More Stories

Informist, Monday, Jun. 1, 2026

By Aaryan Khanna

NEW DELHI – Prices of most government bonds ended off lows by the close of trade as traders covered intraday short sales. Gilt prices were under pressure through the day on uncertainty around a peace deal between the US and Iran, which pushed up crude oil prices, dealers said. Trade volumes were thin on caution before the Reserve Bank of India's Monetary Policy Committee three-day meeting, which is scheduled to begin Wednesday. 

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.35, lower than INR 96.44 Friday. Its yield settled at 7.0181%, compared with 7.0037% at the previous close. The newer 6.94%, 2036 bond ended at INR 99.53, lower than INR 99.74 Friday. The bond's yield rose to 7.0052% from 6.9759% Friday. The 2036 bond was the biggest loser on the day ahead of its next scheduled auction on Friday, ending near the day's low. Both short- and long-term bonds fell less than the benchmarks.

"It's not only today, even on Friday you would have seen that the 10-year bonds were underperforming," a dealer at a private sector bank said. "Between the large supply and before that the monetary policy where people are expecting the governor to prepare the market for rate hikes, that is the only position that the market is holding."

There was no material progress on a peace deal despite hopes of a breakthrough over the weekend, though both sides acknowledged active discussions and points of commonality. Brent crude for August delivery was at $93.71 per barrel at 1700 IST, up around 2% from the same time Friday. However, with Brent remaining below $95 a barrel, traders remained hopeful that inflationary pressures in India would be manageable with only small and staggered rate hikes.

Trading activity was dull through the day amid lack of domestic cues and with the rate decision coming up, along with the release of India's GDP data on Friday. Some saw an opportunity to place short bets early in the day with no progress in the peace talks, but were unwilling to carry that risk overnight and covered them in the second half of trade, dealers said. However, investor demand above 7.02% yield on the 6.48%, 2035 bond, seen lucrative, capped losses.

Some banks said bonds maturing in up to five years provided a good opportunity to lock in current returns in their held-to-maturity portfolio. The five-year benchmark yielded 6.83% at the day's close, yielding nearly 160 basis points more than the current repo rate. It also prices in 125 bps of rate hikes in financial year 2026-27 (Apr-Mar), which are expected only in an adverse scenario with severe imported inflation and food costs spiralling due to lower-than-average rainfall.

"There is some value in the short-end segment, may be up to seven years, but that is all going through the ALM (asset-liability management) desk," a dealer at a state-owned bank said. " 

Traders expect no change in the repo rate of 5.25% on Friday. However, comments by RBI Governor Sanjay Malhotra and other MPC members are widely expected to be less accommodative than in April, when the US and Iran agreed to a ceasefire just hours before the announcement of the rate decision. With the war lasting another two months and the key Strait of Hormuz still effectively shut, traders expect the central bank to signal its focus on controlling inflation to avoid second-round effects.

OUTLOOK

Government bond prices are seen steady Tuesday on caution before the three-day MPC meeting that starts Wednesday. Traders widely expect the rate-setting panel to keep status quo on the repo rate in June. Rate hikes are expected to begin in August or October, dealers said.

RBI Governor Malhotra's commentary is expected to set the stage for monetary policy tightening as CPI inflation is seen averaging 5.0% in 2026-27 (Apr-Mar), above the central bank's 4.6% forecast in April and its 4% retail inflation target. The RBI is also expected to trim its FY27 GDP growth estimate to around 6.5% from 6.9% in April. The central bank is likely to focus on keeping inflationary expectations in check for the next few months rather than prioritising growth, dealers said. 

Global triggers may be of less importance for gilt prices ahead of the significant domestic triggers. Traders may begin to look through the volatility in crude oil prices this week as it may not immediately make a case for rate changes. However, a US-Iran peace deal overnight would drive the 10-year gilt's yield down to 6.90%, while a return of the two countries to outright hostilies may push it to as high as 7.10%.

The result of the state bond auction at 1030-1130 IST may also lend cues Tuesday. Eight states will raise INR 241 billion through bonds at the auction, similar to the amount indicated in the Apr-Jun calendar. Demand for fresh supply may be diminished by the uncertainty on the global and local fronts, though improved liquidity conditions might increase banks' appetite for bonds, dealers said. 

India Gilts: Off lows; traders cautious to take positions ahead of MPC

MUMBAI--1606 IST--Prices of government bonds were off lows, as traders covered short bets placed earlier in the day, dealers said. Prices remained down due to elevated crude oil prices amid a fragile truce between the US and Iran, dealers said. The Reserve Bank of India's Monetary Policy Committee meeting scheduled for this week, coupled with mixed signals from the ongoing war in West Asia, kept sentiment cautious, they added.

  
Traders refrained from taking fresh positions ahead of the MPC outcome Friday, dealers said. Those who placed short bets on gilts earlier in the day were covering their positions Monday, they said. 

"No one will take positions before policy," a dealer at a primary dealership said. "So intraday, whatever positions were taken are being squared off."

Dealers said that the fall in the 15-year 6.68%, 2040 bond was slightly less than that of the 10-year benchmark bond, since traders who did not get their hands on auction stock last week were covering their positions Monday.

At 1606 IST, total volume in the government securities market was INR 320.85 billion, below INR 444.15 billion at 1635 IST Friday, data on the RBI's Negotiated Dealing System showed. The yield on the 10-year benchmark bond is seen in the 7.00–7.03% range for the rest of the day. At 1606 IST, the trading volume for the new 10-year 6.94%, 2036 bond was at INR 18.25 billion.  (Durgesh Nandan)    

India Gilts: Remain down on rise in crude; volumes down ahead of MPC meet 

India Gilts: Remain down on rise in crude; volumes down ahead of MPC meet 

MUMBAI--1526 IST--Prices of government bonds remained down due to a rise in crude oil prices with no further progress in a US-Iran peace deal and the Strait of Hormuz is still effectively shut, dealers said. After an early fall, gilt prices have moved in a narrow band as traders are in wait-and-watch mode ahead of the Reserve Bank of India's Monetary Policy Committee meeting Wed-Fri.

Short-term gilts are pricing in a chance of a 25-basis-point hike in the repo rate of 5.25% at the rate decision on Friday. However, most traders said the caution was unlikely to come into fruition as tensions in West Asia have eased and crude oil prices have also fallen from highs. Brent crude for delivery in August was at $94.21 a barrel at 1504 IST, up over 2% from Friday's close. The near-month contract had hit $120 per barrel in April.

"We do not expect any rate hikes from this meeting, as per global conditions," a dealer at a public sector bank said. "...they will hike rates probably in December's meeting, not before that, and we expect hawkish commentary from the MPC meeting." Losses in bonds maturing in up to five years were limited, likely due to demand for state-owned banks, dealers said.

Trade volumes were lower than usual due to lack of fresh domestic cues. Traders did not want to place aggressive bets ahead of the rate decision. The 10-year benchmark 6.48%, 2035 gilt and new 10-year 6.94%, 2036 bonds were biggest losers among heavily traded gilts on Monday ahead of the weekly gilt auction, dealers said. The government is scheduled to sell INR 340 billion of a 10-year bond this week, expected to be the second auction of the 2036 bond. The bond may ascend to benchmark status as the most-traded gilt next week.

The total volume in the government securities market at 1526 IST was INR 274.30 billion, down sharply from INR 407.95 billion at 1530 IST Friday, according to data from the RBI's Negotiated Dealing System. The yield on the 10-year benchmark is seen in the 6.99–7.05% range for the rest of the day.  (Durgesh Nandan)

India Gilts: Stay down on US-Iran deal uncertainty, caution before MPC meet

MUMBAI--1237 IST--Prices of government bonds remained down on elevated crude oil prices and dampened hope of a peace agreement between the US and Iran, dealers said. Traders remained cautious of building aggressive positions ahead of the weekly gilt auction, GDP growth data and the Reserve Bank of India's Monetary Policy meeting decision scheduled for Friday.

"... There is uncertainty around the peace deal and there is a possibility that inflation could be higher than what the RBI has expected," a dealer at a state-owned bank said. "The market is pricing-in a rise in Brent crude oil price and a "hawkish" commentary on MPC." Dealers expect the RBI to trim its GDP growth forecast for financial year 2026-27 (Apr-Mar) by 20-30 basis points and lift its CPI inflation forecast for FY27 to above 5%, up from 4.6% now.

Some private sector banks likely booked profit as the levels seem lucrative, dealers said. This market segment had net sold INR 27.87 billion worth of gilts in the secondary market on Friday, according to data from Clearing Corp. of India. Some corporates, on other hand, likely bought gilts in the secondary market, dealers said.

At the state bond auction Tuesday, some dealers expect the spread between the state bonds and gilts to remain similar to previous week's auction. At the weekly state bond auction last week, the cut-off yield on the states' 10-year bonds was in the range of 7.78-7.79% with a spread of 77-78 basis points over gilts of similar tenure. Some traders expect states to raise lower than the total notified amount as traders are likely to refrain from placing aggressive bids ahead of the MPC meeting decision Friday. On the other hand, some dealers do not expect the cut-off yields to be at higher levels as they likely prefer these bonds due to lucrative spread over gilts of similar maturity, dealers said. On Tuesday, eight states will raise INR 241 billion, higher than INR 164.60 billion as indicated in the state borrowing calendar for Apr–Jun.   

The total volume in the government securities market at 1237 IST was INR 161.40 billion, below INR 176.05 billion at 1230 IST Friday, according to data from the RBI's Negotiated Dealing System. The yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.98–7.05% range for the rest of the day. At 1237 IST, the trading volume for the new 10-year 6.94%, 2036 bond was at INR 8.65 billion. (Janwee Prajapati)

India Gilts: Stay lower, hope of US-Iran peace deal fragile

MUMBAI--1030 IST--Prices of government bonds stayed lower as Brent crude oil firmed up and there was no sign of a peace deal agreement between the US and Iran, dealers said. Traders will remain cautious ahead of the Reserve Bank of India's Monetary Policy Meeting decision Friday, which will cap trading volumes, dealers said.   

"Sentiments were positive due to hopes of a peace deal (between US-Iran) but that did not happen...crude also rose," a dealer at a public sector bank said. "I do not think there is anything positive left, from here only a confirmed peace agreement can bring down (Brent) crude oil below $85 per barrel and yield on 6.48%, 2035, bond below 6.90%."   

Some traders likely placed some short bets while others made some space in their portfolio ahead of the new 6.4%, 2036 bond as they expect the bond to become liquid soon after the auction, dealers said. Some traders said the bond was "underperforming" and was likely to "outperform" after the auction. However, they refrained from building any aggressive positions in the said bond on caution ahead of MPC's policy rate decision, dealers said. At 1030 IST, the trading volume for the new 10-year 6.94%, 2036 bond was at INR 4.50 billion.

"I think there will be short selling throughout the week as there is an auction also on Friday," a dealer at a primary dealership said. "I think bond yields will trade above 7% this whole week."

On the liquidity front, traders expect the RBI to maintain comfortable liquidity in the banking system, dealers said. Some traders expect the RBI to maintain a liquidity surplus of INR 1.25 trillion-INR 2.00 trillion into the banking system through variable-rate repo and variable-rate reverse repo auctions, dealers said. Traders pared bets on the announcement of an open-market operations auction as RBI net liquidity absorbed INR 1.04 trillion Friday, up from INR 674.82 billion Thursday.  

The total volume in the government securities market at 1030 IST was INR 65.35 billion, significantly below INR 95.15 billion at 0930 IST Friday, according to data from the RBI's Negotiated Dealing System. The yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.98–7.05% range for the rest of the day.  (Janwee Prajapati)

India Gilts: Fall on rise in crude oil price, no development on W Asia deal

MUMBAI--0929 IST--Prices of government bonds were lower as Brent crude oil prices inched up from their close on Friday, dealers said. The fact that there was no positive development on the US-Iran peace agreement front pulled down bond prices, they said. Trade volume remained low as traders remained cautious ahead of the Reserve Bank of India's Monetary Policy meeting decision Friday, dealers said.   

Brent crude oil futures for August delivery rose above $93 per barrel, pulling down bond prices. However, it remained below the crucial $95-per-barrel level, limiting the fall in bond prices, dealers said.  

"Prices are down as there is no positive in the market," a dealer at a primary dealership said. "Traders had expected some positive news from the US-Iran war, but there was no progress there. Crude has also risen... if there is no peace deal, it (crude price) will again go over $95 per barrel."  

Monday, the new 10-year bond opened ahead of the 6.48%, 2035 bond as traders expect it to become the new 10-year benchmark after the completion of the next weekly gilt auction for the bond, dealers said. However, trading volume in the 6.94%, 2036 bond remained below that of the 6.48%, 2035 bond.  

"I do not think the rates (yield on the 10-year benchmark 6.48%, 2035 bond) will sustain below 7.00% today (Monday)," a dealer at a private sector bank said. "Even if it falls to 6.99-6.98% levels, some profit booking will bring it back to near 7%."

Traders refrained from building aggressive positions ahead of the Reserve Bank of India's Monetary Policy decision and weekly gilt auction for the new 10-year 6.94%, 2036 bond, Friday. Traders largely expect the RBI's Monetary Policy Committee to hold policy rates steady at the upcoming meeting. However, the tone of the RBI governor's commentary can be "hawkish", dealers said. 

The total volume in the government securities market at 0929 IST was INR 24.20 billion, significantly below INR 42.10 billion at 0930 IST Friday, according to data from the RBI's Negotiated Dealing System. At 0929 IST, the trading volume for the new 10-year 6.94%, 2036 bond was at INR 1.50 billion. The yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.95–7.05% range for the rest of the day.  (Janwee Prajapati)

India Gilts:Seen steady on lack of significant cues, caution before MPC meet

MUMBAI – Government bond prices are seen opening steady amid lack of escalation in the West Asia war and caution ahead of the Reserve Bank of India's Monetary Policy Committee meeting decision on Friday, dealers said. Brent crude oil prices inched slightly higher over the weekend, which will weigh on bond prices. However, it continued to trade below the crucial level of $95 per barrel, which will contain any fall in bond prices, dealers said. Traders are likely to refrain from placing aggressive bets due to lack of       

The yield on the 10-year benchmark Indian government 6.48%, 2035 bond is expected to open near 7.00% and is likely to oscillate between 7.00% and 7.05% during the day, dealers said. Traders do not expect the yield on the 10-year benchmark bond to sustain a fall below 7%. Friday, the 10-year benchmark bond ended higher at INR 96.44, or 7.0037% yield, on hopes of a peace deal between the US and Iran, which kept Brent crude oil prices at their lowest in over a month.

Traders expect the RBI's Monetary Policy Committee to keep the repo rate unchanged next week, with a hawkish stance. However, with unsteady progress in US-Iran peace talks, traders are unsure of the tone of the RBI governor's commentary and how restrictive it can be.

Dealers also expect the RBI to trim its GDP growth forecast for financial year 2026-27 (Apr-Mar) by 20-30 basis points and lift its CPI inflation forecast for FY27 to above 5%, up from 4.6% now. In the swaps market, the one-month rate is pricing in less than a 25 bps hike for June, while the three-month rate is pricing in a single 25 bps hike.

On the war front, US President Donald Trump said he was working toward an agreement to ensure Iran never obtains a nuclear weapon. He said he'd like a deal done quickly but isn't rushing talks and warned that the US could take further military action if negotiations collapse.

"I'd like to say I'm in a hurry because gasoline prices are going to come tumbling down, but if you're going to be in a hurry, you're not going to make a good deal," Trump said. "And slowly but surely we're getting, I think, what we want, and if we don't get what we want we're going to end it a different way."

Brent crude oil for August delivery traded at $93 per barrel, up slightly from $91.97 per barrel Friday, at the end of Indian trading session. At 0835 IST, the US Treasury yields on 10-year benchmark note rose to 4.47% from 4.45% at 1700 IST Friday.  

Buying momentum is likely to remain muted ahead of the Monetary Policy Committee's decision on the repo rate on Friday and the expected supply of the 6.94%, 2036 bond. The government is scheduled to sell INR 340 billion of the 10-year bond next week at auction. It will also release GDP data for the March quarter Friday.  (Janwee Prajapati)

End

US$1 = INR 94.99

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

Edited by Avishek Dutta

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2026. All rights reserved.