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Informist, Thursday, Jun. 4, 2026

 

By Aaryan Khanna

 

MUMBAI – Government bond prices ended sharply higher due to an intraday slump in crude oil prices, which tumbled towards the close of Indian market hours, dealers said. Traders were closely tracking developments in the West Asia war but remained cautious of placing aggressive bets before the Reserve Bank of India Monetary Policy Committee's rate decision Friday. 

 

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.51, sharply higher than INR 96.31 Wednesday. Its yield settled at 6.9931%, down from 7.0240% at the previous close. The newer 6.94%, 2036 bond ended at INR 99.63, sharply higher than Wednesday's close of INR 99.40. The 2036 bond's yield ended at 6.9920%, also lower than 7.0240% Wednesday.

 

Brent crude for August delivery fell to $95.45 per barrel from $97.35 a barrel at 0900 IST and sharply down from $98 per barrel at the end of Indian market hours Wednesday. Crude prices fell afrer Al-Arabiya reported that the US and Iran were close to a peace deal, with the only sticking point being the sanctions on frozen Iranian assets abroad. The report led to hope of the Strait of Hormuz traffic being normalised, increasing supply of oil. The crytallisation of a ceasefire between Israel and Lebanon also aided hopes of an end to the war in West Asia. 

 

"The market moved on crude through the day. There is some fresh report on a peace deal that has helped I think, because crude was falling when the (gilts) market was shutting," a dealer at a state-owned bank said.

 

Volumes rose Thursday as traders were trimming outstanding bets from earlier on both a rise and fall in gilt prices from the MPC decision, dealers said. The total turnover in the government securities market was INR 527.55 billion, up slightly from INR 468.35 billion Wednesday. There were no trades using the e-rupee wholesale pilot Thursday, as has been the case since February. 

 

In an unusual move, the yield on the newer bond rose above the outgoing benchmark during the day, largely due to selling pressure ahead of its auction Friday. While traders did make room for the fresh INR 340 billion of supply of the bond Thursday, several traders were upbeat that bond prices would rise after RBI Governor Sanjay Malhotra announces the policy outcome at 1000 IST. With the gilt auction at 1230 IST, traders were of the view that it would be more prudent to initiate fresh sales or short sales of bonds on Friday, dealers said.

 

"It makes sense for me to not keep the short open overnight since I have time to do it in the morning if required," a dealer at a primary dealership said. "I feel it is better to take a risk on the policy being a bit better and crude being under $100 (per barrel) rather than the opposite side."

 

The rise in bond prices was capped through the day as the yield on the 10-year gilt fell below 7.00%, leading to some traders booking profits at that levels. Most traders expect the MPC to maintain status quo on the repo rate at 5.25%. In his comments, RBI Governor Malhotra is expected to lay the groundwork for a rate hike later in financial year 2026-27 (Apr-Mar), citing a rise in inflation both from the West Asia war and a weaker monsoon. The central bank is also expected to increase its CPI inflation forecast for FY27 by 40 basis points to 5.0%, while trimming the GDP growth forecast by a similar amount to around 6.5%.

 

However, the pricing of short-term bonds and overnight indexed swap rates suggests worries of a repo rate hike still persist, dealers said. Rate-sensitive bonds maturing in under five years may see yields fall sharply if the MPC does not hike rates and if traders assess that the RBI's intent for future rate increases is not as high as currently feared. Traders widely expect repo rate hikes of 50-75 bps in FY27, which is reflected in bond prices, they said.

 

OUTLOOK

At Friday's open, bond prices may take cues from overnight developments in the West Asia conflict and their impact on crude oil prices, dealers said. Focus will almost immediately turn to RBI Governor Sanjay Malhotra's statement laying out the MPC's rate decision at 1000 IST, they said.

 

Most traders expect the MPC to maintain status quo on the repo rate at 5.25% and its policy stance at 'neutral'. Malhotra's statement is expected to focus on curbing inflation, setting the stage for rate hikes in the future. Should this base case arise, the 10-year gilt yield is seen easing to the 6.92-6.95% range as a minority of traders betting on a rate hike add to their portfolios, dealers said.  

 

Bond prices are expected to rise sharply if the RBI announces measures to encourage capital inflows, which will weaken the case for an interest rate defence of the floundering rupee. Various measures have been floated in recent days, including additions to bonds under the fully accessible route and an interest subvention plan for external commercial borrowing, to make the route more viable for corporates and banks. Traders expect the RBI to announce measures that will bring in $20 billion-$50 billion from overseas in FY27. In the best-case scenario, the 10-year gilt yield may fall to 6.85%, dealers said.

 

"The market is pricing in around 100 bps of rate hikes in a year's time. If the RBI announces big measures for the rupee, one of those rate hikes at the tail end will dissolve immediately," the dealer from the primary dealership said. 

 

However, a more adverse outcome of the MPC meeting could also take place. A rate hike of 25 bps on Friday might push up the benchmark gilt yield up to 7.10-7.15%. A further rise is unlikely as state-owned banks are likely to add bonds to their portfolios at levels they consider attractive, dealers said. Moreover, inflationary pressures in the economy are seen fading soon if the MPC hikes rate pre-emptively. CPI inflation is expected to top 6% later in the financial year, topping the RBI's 2-6% target band, from 3.48% in April.

 

After the policy decision Friday, dealers will have the auction of the 6.94%, 2036 gilt to focus on, with several traders already making room for the fresh supply. Demand at the auction is likely to be determined by traders' takeaways from the RBI's comments, though the auction will sail through, dealers said.

 

Immediately after that is the scheduled release of India's GDP data for the March quarter, at 1600 IST. An Informist poll of 16 economists expects the GDP growth print at 7.3%, down from 7.8% in the December quarter. The movement in the rupee and US Treasury yields may also lend cues through the day, dealers said. 

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	96.5125	6.9931%	96.3075	7.0240%
6.94%, 2036	99.6250	6.9920%	96.1700	6.9113%
6.36%, 2031	98.2300	6.8033%	98.1400	6.8260%
6.68%, 2040	94.3875	7.3243%	94.2000	7.3466%
6.90%, 2065	90.2600	7.6901%	90.1700	7.6981%

 

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India Gilts: Hit intraday high as Brent dips below $96/bbl; caution prevails

 

	1640 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.45	96.51	96.30	96.36	96.31
YTM (%)	7.0026	6.9943	7.0260	7.0162	7.0240

 

	1640 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.55	99.57	99.38	99.46	99.4
YTM (%)	7.0027	6.9998	7.0268	7.0154	7.024

 

MUMBAI-–1640 IST--Prices of government bonds hit their intraday high as Brent crude for August delivery dipped below $96 per barrel, dealers said. However, the levels didn't sustain as oil prices rose again from the day's low and caution prevailed ahead of the Monetary Policy Committee's decision Friday.

 

Brent crude for delivery in August fell to $95.61 a barrel intraday from $97.35 a barrel at 0900 IST, prompting a rise in gilt prices, but was at $96.43 per barrel at 1613 IST. Traders avoided large bets on global cues before the domestic rate decision, dealers said.

 

"The prices rose suddenly due to intraday fall in crude below $96 (per barrel) at 1530 IST but it again rose slightly, so whatever is happening in the market is due to MPC meeting as people are covering and shorting positions according to their needs," a dealer at a private sector bank said.

 

Most traders expect the MPC to keep the repo rate unchanged at 5.25% on Friday, while the RBI prepares the market for rate hikes later in financial year 2026-27 (Apr-Mar). However, with Brent futures unable to sustain above $100 per barrel in recent days and bond prices already reflecting rate hikes, traders said further selling pressure was limited. With no rate hike expected, traders who wanted to make room for INR 340 billion of supply of the new 10-year 6.94%, 2036 bond avoided aggressive short sales, dealers said. The governor will unveil the MPC decision at 1000 IST and the auction will be conducted at 1230-1330 IST.

 

For the rest of the day, the yield on the 10-year benchmark bond is likely to be in the 6.98–7.05?nd. At 1630 IST, the total volume in the government securities market was INR 480.80 billion, up from INR 437.65 billion at 1630 IST Wednesday, according to data from the RBI's Negotiated Dealing System. (Durgesh Nandan)

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India Gilts: Remain higher as traders cover short bets, PSU banks likely buy

 

	1307 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.41	96.50	96.36	96.36	96.31
YTM (%)	7.0086	6.9958	7.0169	7.0162	7.0240

 

	1307 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.45	99.5475	99.38	99.46	99.4
YTM (%)	7.0168	7.003	7.0268	7.0154	7.024

 

India Gilts: Remain higher as traders cover short bets, PSU banks likely buy

 

MUMBAI--1307 IST--Prices of government bonds remained higher as traders covered short positions due to caution ahead of the Reserve Bank of India's Monetary Policy Committee decision Friday, dealers said. Also, public sector banks likely bought bonds at levels seen as attractive, dealers said. 

 

In the secondary market, most of the trade volume was concentrated in the 10-year, 5-year and 15-year bonds as traders preferred the most liquid papers to trade amid caution ahead of the monetary policy decision, dealers said. Some traders picked up the 15-year paper as they preferred the spread between the 10-year benchmark 6.48%, 2035 bond and the 15-year benchmark 6.68%, 2040 bond, they said. The 10-year papers were preferred ahead of the INR-340-billion weekly gilt auction of the 6.94%, 2036 paper, dealers said. The amount of short bets placed on the new 10-year bond increased significantly, which will likely drive demand for the bond at the auction as traders will seek to cover their positions, dealers said. 

 

The trade volume in the 6.48%, 2035 and 6.94%, 2036 bonds together constituted over 75% of the total trade volume. The 15-year benchmark bond was the third most traded bond with nearly 9% of the total trade volume. The total volume in the government securities market at 1307 IST was INR 250.10 billion, up from INR 169.30 billion at 1330 IST Wednesday, according to data from the RBI's Negotiated Dealing System. At 1330 IST, the volume of trade in the new 10-year 6.94%, 2036 bond was INR 30.45 billion, and it was the second-highest traded bond in the secondary market.

 

"... Given a hawkish pause in the policy tomorrow, I think the underwriting fee could be around 0.50-0.60 paisa at the auction (underwriting auction for the 6.94%, 2036 bond)," a dealer at a primary dealership said. "But it will also depend on the tone of the commentary. The cut yield will be a bit above 7% (cut-off yield on the 6.94%, 2036 bond), we will only get a clear picture after today's closing." 

 

Public sector banks likely picked up the 10-year benchmark bond as the yield above 7% on the bond seemed attractive, dealers said. Moreover, foreign banks likely trimmed their positions ahead of the policy decision Friday, dealers said. Public sector banks net bought INR 15.65 billion, whereas foreign banks net sold INR 25.02 billion worth of gilts in the secondary market Wednesday.

 

The yield on the 6.48%, 2035 bond is expected to move between 6.99% and 7.03% for the day, dealers said.  (Janwee Prajapati)

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India Gilts: Rise on short covering before MPC outcome; rate hike fear eases

 

	1050 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.44	96.50	96.36	96.36	96.31
YTM (%)	7.0048	6.9958	7.0169	7.0162	7.0240

 

	1050 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.475	99.5475	99.455	99.46	99.4
YTM (%)	7.0133	7.003	7.0161	7.0154	7.024

 

MUMBAI--1050 IST--Prices of government bonds rose further as traders covered short positions ahead of the Reserve Bank of India's Monetary Policy Committee's rate decision Friday, dealers said. Traders await the policy decision before placing any aggressive bets, dealers added.  

 

"There is not much outstanding in the new 10-year (6.94%, 2036 bond) and people are covering (short positions) in the old 10-year bond so the spreads have narrowed," a dealer at a primary dealership said. "Naturally the spread between both the bonds should be around 3-4 basis points...but this policy is a little tricky, so let's see."

 

The spread between the new 6.94%, 2036 bond and the 10-year benchmark 6.48%, 2035 bond had narrowed to nearly zero as traders placed short bets in the new 10-year while they covered their positions in the 6.48%, 2035 bond, dealers said. Traders expect the yield spread between the two bonds to widen by 3-4 bps, which will also depend on the tone of the RBI's governor's commentry following the June policy decision. 

 

Short-term bonds performed better than the 10-year benchmark 6.48%, 2035 bond as traders bought the bond after they pared bets on a repo rate hike at the monetary policy decision Friday, dealers said. This led to traders expecting a steepening in the yield curve in the first half of the current financial year, dealers said.

 

Traders had aggressively sold short-term bonds earlier as they had feared the rate-setting panel would hike rates due to a rise in inflation as Brent crude oil prices had firmed up, dealers said. Brent Crude oil prices had risen to a high of $122.53 per barrel in April due to escalations in the West Asia war. At 1050 IST, Brent crude futures for August delivery traded at $97.08 per barrel, slightly lower than $97.99 at the end of Indian trading hours Wednesday. 

 

The total volume in the government securities market at 1050 IST was INR 135.15 billion, up from INR 52.90 billion at 1030 IST Wednesday, 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 1050 IST, the volume of trade in the new 10-year 6.94%, 2036 bond was INR 14.40 billion, and it was the second-highest traded bond in the secondary market.  (Janwee Prajapati)

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India Gilts: Yields tad down as hopes of US-Iran peace agreement rise

 

	0946 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.40	96.42	96.36	96.36	96.31
YTM (%)	7.0109	7.0071	7.0169	7.0162	7.0240

 

	0946 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.48	99.5	99.455	99.46	99.4
YTM (%)	7.0126	7.0097	7.0161	7.0154	7.024

 

MUMBAI--0946 IST--Prices of government bonds rose slightly as traders were hopeful of a peace agreement between the US and Iran following President Donald Trump's comments, dealers said. Crude oil prices and US Treasury yields eased overnight as there was no significant escalation in the West Asia conflict. Reports of a likely tax cut on bond purchases by foreign portfolio investors also supported gilt prices, dealers said.

 

On the war front, Trump said progress in talks with Iran could come as early as the weekend. Iran's Foreign Minister Abbas Araghchi said Tehran's line of communication with Washington remains open but no breakthrough has been made. He added that both sides are reviewing texts exchanged during negotiations.

 

"There are two things that are positive right now... first is a possible agreement between the US and Iran and the next is the tax cut on foreign (bondholders)," a dealer at a private-sector bank said. "Some people are also covering their short positions in the old 10-year benchmark (bond)."

 

Some traders covered short positions as they expect the warring sides to reach a peace deal soon. Also, fears of a repo rate hike at the Reserve Bank of India's Monetary Policy Committee meeting Friday were reduced after the RBI rejected all bids for the 182-day and 364-day Treasury bills at auction Wednesday.

 

On the other hand, short bets on the new 6.94%, 2036 bond rose significantly as traders hoped to cover their positions at its INR-340-billion auction Friday, 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 0942 IST showed trades worth INR 13.09 billion in the 6.94%, 2036 gilt, up from INR 8.84 billion Wednesday.

 

Volume remained thin in early trade. The total volume in the government securities market at 0946 IST was INR 52.55 billion, up from INR 16.60 billion at 0930 IST Wednesday, 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 0946 IST, the volume of trade in the new 10-year 6.94%, 2036 bond was INR 4.00 billion.  (Janwee Prajapati)

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India Gilts: Seen steady on caution ahead of MPC decision Friday

 

MUMBAI – Government bond prices are seen steady Thursday ahead of the interest rate decision Friday of the Reserve Bank of India's Monetary Policy Committee, dealers said. Moreover, Brent crude oil price remained largely unchanged from the end of the Indian trading session Wednesday because of the lack of any major developments in the US-Iran war, they said. Some traders are likely to make space in their portfolios ahead of the fresh supply at the weekly gilt auction Friday, which will also weigh on bond prices, dealers said.

 

The yield on the 10-year benchmark 6.48%, 2035 government bond is expected to open near 7.02% and move between 7.00% and 7.05% during the day, dealers said. Wednesday, the 10-year benchmark bond had ended at INR 96.31, or 7.0240% yield. Bond prices ended lower as Brent crude oil price rose to over $98 per barrel. However, bond prices recovered largely from a fall after the RBI rejected all bids for the 182-day and 364-day Treasury bills at auction, which reduced fears of a repo rate hike by the Monetary Policy Committee. 

 

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. Bond yields are pricing in a rate hike later in the year and could rise by 3 to 5 basis points if the panel hikes the repo rate Friday, dealers said. RBI Governor Sanjay Malhotra's commentary is expected to set the stage for monetary policy tightening.

 

The RBI is expected to trim its GDP growth estimate for the financial year 2026-27 (Apr-Mar) 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 and any diversion from this expectation could see yields falling, dealers said. The 10-year benchmark yield is seen in a range of 6.90-7.20% on Friday, depending on the tone of the policy and the measures the central bank announces.

 

After the rate decision, dealers will focus on the INR-340-billion auction of the 6.94%, 2036 gilt. Short sales before the auction could weigh on 10-year bonds Thursday.  (Janwee Prajapati)

 

End

 

US$1 = INR 95.79

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

 

Edited by Avishek Dutta

 

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