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Informist, Tuesday, Jun. 2, 2026

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended off highs Tuesday. Prices initially rose, tracking a fall in overnight indexed swap rates, before extending them further on an intraday decline in crude oil prices and US Treasury yields, dealers said. However, traders took profits towards the end of the day, wiping out most gains amid caution ahead of the Reserve Bank of India's three-day Monetary Policy Committee meeting, starting Wednesday, they said.

 

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.38, slightly higher than INR 96.35 Monday. Its yield settled at 7.0129%, compared with 7.0181% at the previous close. The newer 6.94%, 2036 bond ended at INR 99.59, above Monday's close of INR 99.53. The bond's yield fell to 6.9977% from 7.0052% Monday. Trade volumes in the 2036 bond remained low as its yield approached that of the older bond, reducing the incentive for incremental sales and prompting short sales in the 2035 bond, dealers said. 

 

The total turnover in the government securities market was INR 423.95 billion Tuesday, higher than INR 378.30 billion Monday. Trading activity on Tuesday was modest but rose from a sluggish pace Monday, when there was a lack of significant domestic and offshore cues, dealers said. There was no trade through the RBI's wholesale e-rupee pilot Tuesday. The instrument has remained unused since February.

 

Bond prices had opened lower, tracking an overnight rise in oil prices. But Brent crude for August delivery fell to $93.88 per barrel by 1700 IST from an intraday high of $95.50 per barrel. The 10-year US Treasury yield dipped below 4.43% for the first time since May 12. With US yields persisting below a key technical level for the second day, the five-year overnight indexed swap fell to as low as 6.58% from 6.64% Monday. This swung bond prices into positive territory in early trade, dealers said.  

 

The fall in OIS rates spurred some short covering from private-sector and foreign banks, leading to bond prices extending gains. Traders booked profits near the end of the session amid uncertainty over further developments in the war in West Asia. The US and Iran are holding on to a fragile ceasefire, but reports in recent days suggest the two sides have moved further away from a peace deal, which was seen as imminent over the weekend, dealers said. With geopolitical uncertainty persisting and the domestic rate decision ahead, traders avoided aggressive bets. 

 

"The market has stuck to a range around 7.00% (yield on the 6.48%, 2035 gilt), which goes on to show that buyers and sellers are both happy around this level before the main event," a dealer at a private-sector bank said. "Traders will never be heavy going into a policy, though expectations that a rate hike will happen in this very policy have been declining."

 

Traders had earlier feared a rate hike of up to 50 basis points at the June MPC meeting, driving the 10-year benchmark gilt yield to 7.14% in May, its highest in over a year. Most traders now expect the MPC to keep the repo rate unchanged at 5.25% as crude prices have eased from their highs amid hopes that the key Strait of Hormuz will reopen to tankers carrying oil. While a minority still expects a rate hike to cap inflation expectations, most traders expect RBI Governor Sanjay Malhotra to shift the policy focus from supporting growth to curbing inflation while keeping the powder dry, dealers said. 

 

His commentary – and those of other central bank officials after the MPC's rate decision – are likely to set the stage for rate hikes later in 2026-27 (Apr-Mar), dealers said. Bond prices have already factored in a hawkish commentary. A more dovish commentary on inflation is likely to pull down the 10-year gilt yield by around 5 basis points, but is seen as unlikely as the central bank would be staring at rising CPI inflation in the coming months, dealers said. Some traders expect retail inflation to top the RBI's 4% target in May and rise above 6% in the winter months, following deficient rainfall predicted by weather agencies.

 

Meanwhile, the INR 241 billion in state bond supply sailed through and had little impact on gilt prices. Traders had been favouring the 6.68%, 2040 gilt against the 10-year benchmark in the secondary market, driving down the spread of the 15-year benchmark against the 6.48%, 2035 gilt. That activity dulled as spread declined to near 25 bps, seen as the bottom of a 25-35 bps trading range. The spread widened last week with the 15-year bond's auction and has compressed sharply as the 6.94% 2036 bond is up for sale on Friday, dealers said.

 

"Spreads have corrected, though people are still finding some opportunity in bond swap trades," a dealer at a primary dealership said. "Some of the four and five-year state bonds today (Tuesday) were attractive to receive while paying the five-year OIS (rate)."

 

OUTLOOK

Government bond prices are seen steady Wednesday as the MPC's three-day meeting begins, with traders cautious ahead of the rate decision on Friday, dealers said. Major developments in the West Asia war and their impact on crude oil prices may provide direction to gilt prices at the open, though global triggers may be less important for gilt prices before the domestic rate decision.

 

Traders widely expect the rate-setting panel to keep the 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 April forecast of 4.6% 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%. The central bank is likely to focus on keeping inflationary expectations in check for the next few months rather than prioritising growth, dealers said. 

 

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, an overnight US-Iran peace deal would drive the 10-year gilt yield down to 6.90%, while a return of the two countries to outright hostilities could push it as high as 7.10%.

 

After the rate decision, dealers have the INR 340 billion auction of the 6.94%, 2036 gilt to focus on, with several traders already making room for the fresh supply. Immediately after that is the scheduled release of India's GDP data for the March quarter at 1600 IST Friday. An Informist poll showed that 19 of 24 economists and market participants expect the rate-setting panel to keep the repo rate unchanged, while the remainder expect a repo rate hike. 

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	96.3800	7.0129%	96.3450	7.0181%
6.94%, 2036	99.5850	6.9977%	99.5325	7.0052%
6.36%, 2031	98.1700	6.8181%	98.1175	6.8313%
6.68%, 2040	94.3000	7.3345%	94.2900	7.3356%
6.90%, 2065	90.2000	7.6954%	90.0800	7.7061%

 

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India Gilts: Remain up on short covering, fall in oil price also supports

 

	1605 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.47	96.54	96.30	96.32	96.35
YTM (%)	6.9997	6.9895	7.0250	7.0228	7.0181

 

	1605 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.6175	99.65	99.48	99.5	99.5325
YTM (%)	6.9931	6.9885	7.0126	7.0098	7.0052

 

MUMBAI--1605 IST--Prices of government bonds remained up mainly due to a fall in crude oil prices and US Treasury yields, dealers said. Market sentiment was optimistic about the re-opening of the Strait of Hormuz, which would ease supply, and fear of inflation among the traders, they added.

 

Brent crude for delivery in August was at $93.82 a barrel at 1605 IST, down from an intraday high of $95.50 a barrel. The 10-year US Treasury yield was 4.44%, below a key technical level, and inched lower from 4.45% at 0900 IST, which also supported the rise in gilt prices, dealers said. Traders said they bought the 10-year benchmark bond as they were short on the bond last week. 

 

Eight states raised a total amount of INR 241 billion through bond issuances at auction. Dealers said banks purchased the short-term bonds, whereas mutual funds and insurance companies bought long-term bonds. Banks bought bonds for asset and liability management, they added.

 

Traders expect measures from the RBI to boost capital inflows into the country at the outcome of the Monetary Policy Committee meeting Friday. "Traders are covering positions before the MPC meeting just as a precautionary measure so that if prices rise after the MPC they don't have to worry," a dealer at a public sector bank said.

 

At 1605 IST, total volume in the government securities market was INR 379.05 billion, below INR 356.75 billion at 1530 IST Monday, according to the data on the RBI's Negotiated Dealing System. The yield on the 10-year benchmark bond is seen closing around 7.00–7.02% for the day. At 1605 IST, the trading volume for the new 10-year 6.94%, 2036 bond was at INR 36.95 billion.  (Durgesh Nandan)

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India Gilts: Remain up on intraday fall in crude oil prices, US yields

 

	1525 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.44	96.54	96.30	96.32	96.35
YTM (%)	7.0039	6.9895	7.0250	7.0228	7.0181

 

	1525 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.6	99.65	99.48	99.5	99.5325
YTM (%)	6.9956	6.9885	7.0126	7.0098	7.0052

 

MUMBAI—1525 IST—Prices of government bonds remained up due to a fall in crude oil prices and US Treasury yields, which dragged down overnight indexed swap rates earlier, dealers said. Some foreign banks and private-sector banks were also covering their short positions in bonds, they added. The result of the state bond auction had little impact on gilt prices. 

 

Brent crude for delivery in August was at $93.40 a barrel at 1505 IST, down from an intraday high of $95.50 a barrel. The 10-year US Treasury yield was at 4.44%, below a key technical level, prompting offshore traders to cut their paid fixed-rate positions in the five-year OIS rate. The benchmark OIS rate was at 5.60% from 5.64% at Monday's close. 

 

"Traders are positive due to the fall in crude oil prices that the war will end soon. That sentiment has led to the rise in prices today (Tuesday)," a dealer at a public-sector bank said.

 

Meanwhile, the INR 241-billion state bond auction saw firm bidding from banks. The Reserve Bank of India set the cut-off for Gujarat's 10-year bond at 7.70%, as against the 7.73% expected in an Informist Poll. Similarly, the cut-off yield on Tamil Nadu's 10-year bond was set at 7.74%, 3 basis points lower than the poll. However, gilt prices retreated from the day's high after the auction as traders likely curtailed intraday bets and booked profits before the close of trade, dealers said. 

 

The volumes of government securities are likely to rise after the RBI's Monetary Policy Committee announces its rate decision on Friday as traders remained cautious before the meeting, dealers said. Traders expect comments from RBI Governor Sanjay Malhotra to set the stage for rate hikes later in 2026-27 (Apr-Mar). According to the median of an Informist poll, the 10-year benchmark gilt yield will rise to 7.05% by June-end. 

 

The total volume in the government securities market at 1530 IST was INR 361.20 billion, up from INR 269.05 billion at 1530 IST Monday, according to data from the RBI's Negotiated Dealing System. The yield on the 10-year benchmark is seen in the 6.98–7.03% range for the rest of the day.  (Durgesh Nandan)

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India Gilts: Rise on short covering; state bond auction result to lend cues

 

	1254 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.44	96.51	96.30	96.32	96.35
YTM (%)	7.0039	6.9933	7.0250	7.0228	7.0181

 

	1254 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.5775	99.61	99.48	99.5	99.5325
YTM (%)	6.9988	6.9942	7.0126	7.0098	7.0052

 

MUMBAI--1254 IST--Prices of government bonds were higher as overnight indexed swap rates eased and Brent crude oil prices fell a tad intraday, dealers said. Some traders covered short bets placed on the current 10-year benchmark 6.48%, 2035 bond, which also pulled up bond prices. US Treasury yields also eased intraday, which helped bond prices, dealers said. Some traders are likely to have shifted to the new 10-year 6.94%, 2036 bond, which limited gains, dealers said. Traders await state bond auction results for further cues.

 

"There is some short covering in the market...everybody is now convinced that this MPC is a pause (no change in the Reserve Bank of India's repo rate)," a dealer at a primary sector bank said. "After this MPC, the view on the new 10-year will be more clear...it will become liquid after this auction, I think." 

 

Some traders covered short bets placed on the 6.48%, 2035 bond as they pared bets on RBI's repo rate hike at the June monetary policy meeting, 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 1254 IST showed trades worth INR 178.63 billion in the 6.48%, 2035 gilt, down from INR 194.36 billion Monday.

 

Some traders also shifted to the new 10-year 6.94%, 2036 bond as they expect the bond to become liquid by its next auction, dealers said. Any change in yield on the 6.94%, 2036 bond is also likely to percolate into 6.48%, 2035 bond, they said. At 1215 IST, the trading volume for the new 10-year 6.94%, 2036 bond was at INR 28.90 billion, sharply higher than INR 1.55 billion at 0900 IST.

 

Traders expect the gilt yield to ease to 6.98% if the cut-off yield on state bonds is lower than expectations, dealers said. The RBI is likely to set the cut-off yield on Gujarat's 10-year bond at 7.73% and on Tamil Nadu's 10-year bond at 7.77% at its auction Tuesday, according to the median in an Informist poll.

 

The total volume in the government securities market was INR 223.30 billion at 1254 IST, higher than INR 139.75 billion at 1230 IST Monday, 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 7.00–7.10% range for the rest of the day. (Janwee Prajapati)

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India Gilts: Remain flat; Cut-off yield at state bond auction seen higher

 

	1016 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.35	96.37	96.30	96.32	96.35
YTM (%)	7.0182	7.0145	7.0250	7.0228	7.0181

 

	1016 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.5	99.52	99.48	99.5	99.5325
YTM (%)	7.0098	7.007	7.0126	7.0098	7.0052

 

India Gilts: Remain flat; Cut-off yield at state bond auction seen higher

 

MUMBAI--1016 IST--Prices of government bonds remained flat as traders refrained from building aggressive positions ahead of the Reserve Bank of India's Monetary Policy Committee decision Friday and results of the weekly state bond auction, dealers said. Any significant deviation in cut-off set on state bonds from market expectations will impact bond prices, dealers said.

 

The total volume in the government securities market at 1016 IST was INR 50.65 billion, significantly below INR 64.35 billion at 1030 IST Monday, according to data from the RBI's Negotiated Dealing System. At 1016 IST, the trading volume for the new 10-year 6.94%, 2036 bond was at INR 7.00 billion.

 

"Trade volume is significantly low, which signifies that people are disinterested," a dealer at a private sector bank said. "If SDL (state bonds) cut-off is better, then we (bond prices) might see some 10 paise rally...given the (low) trade volumes, slight prices will react to even slight positivity." 

 

At the state bond auction, some banks are likely to bid at higher yields, dealers said. However, bids from these banks are likely to be concentrated on bonds having maturity in 4-year to 15-year tenures, they said. Banks will likely buy state bonds for their asset liability management books and held-to-maturity books, dealers said. Banks refrained from adding securities to their held-for-trading books amid fears of an escalation in the West Asia war, they said. 

 

Some traders expect the cut-off yield on state's 10-year bond to be in the range of 7.65-7.67%, dealers said. Traders do not expect the cut-off yields on the state bonds at the auction to surprise on the lower side of their expectations, they said. The yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 7.00–7.10% range for the rest of the day. 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 also placed short bets in the 10-year benchmark 6.48%, 2035 bond while they bought the 15-year benchmark 6.68%, 2040 bond as the spread between the said bonds seemed attractive, dealers said. This trade also weighed on the prices of 10-year bonds, they said. 

 

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 7.00–7.10% range for the rest of the day. (Janwee Prajapati)

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India Gilts: Steady on caution ahead of MPC Fri, fear of escalation in W Asia

 

	0915 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.35	96.37	96.30	96.32	96.35
YTM (%)	7.0175	7.0145	7.0250	7.0228	7.0181

 

	0915 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.52	99.52	99.5	99.5	99.5325
YTM (%)	7.007	7.007	7.0098	7.0098	7.0052

 

MUMBAI--0915 IST--Prices of government bonds opened steady in thin trade as traders remained cautious ahead of the Reserve Bank of India's Monetary Policy Committee decision Friday and amid uncertainty hovering around escalations in the war in West Asia, dealers said. The overnight rise in Brent crude oil prices also weighed on market sentiments.  

 

"I was expecting a lower opening, but it opened flat," a dealer at a private sector bank said. "Overall sentiment is negative with the Brent crude rising. I think yield (on 6.48%, 2035) will trade between 7.00%-7.05% and later (state bond) auction (result) will lend cues." 

 

Traders will track the results of the weekly state bond auction, which is likely to lend cues to bond prices, dealers said. Eight states will raise INR 241 billion Tuesday, similar to INR 242 billion indicated in the state borrowing calendar for Apr–Jun. Traders are likely to place their bids at higher yields, dealers said. Some banks may buy state bonds for their held-to-maturity books due to higher yields on these bonds, they said.

 

Private sector banks remained net sellers of gilts for three consecutive trading sessions as they booked profits on their holdings, dealers said. These banks net sold nearly INR 50 billion worth of gilts in the secondary market over three sessions. Some traders likely switched to the new 6.94%, 2036 bond from the old 10-year benchmark 6.48%, 2035 bond ahead of its fresh supply at the weekly gilt auction Friday, dealers said.  

 

Traders widely expect the RBI's Monetary Policy Committee to keep the repo rate unchanged in June. Rate hikes are expected to begin in August or October, most dealers said. 

 

The total volume in the government securities market at 0915 IST was INR 12.70 billion, significantly below INR 22.75 billion at 0930 IST Monday, 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 7.00–7.10% range for the rest of the day. At 0915 IST, the trading volume for the new 10-year 6.94%, 2036 bond was at INR 1.55 billion.  (Janwee Prajapati)

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India Gilts:Seen down on rise in oil prices, caution before MPC decision Fri

 

MUMBAI – prices of government bonds are seen lower as fears of an escalation in the West Asia war pushed up Brent crude oil prices near the crucial level of $95 per barrel, dealers said. Traders are likely to stay on the sidelines as they remain cautious ahead of the Reserve Bank of India's three-day Monetary Policy Committee meeting, starting Wednesday, dealers said. Traders will also track the result of weekly state bond auction which is likely to influence bond prices, they said.

 

The yield on the 10-year benchmark Indian government 6.48%, 2035 bond is expected to open near 7.03% and is likely to oscillate between 7.00% and 7.05% during the day, dealers said. Monday, the 10-year benchmark bond ended higher at INR 96.35, or 7.0181% yield. Prices of most government bonds ended off lows Monday as traders covered intraday short bets. 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.

 

On the geopolitical front, US President Donald Trump downplayed the risk of a breakdown in US-Iran talks, saying, "I don't care if they're over, honestly." The remarks lifted crude oil prices higher, dampening overall market sentiment. Fears that Iran could keep the Strait of Hormuz closed for an extended period added to the oil rally and fuelled inflation concerns. That shift led some traders to bet on a possible Federal Reserve rate hike later this year. Investors are now awaiting US labour market data and remarks from Fed officials this week for further signals on the interest rate outlook.

 

Following the developments in West Asia, Brent crude oil futures for August delivery rose to near $94.56 per barrel at 0800 IST, higher from $93.71 per barrel at the end of Indian trading hour Monday. US Treasury yields, on other hand, eased to 4.45% at 0800 IST, down from 4.46% at 1700 IST Monday.

 

Back home, 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, most dealers said. RBI Governor Sanjay Malhotra's commentary is expected to set the stage for monetary policy tightening as CPI inflation is seen averaging 5.0% in FY27, 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.

 

Traders will also track the result of weekly state bond auction, 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 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.  (Janwee Prajapati)

End

 

US$1 = INR 95.27

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

 

Edited by Saji George Titus

 

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.

 

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