalent to a yield of 7.71%, against the Informist poll median estimate of INR 96.85, or 7.6766% yield. Dealers said pension funds and insurers likely demanded higher yields on the 50-year paper.

 

Meanwhile, the cut-off yield on the 15-year bond was broadly in line with market expectations on demand for traders and banks at the auction. Short sales in the bond had also built up until Wednesday, which traders covered at the auction. However, some banks refrained from placing aggressive bets as they did not want to increase the average duration of their portfolios, dealers said.

 

The total turnover in the government securities market was INR 471.55 billion at the end of Indian gilt market hours Friday, compared with INR 431.55 billion Wednesday. Market turnover has remained below the INR-500-billion mark this week as traders remained cautious ahead of next week's MPC decision, dealers said. There was no trade through the RBI's wholesale e-rupee pilot Friday. The instrument has remained unused since February.

 

Trading activity has been picking up gradually in the new 10-year 6.94%, 2036 gilt. It was the third most-traded bond Friday. Trade volume in the paper was INR 38.75 billion, according to RBI data from the Negotiated Dealing System. Traders expect the bond to become more liquid after its next auction on Jun. 5, when its outstanding stock will rise to INR 680 billion.

 

"When the market thinks yields are going to inch higher, volume starts to shrink," a dealer at a state-owned bank said. "That is what we are seeing. The market is waiting for the MPC, auction, and GDP data to base their decisions. Maybe after that we'll have a better idea of what volumes are signalling." India's GDP data for the March quarter and FY26 will be released after the MPC decision on Jun. 5.

 

MIXED FRIDAY, HAPPY WEEK

The yield on the 10-year benchmark 6.48%, 2035 bond has fallen nearly 10 basis points this week, largely tracking the thaw in the West Asia war. By 1700 IST Friday, Brent crude futures for July fell nearly 13% since the end of Indian gilt trading hours on May 22. Crude oil prices declined amid positive developments in US-Iran peace talks, including reports that a tentative 60-day extension to the ceasefire proposal had been agreed to be negotiators and just await US President Donald Trump's assent, dealers said.

 

Expectations that the RBI would refrain from raising rates also pull down bond yields, particularly those of gilts maturing in under five years, dealers said. Traders no longer expect a rate hike at the June MPC meeting next week as tensions in West Asia have eased and crude oil prices have moderated, dealers said. However, most traders expect the RBI to revise its inflation forecast higher at the upcoming MPC meeting because oil prices, despite recent moderation, remain elevated. Dealers said the central bank may prefer to act pre-emptively through guidance and withdrawing surplus liquidity before considering any repo rate action.

 

Expectations of additional measures to support the rupee also aided bond prices this week, dealers said. Some market participants expect the RBI to announce measures aimed at improving capital account inflows, reducing the need for tighter monetary policy to attract foreign investors. A sharper recovery in the domestic currency would also be positive for bond prices, they added. Hefty spot dollar sales from the RBI Friday helped the rupee rise the most in nearly two months to 95.00 per dollar, its highest closing level in three weeks.

 

State-owned banks were likely the top net sellers of gilts this week, selling securities worth INR 68.31 billion on a net basis between Monday and Wednesday, according to CCIL data. Dealers said these banks booked profits after the benchmark 10-year yield fell near 7%, having accumulated bonds when the yield had risen to 7.14% last week.

 

OUTLOOK

Gilts are not traded Saturday. Monday, bond prices will track movements in Brent crude oil prices and developments in the West Asia conflict, dealers said. The yield on the benchmark 10-year 6.48%, 2035 bond is seen in the 6.95-7.05% range. However, a finalised peace agreement between the US and Iran could pull the benchmark yield closer to the 6.85% level, dealers said. Traders widely expect the benchmark yield to remain below 7.05% unless there is a major setback in efforts to end the conflict in West Asia.

 

Buying momentum may remain slightly muted next week ahead of the RBI Monetary Policy Committee decision on Jun. 5 and the weekly gilt auction of the new 10-year benchmark bond on Friday, dealers said. The government is scheduled to sell INR 340 billion of a 10-year bond next week at auction. It will also release GDP data for the March quarter on Jun. 5. 

 

	FRIDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	96.4400	7.0037%	96.4900	6.9960%
6.94%, 2036	99.7400	6.9759%	99.6950	6.9823%
6.33%, 2035	96.3600	6.8815%	96.3100	6.8890%
6.36%, 2031	98.15	6.8227%	98.12	6.8299%
6.68%, 2040	94.3700	7.3260%	94.1000	7.3581%
6.90%, 2065	90.1800	7.6972%	90.2500	7.6910%

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India Gilts: Fall on intraday rise in Brent crude oil price

 

	1511 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.45	96.63	96.36	96.62	96.49
YTM (%)	7.0022	6.9754	7.0158	6.9766	6.9960

 

	1511 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.76	99.82	99.69	99.81	99.70
YTM (%)	6.9730	6.9829	6.9646	6.9667	6.9823

 

MUMBAI--1511 IST--Prices of government bonds fell, tracking an intraday rise in Brent crude oil prices amid uncertainty over a potential resolution to the conflict in West Asia, dealers said. Traders were also cautious of building aggressive positions ahead of the Reserve Bank of India's Monetary Policy Committee meeting decision next week, they said. The cut-off yield on 7.43%, 2076 bond at the auction Friday was slightly higher than market expectations, which weighed on secondary bond prices, dealers said. 

 

"Cut-off (price) on 15-year paper was in line with expectations... we were expecting around 20-22 paise (INR 94.20-INR 94.22)," a dealer at a primary dealership said. "It was only after the rise in Brent crude oil prices that we (bond prices) started falling."

 

At the weekly gilt auction, the government sold INR 170 billion of the 6.68%, 2040 bond at a cut-off yield of 7.34%, and INR 110 billion of the 7.43%, 2076 bond at a cut-off yield of 7.71%. The cut-off yield set on the 15-year bond was in line with market expectations as banks likely bought the bond at the auction, dealers said. However, some banks refrained from placing aggressive bets as they did not want to increase the average duration of their portfolio, dealers said.

 

Some inflows from the Deposit Insurance and Credit Guarantee Corp., a wholly owned subsidiary of the RBI, also helped the demand for the 15-year bond at the auction, dealers said. The 53-year paper, on the other hand, was bid at a higher yield from pension funds and insurers, dealers said. The bid-cover ratio for the 7.43%, 2076 bond was slightly over two. 

 

Traders refrained from building aggressive positions amid uncertainty about the end of the war in West Asia, dealers said. However, Brent crude oil prices continue to trade below the crucial $95 per barrel level, at over $92 per barrel. Brent crude oil rose to over $93 per barrel intraday, which pulled down bond prices, dealers said. Moreover, traders remained divided on rate-hike expectations ahead of the RBI's MPC decision on policy rates at the June meeting.

 

The total volume in the government securities market at 1511 IST was INR 393.25 billion, slightly above INR 352.90 billion at 1530 IST Wednesday, according to data from the RBI's Negotiated Dealing System. The new 10-year 6.94%, 2036 bond was the third most-traded bond Friday. At 1511 IST, the trading volume for the bond was at INR 34.90 billion. The yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.95–7.02% range for the rest of the day. 

 

"Volumes will only rise after the MPC meet(ing) now," a dealer at a state-owned bank said. "Brent prices were down in the morning, but the bond prices did not react as much because we are already in the MPC week, so people are not building positions."  (Janwee Prajapati)

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India Gilts: Off highs as traders place short bets; auction demand seen firm

 

	1305 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.54	96.63	96.47	96.62	96.49
YTM (%)	6.9894	6.9754	6.9999	6.9766	6.9960

 

	1305 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.79	99.82	99.75	99.81	99.70
YTM (%)	6.9695	6.9646	6.9745	6.9667	6.9823

 

MUMBAI--1305 IST--Prices of government bonds were off the day's high as traders placed short bets amid no clarity over the end of the US-Iran war, dealers said. Some traders booked profits on their holdings at levels seen as attractive, they said. However, bond prices remained supported as Brent crude oil prices stayed below the crucial $95-per-barrel mark, dealers said.

Friday, the government invited bids to sell INR 170 billion of the 6.68%, 2040 bond and INR 110 billion of the 7.43%, 2076 bond. Dealers said the auction likely saw strong demand for both papers. Banks likely bought the 15-year 6.68%, 2040 bond to add to their portfolios, while insurers and pension funds are believed to have picked up the 50-year 7.43%, 2076 bond for their investment books, dealers said.

 

According to an Informist poll, the Reserve Bank of India is likely to set a cut-off price of INR 94.18 on the 6.68%, 2040 bond and a cut-off price of INR 96.85, or a yield of 7.6766%, on the 7.43%, 2076 bond. Market participants await the auction result for cues on investor appetite.

Traders who had short-sold the 15-year bond ahead of the auction likely covered their positions at the gilt auction, which led to strong demand, dealers said. Traders likely sold the benchmark 10-year paper and bought the 15-year bond at the auction as the yield spread between the two securities widened, which supported demand for the 2040 paper, they said.

"There is a spread trade going on in the market," a dealer at a state-owned bank said. "Traders went short on the 10-year (6.48%, 2035 bond) and went long on the 15-year bond because yield spread has widened. I think that helped the auction demand, too."

 

Traders who were looking to exit the market amid West Asia war-related uncertainty booked profits when the yield on the 10-year benchmark bond fell to 6.97% level, dealers said. The profit booking by traders weighed on bond prices, they said.

Traders also assessed the RBI's Annual Report for 2025-26 (Apr-Mar), released Friday. The report said the average yield on the 10-year government security stood at 6.76% in the March quarter of FY26, compared with 6.57% in the previous quarter, while the weighted average gilt yield softened by 27 basis points during FY26. Dealers said market participants will closely study the RBI's forward-looking guidance amid uncertainty stemming from the West Asia war.

Market participants also assessed the RBI's commentary on the proposed Expected Credit Loss framework, dealers said. In its annual report, the central bank said the Expected Credit Loss norms would align the regulatory framework with global financial reporting principles, while strengthening credit risk management and improving comparability across lenders.

 

The total volume in the government securities market at 1305 IST was INR 193.75 billion, down from INR 208.65 billion at 1230 IST Wednesday, according to data from the Reserve Bank of India's Negotiated Dealing System. The new 10-year 6.94%, 2036 bond was the third most-traded bond Friday. At 1305 IST, the trade volume for the bond was at INR 20.05 billion. The yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.95–7.02% range for the rest of the day. (Diksha Tripathy)

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India Gilts: Up as Brent crude falls below $95/bbl; short-selling caps gains

 

	0936 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.58	96.63	96.52	96.62	96.49
YTM (%)	6.9826	6.9754	6.9916	6.9766	6.9960

 

	0936 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.79	99.82	99.76	99.81	99.70
YTM (%)	6.9688	6.9646	6.9730	6.9667	6.9823

 

MUMBAI--0936 IST--Prices of government bonds were up, tracking a sharp fall in prices of Brent crude oil, dealers said. However, the rise in bond prices was capped as traders made room in their portfolios for fresh supply of bonds ahead of the weekly gilt auction Friday, they said.        

 

The government will sell INR 170 billion of the 6.68 40bond and INR 110 billion of the 7.43 76bond at the auction Friday. Demand for both bonds is expected to be strong, with insurers and pension funds seen picking up the 2076 bond. Traders are likely to place aggressive bids for the 6.68 40bond at the auction as they look to cover their short bets, dealers said. The result of the auction will be closely tracked by market participants, dealers said. 

 

"Some short-selling is there before the (weekly gilt) auction, that is putting some pressure on (bond) prices," a dealer at a state-owned bank said. "Apart from that, the sentiment is positive only in the market because crude has come down and there is a report of 60-day ceasefire extension."

 

Bond prices were supported as Brent crude oil futures fell significantly below $95 per barrel after reports said the US and Iran have agreed on a deal to extend the ceasefire to up to 60 days. However, traders still remained uncertain over the end of the war as there has not been any official confirmation by the two countries on the peace deal, dealers said.

 

The total volume in the government securities market at 0936 IST was INR 54.85 billion, up from INR 35 billion at 0930 IST Wednesday, according to data from the Reserve Bank of India's Negotiated Dealing System. Traders attributed the higher volume to improved risk appetite amid hopes of a peace deal, dealers said. The gilts market was shut Thursday for Id-ul-Zuha. 

 

Bond prices were also supported by a fall in US Treasury yields, dealers said. The yield on the benchmark 10-year US Treasury note was down at 4.44% at 0930 IST compared to 4.48% at the close of Indian gilt market hours Wednesday.

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.95–7.02% range for the rest of the day. (Diksha Tripathy)

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India Gilts: Seen higher as Brent crude oil slips below $95 per barrel

 

MUMBAI – Government bond prices are set to open higher, tracking the fall in Brent crude oil price as the prospects for an end to the US-Iran war look stronger than before, dealers said. Brent crude fell below $95 per barrel after reports of a tentative US-Iran agreement to extend the truce by 60 days and allow shipments through the Strait of Hormuz to resume. Following these developments, traders are likely to cover short bets placed on fears of an escalation in the West Asia war, which will pull up bond prices, dealers said. However, trade volume may remain subdued ahead of the weekly gilt auction result, they said.

 

Brent crude futures for July delivery fell below $95 per barrel and significantly below the key $100-per-barrel level at 0730 IST Friday to $92.62 per barrel, the lowest in over a month. At 1700 IST Wednesday, Brent crude was at $97.04 per barrel. US Treasury yields fell to 4.44% at 0730 IST, down from 4.48% at the end of Indian trading hours Wednesday. Indian markets were shut Thursday for Id-ul-Zuha (Bakri Id).

 

The yield on the 10-year benchmark Indian government 6.48%, 2035 bond is expected to open near 6.94% and is seen in the 6.90-6.95% range during the day, dealers said. The yield is likely to remain below 7% for the third consecutive session on increased hopes of an end to the three-month-old war in West Asia. Traders had earlier said that if the 6.48%, 2035 bond yield continues to be below 7?cause of a lowering of Brent crude oil price, banks will step up fresh buys, which will further aid the rise in bond prices. Public-sector and private-sector banks together net sold INR 28 billion worth of gilts Wednesday, according to data from Clearing Corp. of India Ltd. 

 

Wednesday, the 10-year benchmark bond had ended at INR 96.49, or 6.9960% yield, as traders took profits at the highest prices seen in over two weeks tracking a sustained fall in Brent crude oil for July delivery below $100 per barrel. Hopes of a peace deal between the US and Iran and bets that there would be no raising of the repo rate at the June meeting of the Reserve Bank of India's Monetary Policy Committee helped.

 

On the West Asia war front, the US and Iran have agreed to extend their ceasefire and remove restrictions on shipping through the Strait of Hormuz, according to media reports. However, US President Donald Trump has not yet signed off on the deal and Iranian state media said it remains to be finalised.

 

US Vice-President J.D. Vance said Washington was "not there yet" with Iran on an agreement but that they were close, adding that the US was in a position where it could substantially set back Tehran's nuclear programme. Vance said there were a couple of sticking points in the talks with Tehran concerning the country's stockpile of enriched uranium and the question of further enrichment. US Treasury Secretary Scott Bessent earlier said that "we perhaps have the makings of a deal here" but some of Trump's red lines had still not been met.

 

Traders may avoid aggressive bets ahead of the weekly gilts auction at 1030-1130 IST, they said. At the auction, the government will sell INR 170 billion of the 6.68 40bond and INR 110 billion of the 7.43 76bond. Demand for both bonds is expected to be strong, with the 2076 bond seen attracting interest from life insurers and pension funds. Traders also anticipate short covering in the 6.68 40bond during the sale. 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 showed trades worth INR 52.01 billion in the 6.68%, 2040 gilt Wednesday, up from INR 38.91 billion Tuesday. Traders expect the 10-year benchmark bond yield to fall to the lower end of the day's range after the auction if the results are in line with expectations, dealers said.

 

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

 

US$1 = INR 95.00

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

 

Edited by Deepshikha Bhardwaj

 

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