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Informist, Friday, Jun. 5, 2026

 

--India's 5-year benchmark bond yld falls over 15 bps Fri, most since Apr 8 

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended higher, with short-term bonds surging after the Reserve Bank of India's Monetary Policy Committee left the repo rate unchanged at 5.25%, quelling bets of a rate hike Friday. However, bonds maturing in 10 years and more gave up most gains as expectations of rate hikes later this year persisted, especially after higher-than-expected GDP growth in the March quarter, dealers said. Risk-trimming before the weekend due to uncertainty on developments in the West Asia conflict also weighed. Sentiment, however, improved in the event-heavy day on the possibility of large foreign inflows into gilts due to tax cuts on FPIs' debt holdings announced by the Centre, they said. 

 

"The bottom (in yields) has already played out. RBI was just giving assurance that everything is fine, but there will be a chance of rate hikes. Maybe it will be delayed, but it will be there because the inflation forecast was revised (upwards) drastically and growth is good," a trader at a primary dealership said.

 

The five-year benchmark 6.36%, 2031 bond ended at INR 98.85, up 62 paise, translating to an over 15 basis-point-fall in its yield to 6.65%. This was the steepest fall in a five-year benchmark bond yield in a day since Apr. 8. The yield spread of the 10-year benchmark 6.48%, 2035 bond over the five-year gilt widened to 33 bps Friday from 19 bps Thursday. 

 

The 10-year benchmark bond ended at INR 96.62, up from INR 96.51 Thursday. Its yield settled at 6.9772%, lower than 6.9931% at the previous close. The yield briefly hit about a one-month low of 6.9388%. The newer 6.94%, 2036 bond ended at INR 99.82, higher than Thursday's close of INR 99.63, despite its fresh supply of INR 340 billion. The 2036 bond's yield ended at 6.9651%, lower than 6.9920% Thursday. The 6.68%, 2040 bond yield fell 3 bps Friday, aided slightly by its inclusion in the RBI's list of fully accessible route bonds. 

 

The MPC left the repo and stance unchanged. It was a largely expected, and favourable decision, dealers said. The tone of the policy was also within view, they said. The RBI's and Centre's slew of measures announced to boost foreign inflows is what surprised dealers, they said.

 

The Centre Friday removed the 20% withholding tax on interest earned by foreign institutional investors on their investment in Indian gilts and exempted them from paying capital gains tax on these securities. In his policy statement Friday, RBI Governor Sanjay Malhotra announced measures, including removing limits on foreign portfolio investors' purchase of gilts under the General Route. The central bank will also add all new issuances of 15-, 30-, and 40-year gilts to the fully accessible route, Malhotra said. The governor also announced short-term measures to shore up capital, such as a facility to boost external commercial borrowings by state-owned banks and concession on banks' hedging cost to raise fresh foreign-currency non-resident deposits. Prior to the policy decision, speculation of all these measures was rife among traders. However, market participants were expecting only a couple of these measures to be implemented. 

 

"Inflation is to be watched out for, but that comfort what we got on the FX (foreign exchange) side is much more than expected. People were expecting one of the measures, but this is quite a lot," a dealer at a private sector bank said. 

 

The central bank Friday raised its CPI inflation forecast for 2026-27 (Apr-Mar) to 5.1% from 4.6%, slightly more than some market participants were expecting. This makes the case for repo rate hikes as early as August if the RBI sees headline inflation above 5.00% in FY27, dealers said.

 

The central bank also scaled down its FY27 GDP growth forecast to 6.6% from 6.9%, in line with expectations. Risks to growth, especially due to the West Asia war, could bode well in deterring rate hikes but could also translate to fiscal slippage by the Centre, dealers said. Bond prices were off highs after India's GDP growth in Jan-Mar was higher than expectations at 7.8%.

 

However, a rise in gilt yields is seen capped by the likelihood of large foreign inflows into gilts, after the tax incentives the Centre provided Friday. The tax measures also raised bets of Bloomberg Index Services Ltd. including Indian gilts in its flagship Global Aggregate Index as early as this month. 

 

The weekly auction sailed through, with banks as the major bidders for the 2036 bond. From Monday, traders are likely to refer to the bond as the new 10-year benchmark bond if Friday's volume sustains, they said. The bond saw a turnover of INR 257 billion Friday, sharply higher than INR 59.05 billion Thursday.

 

The total turnover in the government securities market was INR 1.07 trillion, sharply higher than INR 527.55 billion Thursday. There were no trades using the e-rupee wholesale pilot Friday, as has been the case since February. 

 

OUTLOOK

Gilts are not traded Saturdays. On Monday, traders are likely to take fresh positions as they digest the slew of domestic developments for the bond market Friday. The gilt yield curve is seen steepening, as was evident by the price action Friday, especially due to the RBI's measures to shore up foreign capital, dealers said. 

 

However, focus will continue to be on the West Asia war, and its impact on crude oil prices, inflation and growth, dealers said. Traders will assess activity from foreign investors after a bonanza of measures to attract inflows. FPIs net purchased gilts worth INR 32.22 billion Friday through the fully accessible route as of 1900 IST, according to data from Clearing Corp. of India. Traders await Bloomberg Index Services' decision on the inclusion of Indian gilts in its flagship index.

 

The 6.48%, 2035 bond yield is seen in a range of 6.94-7.05% Monday, which is also the range for the bond in the near term. The movement in the rupee and US Treasury yields may also lend cues through the day, dealers said.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	96.6200	6.9772%	96.5125	6.9931%
6.94%, 2036	99.8150	6.9651%	99.6250	6.9920%
6.36%, 2031	98.8500	6.6464%	98.2300	6.8033%
6.68%, 2040	94.6800	7.2897%	94.3875	7.3243%
6.90%, 2065	90.6000	7.6600%	90.2600	7.6901%

 

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India Gilts: Give up most gains after Jan-Mar GDP growth above view

 

	1607 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.64	96.88	96.46	96.48	96.51
YTM (%)	6.9749	6.9388	7.0014	6.9983	6.9931

 

	1607 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.7975	99.9375	99.6	99.6	99.625
YTM (%)	6.9675	6.9478	6.9955	6.9955	6.992

 

India Gilts: Give up most gains after Jan-Mar GDP growth above view

 

MUMBAI--1607 IST--Prices of government bonds gave up most of their rise after India's GDP growth in the March quarter was higher than most traders' expectations, at 7.8%. It was also higher than an Informist poll estimate of 7.3%. Additionally, bond prices were off highs as traders do not wish to carry large positions into the weekend due to uncertainty on where the ongoing West-Asia war is headed, dealers said. However, GDP growth is seen slowing down this financial year, especially due to the impact of the West Asia war, they said, and some traders dismissed the higher-than-expected print.

 

"Market was expecting 7.2% (Q4 GDP growth), so obviously we've seen a dip in market (prices). But this is March data, going ahead there's concerns; RBI has just lowered its GDP forecast, we are yet to see what inflation is like, so this has not changed my rate view," a dealer at a private sector bank. The RBI Friday lowered its FY27 GDP growth forecast to 6.6% from 6.9%, in line with traders' expectations. 

 

Earlier, prices were little changed after the result of the INR-340-billion gilt auction was published. The cut-off price set on the 10-year 6.94%, 2036 bond was largely in line with traders' expectations, dealers said. Banks were the major bidders for the bond, though demand was robust from across market segments, they said. 

 

The total volume in the government securities market at 1607 IST was INR 827.65 billion, about double the INR 480.80 billion at 1630 IST Thursday, 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 6.95–7.00% range for the rest of the day. At 1607 IST, the volume of trade in the new 10-year 6.94%, 2036 bond, was INR 231.85 billion, sharply higher than INR 53.05 billion at 1630 IST Thursday. (Cassandra Carvalho and Durgesh Nandan)

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India Gilts: Remain sharply up; demand at auction seen firm from banks

 

	1438 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.81	96.88	96.46	96.48	96.51
YTM (%)	6.9486	6.9388	7.0014	6.9983	6.9931

 

	1438 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.925	99.9375	99.6	99.6	99.625
YTM (%)	6.9495	6.9478	6.9955	6.9955	6.992

 

MUMBAI--1438 IST--Prices of government bonds remained sharply higher after the RBI governor's commentary after the Reserve Bank of India's Monetary Policy Committee meeting was in line with market expectations, dealers said. Demand at the INR-340-billion gilt auction was likely firm from banks. Traders await GDP data for further cues.    

 

"Mostly banks were there at the auction...the way it (6.94%, 2036 bond) is performing seems like it will become the main trading paper from Monday itself," a dealer at a primary dealership said. "I am expecting 6.97% cut-off this time."

 

At the INR-340-billion auction, demand is likely to be firm from banks, dealers said. Mutual funds and insurance companies also placed bids for the bonds, they said. Some traders will also cover their short bets placed on the bond ahead of its auction, which will likely drive up demand for the bond at the auction, 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 1433 IST showed trades worth INR 191.06 billion in the 6.94%, 2036 gilt, slightly down from INR 336.05 billion Thursday.

 

The RBI is likely to set a cut-off of INR 99.80 on the 6.94%, 2036 gilt at the auction Friday, according to 12 bond dealers polled by Informist. Some traders were cautious of placing aggressive bids as they await the release of GDP data at 1600 IST Friday. The RBI revised its GDP growth forecast for financial year 2026-27 (Apr-Mar) to 6.6% from 6.9%.

 

The total volume in the government securities market at 1438 IST was INR 833.55 billion, up from INR 336.05 billion at 1430 IST Thursday, 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 6.90–7.00% range for the rest of the day. At 1438 IST, the volume of trade in the new 10-year 6.94%, 2036 bond, was INR 171.30 billion.  (Janwee Prajapati)

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India Gilts: Stay up, MPC decision on expected line; profit booking cap gains

 

	1223 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.79	96.88	96.46	96.48	96.51
YTM (%)	6.9516	6.9388	7.0014	6.9983	6.9931

 

	1223 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.9	99.935	99.6	99.6	99.625
YTM (%)	6.9531	6.9481	6.9955	6.9955	6.992

 

MUMBAI--1223 IST--Prices of government bonds remained elevated as decision of the Reserve Bank of India's Monetary Policy Meeting was largely in line with the market expectations, dealers said. However, the rise in bond prices was limited as traders booked profit, dealers said. Some traders also made room in their portfolios for the fresh supply of 6.94%, 2036 bond, which also pulled down bond prices, dealers said.

 

"The market is positive because he (RBI Governor) delivered everything the market was expecting for the last one week, even more than what the market was expecting," a dealer at a public sector bank said. "I expect the entire yield curve to perform better now and the yield on 10-year bond could be in the range of 6.90% to 7.00% now." 

 

Most traders were focused on the RBI governor's commentary on GDP and inflation. The RBI Revised financial year 2026-27 (Apr-Mar) GDP growth forecast to 6.6% from 6.9?rlier and revised FY27 CPI inflation forecast to 5.1% from 4.6?rlier. Moreover, to attract foreign investment and shore up foreign exchange reserves, the government on Friday exempted foreign institutional investors from paying capital gains tax on investment in government bonds. The government also exempted FIIs from paying any withholding tax on interest on such investments which also pushed up bond prices, dealers said.

 

Following the monetary policy decision, traders expect the auction for the 6.94%, 2036 gilts to be 5 to 10 paise lower than the market levels, dealers said. Demand at the auction is likely to be robust from all the market participants, dealers said. The government will sell INR 340 billion of 10-year 6.94%, 2036 gilt at its auction Friday.

 

While some traders expect the 10-year benchmark bond to trade in the range of 6.90-7.00%, others expect the bond yields to fall to 6.85% next week, dealers said. However, bond prices will also track the movement in the rupee in response to the measures announced by the RBI to improve foreign inflows, dealers said. Traders expect the RBI's MPC to hike rates only in the second or third quarter of the current financial year, dealers said. However, it will largely depend on the developments in the West Asia war and the global scenario, they said.

 

The total volume in the government securities market at 1223 IST was INR 643.80 billion, up from INR 214.65 billion at 1230 IST Thursday, 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 6.90–7.00% range for the rest of the day. At 1223 IST, the volume of trade in the new 10-year 6.94%, 2036 bond was INR 132.20 billion.  (Janwee Prajapati)

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India Gilts: Sharply up as RBI keeps repo rate steady at 5.25%

 

	1029 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.75	96.81	96.46	96.48	96.51
YTM (%)	6.9576	6.9486	7.0014	6.9983	6.9931

 

	1029 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.775	99.85	99.6	99.6	99.625
YTM (%)	6.9707	6.9601	6.9955	6.9955	6.992

 

MUMBAI--1029 IST--Prices of government bonds rose sharply the Reserve Bank of India's Monetary Policy committee left the repo rate unchanged at 5.25%, dealers said. Traders booked profit on their positions as the yield on the 10-year benchmark 6.48%, 2035 bond yield fell below the crucial 7.00% level which capped gains, they said. The yield on the 10-year benchmark bond fell to 6.94% for the first time in over a month.   

 

"... The market is positive with all the tax cuts and lower GDP forecast," a dealer at a private sector bank said. "I think the range is now from 6.95% to 7.05% (on the 6.48%, 2035 bond)."

 

Traders had widely expected the rate-setting panel to maintain a status quo on the repo rate. Rate hikes are expected to begin in August or October, dealers said. Nineteen of the 24 economists and market participants polled by Informist had said the Monetary Policy Committee will hold the repo rate at 5.25% at the end of its three-day meeting Friday. Five poll respondents had said the committee will raise interest rates not only to defend the rupee from falling against the dollar but also because inflation is seen rising above the RBI's 4% target over the coming months.

 

The total volume in the government securities market at 0950 IST was INR 346.85 billion, up from INR 119.60 billion at 1030 IST Thursday, 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 6.95–7.00% range for the rest of the day.  (Janwee Prajapati)

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India Gilts: Up on short covering ahead of MPC policy rate decision

 

	0950 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.62	96.63	96.46	96.48	96.51
YTM (%)	6.9772	6.9757	7.0014	6.9983	6.9931

 

	0950 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.71	99.71	99.6	99.6	99.625
YTM (%)	6.9799	6.9799	6.9955	6.9955	6.992

 

MUMBAI--0950 IST--Prices of government bonds rose after opening steady following short covering ahead of the Reserve Bank of India's Monetary Policy Committee Meeting decision at 1000 IST, dealers said. Traders pared bets of a repo rate hike which also supported the rise in bond prices, dealers said. Traders widely expect the RBI governor to announce measures to improve foreign inflows to support the rupee, which also pushed up bond prices, they said.    

 

"It is usually ahead of the MPC policy we (bond prices) see some positivity, some short covering might be there," a dealer at a primary dealership said. "Market wide traders are expecting a pause in rates and hawkish commentary...and some measures for the rupee."

 

Traders expect the RBI governor to hold the policy rates steady and set the stage for a repo rate hike later in the current financial year. However, some traders said that any case for a further rate hike will heavily depend on subsequent economic data. Announcement of measures to improve foreign inflows will likely pull down the yield on the 10-year 6.48%, 2035 bond to 6.94%, at which traders are likely to book profit, dealers said.

 

The rise in bond prices was capped ahead of the INR-340-billion Weekly gilt auction as some dealers made space in their portfolios for the fresh supply of gilts, dealers said. Dealers expect the underwriting fee to be below 1 paise for the 6.94%, 2036 bond, while the cut-off yields are likely to be around 3-4 basis points higher than the current market levels, dealers said.

 

The total volume in the government securities market at 0950 IST was INR 115.00 billion, up from INR 37.10 billion at 0930 IST Thursday, 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 6.94–7.10% range for the rest of the day. At 0950 IST, the volume of trade in the new 10-year 6.94%, 2036 bond was INR 22.25 billion.  (Janwee Prajapati)

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India Gilts: Seen steady on caution ahead of MPC decision

 

MUMBAI – Government bond prices are seen opening steady on Friday, with no major escalation in the West Asia war and ahead of the Reserve Bank of India's Monetary Policy Meeting decision, dealers said. Traders will refrain from taking any major bets and remain on the sidelines in early trade ahead of the RBI's monetary policy decision, they said. Further, bond prices will take cues from the RBI governor's commentary on the outlook, they said. 

 

The yield on the 10-year benchmark 6.48%, 2035 government bond is expected to open near 7.00% and move between 6.95% and 7.10% during the day, dealers said. A rise in bond yields above the upper range is unlikely as state-owned banks will likely add bonds to their portfolios at levels they consider attractive, dealers said. Some dealers do not expect any major move in bond prices if the governor leaves policy rates unchanged and the commentary is in line with market expectations. Thursday, the 10-year benchmark bond ended at INR 96.51, or 6.9931% yield. 

 

Later Friday, after the INR-340-billion weekly gilt auction of the 6.94%, 2036 bond, traders will likely shift their positions from the 10-year benchmark 6.48%, 2035 bond to the new 10-year benchmark, which will also push down the price of the previous benchmark, they said. However, some traders will continue to cover their short positions in 6.94%, 2036 bond, limiting losses, dealers said. 

 

Traders expect the RBI to set the cut-off yield on the 6.94 36bond 3-4 basis points above market levels. The spread between the new 10-year and the old 10-year benchmark is likely to widen by 2–3 basis points after the gilt auction, dealers said.       

 

The markets will remain focused on RBI Governor Sanjay Malhotra's statement at 1000 IST and refrain from aggressive trading, which will keep early trade volume muted, dealers said.

 

Most traders expect the MPC to keep the repo rate unchanged at 5.25% and retain its policy stance at 'neutral'. Malhotra's statement is expected to focus on curbing inflation and setting the stage for future rate hikes based on key economic data, dealers said. Should this base case arise, the 6.48%, 2035 bond is seen easing into a 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 rupee. 

 

After the policy outcome, traders will position ahead of the scheduled release of India's GDP data for the March quarter at 1600 IST. An Informist poll of 16 economists expects GDP growth at 7.3%, down from 7.8% in the December quarter, in line with traders' expectations.  (Janwee Prajapati)

 

End

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

 

Edited by Avishek Dutta

 

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