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Informist, Thursday, Jun. 11, 2026

 

By Diksha Tripathy

 

MUMBAI – Prices of government bonds ended higher, tracking an intraday fall in Brent crude oil prices and US Treasury yields, dealers said. Short-term bonds ended even higher due to robust demand from traders betting on a further rise in their prices despite fresh supply of the five-year benchmark 6.36%, 2031 gilt coming up on Friday, they said.

 

The 2031 gilt and other short-term gilts have been in favour because the Reserve Bank of India's Monetary Policy Committee held off on a rate hike last week and its efforts to lure foreign capital into India are seen reducing the case for aggressive rate hikes, dealers said. Moreover, the measures announced by the central bank and the government last week were seen positive for short-term gilts, especially when foreign currency non-resident deposits in three-five year tenures begin flowing in next week. However, some traders trimmed positions to make room for the fresh INR 210 billion of supply of the five-year benchmark at the weekly gilt auction Friday. 

 

The 6.36%, 2031 gilt ended at INR 99.35, up from INR 99.15 on Wednesday. Its yield settled at 6.5205%, down 5 basis points from Wednesday. The new 10-year benchmark 6.94%, 2036 bond ended at INR 100.11, up from Wednesday's INR 99.97. Its yield closed at 6.9240%. Meanwhile, the old 10-year 6.48%, 2035 bond ended at INR 97.02 and its yield settled at 6.9174%.

 

The trade volume in the market remained muted Thursday as traders maintained caution amid uncertainty around an end to the US-Iran war, dealers said. The total turnover in the government securities market was INR 572.20 billion at the end of gilt market hours, significantly lower than INR 715.30 at 1700 IST Wednesday. Traders refrained from placing aggressive bets ahead of the release of India's CPI inflation print for May at 1600 IST Friday. India's retail inflation is likely to have risen to a 16-month high of 4% in May due to elevated oil prices stemming from the West Asia war, according to an Informist poll.

 

"Till 4-4.5% (headline CPI inflation), the market has factored in," a dealer at a private sector bank said. "But a higher figure than that could be a problem. In that case, the yields (on government bonds) could go up significantly...difficult to say how much."

 

 

Bond prices across tenures rose as Brent crude oil futures for August delivery fell over 3% intraday to as low as $91.61 per barrel Thursday, dealers said. Tracking the fall in oil prices, US Treasury yields also fell, which helped bond prices in India, dealers said. At 1700 IST, the benchmark 10-year US Treasury note was at 4.53%, down from 4.56% at 0900 IST, and 2 bps lower than 4.55% at the end of Indian gilt trading hours Wednesday. 

 

Some traders also covered short positions in the 6.48%, 2035 bond amid a fall in liquidity in the paper, with market participants shifting to the new 10-year benchmark bond, dealers said. Some foreign banks that had sold bonds Wednesday, covered short sales in the 2031 paper, which prompted its outperformance against other gilts, dealers said. 

 

"The market is largely range-bound," a dealer at a state-owned bank said. "I think some (short) covering in 2031 by foreign banks. Yesterday (Wednesday) they sold, so now today (Thursday) they are covering, and thus we are seeing a rally. We might see them at the auction tomorrow (Friday) as well."    

 

OUTLOOK

At the open, gilt prices Friday may take direction from developments in the West Asia war after US President Donald Trump said on social media the US would hit Iran very hard "tonight". Traders will closely track the result of the INR 320-billion gilt auction Friday, dealers said.

 

The government will sell INR 210 billion of 6.36%, 2031 gilt and INR 110 billion of the 7.71%, 2066 gilt at the auction. For the short-term paper, demand is expected from both state-owned and private sector banks for asset-liability management and held-to-maturity books amid hopes of higher inflows, dealers said. Foreign investors are also expected to be aggressive in picking up the short-term paper, dealers said. 

 

For the 40-year bond, insurance companies and pension funds are likely to sweep up most of the auction stock, as is usual, dealers said. However, sluggish insurance premium collections in the June quarter may hold insurers back from bidding aggressively at the auction, they added. Traders expect the supply to sail through after the MPC held the policy repo rate last week and commentary did not suggest policymakers were in a hurry to raise rates, dealers said. 

 

Traders may avoid large bets even after the auction result, ahead of the weekend and India's CPI inflation data at 1600 IST. An Informist poll median of economists shows retail inflation may have risen to the RBI's 4% target in May, with a reading between 4.0-4.5% already expected and reflected in bond prices, dealers said.

 

On the West Asia war front, traders will track Brent crude oil prices, a rise in which may pull down bond prices, dealers said. The 6.94%, 2036 bond is seen moving in a range of 6.90-6.98% range Friday. 

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	97.0200	6.9174%	96.9000	6.9353%
6.94%, 2036	100.1050	6.9240%	99.9700	6.9431%
6.36%, 2031	99.3500	6.5205%	99.1500	6.5709%
6.68%, 2040	95.2300	7.2248%	95.1300	7.2366%
6.90%, 2065	90.6800	7.6529%	90.6000	7.6600%

 

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India Gilts: Remain flat; slight intraday fall in crude oil price helps

 

	1437 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100	100.02	99.89	99.95	99.97
YTM (%)	6.9388	6.9363	6.9551	6.9459	6.9431

 

	1437 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	96.94	96.95	96.81	96.81	96.90
YTM (%)	6.9294	6.9279	6.9489	6.9489	6.9353

 

MUMBAI--1437 IST--Prices of government bonds continued to hover near Wednesday's closing level as traders were cautious to take aggressive bets prior to the release of India's May CPI inflation data and weekly gilt auction Friday, dealers said. However, bond prices were supported due to an intraday ease in Brent crude oil prices, they said. 

 

"I think prices should have moved even higher, but we are still at these levels because of the auction tomorrow (Friday)," a dealer at a private sector bank said. "Crude is down, swap rates are also lower. It is just CPI and auction which is why bonds are underperforming." 

 

Foreign participants likely bought gilts after they booked profit on some of their holdings Wednesday, dealers said. Foreign banks were the largest net sellers Wednesday, with sales worth INR 43.76 billion, as per Clearing Corporation of India data. 

 

Brent crude futures for August delivery fell to over $92 per barrel, down from over $95 per barrel overnight, but similar to $92.95 per barrel at the end of Indian trading hours. Along with caution before the CPI data and the weekly gilt auction Friday traders were uncertain about the end of the West Asia war, which also kept the total trading volume of government securities muted. The total volume in the government securities market at 1437 IST was INR 339.55 billion, higher than INR 481.05 billion at 1430 IST Wednesday, according to data from the RBI's Negotiated Dealing System.

 

Traders expect demand at the weekly gilts auction Friday to be robust for the 6.36%, 2031 bond from banks as they will buy the bond for their trading books. Some traders also expect the long-term bonds to be bid by the insurers, dealers said. The government will sell INR 210 billion of the five-year 6.36%, 2031 bond and INR 110 billion of the forty-year 7.71%, 2066 bond at the auction. The 6.36%, 2031 bond was down 34 basis points since Friday after the central bank and government announced measures to improve foreign inflows.

 

The government also announced INR 300 billion of switch auction which is to be held Monday. Traders expect the bids at the auction to be for less than the full notified amount. However, some traders do not expect the cut-off at the switch auction to impact bond prices.    

 

For the rest of the day, the yield on the 10-year benchmark 6.48%, 2035 bond, is seen at 6.93–6.98%. Traders expect the closing to be slightly on the lower side as traders will likely place short bets ahead of the auction Friday, dealers said.  (Janwee Prajapati and Durgesh Nandan)

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India Gilts: In thin band amid uncertainty over end to West Asia war

 

1315 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
					6.48%, 2035
PRICE (INR)	96.91	96.95	96.81	96.81	96.90
YTM (%)	6.9339	6.9279	6.9489	6.9489	6.9353

 

	1315 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.995	100.00	99.89	99.95	99.97
YTM (%)	6.9395	6.9395	6.9551	6.9459	6.9431

 

MUMBAI-–1315 IST--Prices of government bonds moved in a thin band Thursday as traders remained cautious amid uncertainty over an end to the US-Iran war, dealers said. Traders also trimmed positions to make space in their portfolios for the fresh supply at the weekly gilt auction Friday, which weighed on bond prices, dealers said. The losses were limited as some traders covered short bets on the 6.48%, 2035 bond, dealers said. 

 

Traders expect liquidity in the 6.48%, 2035 bond to fall significantly amid a shift in volume to the new 10-year 6.94%, 2036 bond, which led to short-covering in the market, dealers said. The volume of the 10-year benchmark, 6.94%, 2036 bond was INR 148.35 billion at 1315 IST, accounting for over half the total turnover of INR 251.05 billion in the government securities market, according to data from Clearing Corp. of India Ltd. At 1330 IST, the total turnover in the market was significantly lower than Wednesday's INR 401.25 billion. Trade volumes remained low as traders await clarity on the West Asia war front, and India's CPI inflation print for May, dealers said. 

 

Traders likely sold bonds to make space in their portfolios as they look to get their intended supply of gilts at the weekly gilt auction Friday, dealers said. At the auction, the government will sell INR 210 billion of the five-year 6.36%, 2031 bond and INR 110 billion of the forty-year 7.71%, 2066 bond. Demand for the long-term paper is likely to be firm as investors look to add it to their held-to-maturity books, dealers said. Banks are expected to participate actively in the auction for the short-term paper, dealers said. 

 

"Demand will be there at the auction," a dealer at a state-owned bank said. "There is no doubt about the long-term paper, but for the short-term paper, we will have to see the cut-offs (yields at the auction). I think FPIs could also be there for the short-term paper."

 

Some state-owned banks likely bought bonds Thursday, continuing their buying momentum from Wednesday, when they had net bought gilts worth INR 43.77 billion, dealers said. Some foreign banks likely booked profits Thursday on expectations of further escalation in the West Asia war, which could pull bond prices down, dealers said. Foreign banks were the largest net sellers Wednesday, with sales worth INR 43.76 billion, as per CCIL data. (Diksha Tripathy and Durgesh Nandan)

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India Gilts: Tad down on rise in crude oil prices; caution ahead of CPI Fri

 

	0921 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.94	99.95	99.89	99.95	99.97
YTM (%)	6.9473	6.9459	6.9551	6.9459	6.9431

 

MUMBAI--0921 IST--Prices of government bonds were a tad lower as renewed escalation in West Asia weighed on market sentiment, dealers said. The rise in Brent crude oil prices to near $95 per barrel weighed on sentiment and pulled down bond prices, they said. Brent crude oil prices continued to trade below the psychological level of $100 per barrel, which limited losses, dealers said. Traders were also cautious in taking aggressive positions ahead of the release of India's May CPI data Friday, dealers said.

 

"(Trade) Volume will be there today (Thursday), but it all depends on the movement in Brent now," a dealer at a small finance bank said. "Volume is decent in early trade, but there is too much volatility in the market... we will have to wait and watch now." Brent crude futures for August delivery rose to over $94 per barrel, slightly down from over $95 per barrel overnight, but sharply up from $92.95 per barrel at the end of Indian trading hours. Some traders likely covered their short bets on the 6.48 35bond after its yield rose above 6.93%, which supported bond prices, dealers said. 

 

"Bond yields are slightly up due to negative sentiments," a dealer at a private sector bank said. With no significant domestic triggers, traders will await the release of CPI inflation data and the weekly gilt auction on Friday. Traders expect the buying momentum to pick up after the gilt auction Friday, they said.

 

Traders will likely make space in their portfolios as they look to add the fresh supply of short-term gilts at auction Friday, dealers said. Demand for the 6.36%, 2031 bond is likely to be robust at the auction following the announcement of a slew of measures by the central bank and the government. The government will sell INR 210 billion of the paper along with INR 110 billion of the 7.71%, 2066 bond.

 

The total volume in the government securities market at 0921 IST was INR 49.05 billion, higher than INR 43.70 billion at 0930 IST Wednesday, according to data from the RBI's Negotiated Dealing System.  (Janwee Prajapati)

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India Gilts: Seen down on rise in crude oil prices, escalation in West Asia

 

MUMBAI – Government bond prices are seen opening lower, tracking an overnight rise in Brent crude oil prices due to renewed escalation in the war in West Asia, dealers said. Traders are likely to remain cautious ahead of the release of India's May CPI inflation data Friday, especially after US CPI inflation data breached 4% for the first time in three years in May, they said. Traders are likely to make space in their portfolios for the fresh supply of gilts at auction Friday, which will also weigh on the bond prices, dealers said.

 

The yield on the 10-year benchmark 6.94%, 2036 government bond is expected to open near 6.95% and oscillate between 6.94% and 6.98% during the day, dealers said. Monday, the 6.94%, 2036 bond ended at INR 99.97, or 6.9431% yield. Bond prices ended lower, tracking a rise in Brent crude oil prices. Foreign banks sold gilts worth INR 43.76 billion on Wednesday, after remaining net buyers for four consecutive sessions, likely booking profits on their holdings, dealers said. Public sector banks, on the other hand, bought a similar quantum of bonds as the yield on the bonds inched higher later in the day, they said.

 

On the war front, the US military confirmed it launched a new wave of strikes on several Iranian targets Wednesday, just hours after President Donald Trump warned of further attacks if a peace agreement wasn't reached. Iran responded by announcing it was closing the Strait of Hormuz. Brent crude futures for August delivery rose to over $94 per barrel, slightly down from over $95 per barrel overnight, but sharply up from $92.95 per barrel at the end of Indian trading hours.

 

On the data front, US consumer prices rose 0.5% on-month on a seasonally adjusted basis, pushing annual inflation to 4.2%, according to the Bureau of Labour Statistics Wednesday. Inflation breached 4% for the first time in three years. The increase was in line with forecasts, but concerns remain over how higher energy costs will affect the broader economy. It marked the highest rate since April 2023 and was up from 3.8% in April. Some traders do not expect the higher US CPI inflation to have an impact on Indian bond prices as US Treasury yields were trading at 4.55%, broadly unchanged from the close of Indian trading hours Wednesday. 

 

Traders will likely make space in their portfolios as they look to add the fresh supply of short-term gilts at auction Friday, dealers said. Demand for the 6.36%, 2031 bond is likely to be robust at the auction following the announcement of a slew of measures by the central bank and the government. The government will sell INR 210 billion of the paper along with INR 110 billion of the 7.71%, 2066 bond.  (Janwee Prajapati)  

 

End

 

US$1 = INR 95.76

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

 

Edited by Avishek Dutta

 

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