More Stories

Informist, Friday, Jun. 12, 2026

 

By Diksha Tripathy

 

MUMBAI – Government bond prices ended sharply higher Friday, tracking a fall in Brent crude oil prices and US yields, dealers said. However, government bond prices pared some gains as traders booked profits and trimmed positions ahead of the weekend, they said. Bond prices remained supported as CPI inflation for May came in slightly lower than traders had expected, they said.    

 

Data released at 1600 IST showed India's CPI inflation rose to a 16-month high of 3.93% in May, slightly lower than the market view of 4.0-4.5% and below the Reserve Bank of India's medium-term target of 4%. Traders had expected a sharp rise in retail inflation, with pump prices increasing in May due to higher crude prices. The benign inflation reading did not raise concerns that the RBI's Monetary Policy Committee would have to hike rates in a hurry, aiding bond prices, dealers said. Meanwhile, core CPI inflation, excluding food and fuel segments, was 3.8%, below the 4% market participants had expected but higher than the 3.4% in April.

 

"We were expecting a 4.0-4.2% (inflation for May) number," a dealer at a primary dealership said. "This 3.9% is slightly lower than the market view and that is why even prices are supported. Although we should have seen some rally, I guess the sell-off is due to the weekend."  

 

The benchmark 10-year 6.94%, 2036 bond ended at INR 100.31, sharply up from INR 100.11 on Thursday. Its yield settled at 6.8957%, down from 6.9240% Thursday. Friday's closing yield was the lowest since Apr. 21. Meanwhile, the 6.48%, 2035 bond ended at INR 97.20 or 6.8906% Friday. The trade volume in the 2035 paper was sharply lower than in the 2036 paper throughout the week as traders shifted to the new 10-year bond, treating it as the benchmark, dealers said. The total turnover in the gilt market was INR 924.85 billion, nearly double the turnover of INR 571.05 billion Thursday. Traders attributed the rise in volume to improved market sentiment as Brent crude oil prices fell to a three-month low during the day, extending an overnight fall.

 

At 1700 IST, Brent crude for August delivery was at $87.10 per barrel, down from $89.30 per barrel at 0900 IST, and sharply lower from $92.24 per barrel at the end of gilt trading hours Thursday. Tracking the fall in oil prices, US Treasury yields also eased to 4.46% at 1700 IST Friday, sharply down from 4.53% at the same time Thursday.

 

Both US and Iranian media reported details of a Memorandum of Understanding drafted by negotiators of the two warring nations that was seen as opening the vital Strait of Hormuz to free passage, leading to crude oil prices tumbling. Reports that the two sides would sign a peace deal over the weekend at the Group of Seven summit also pulled down the commodity's price. Intraday, the near-month Brent contract fell to a three-month low below $86 per barrel. 

 

"Crude has been the driving factor in the market since the beginning of the West Asia war," a dealer at a state-owned bank said. "Today (Friday), it is below $90 (per barrel) and that's helping the market; (bond) prices are up due to that." 

 

However, gilt prices did not react as much to the intraday fall in oil prices, and the 10-year benchmark 6.94%, 2036 bond failed to recover the day's high of INR 100.40 hit in early trade. A Bloomberg report Friday, quoting a person in the know, said the government was prepared for its fiscal deficit in 2026-27 (Apr-Mar) to widen to 4.8% of GDP from the Budget target of 4.3% due to the impact of the war in West Asia. This raised fears of extra market borrowing in FY27 and dampened traders' growing risk appetite. Short sellers had also covered a majority of their sales since gilt prices rose sharply this week, limiting the scope for further gains without a concrete end to the war, dealers said. 

 

Bond prices also did not react much to the results of the weekly gilt auction, in which the government raised INR 320 billion through sales of the 6.36%, 2031 gilt and the 7.71%, 2066 gilt. The cut-off yield on the five-year paper was largely in line with the market view of 6.50%, driven by firm demand from banks, dealers said. Banks likely bid aggressively at the auction for the short-term paper to add to both their trading and held-to-maturity books, dealers said.

 

Traders have been preferring the five-year paper after the Reserve Bank of India's Monetary Policy Committee held off on a rate hike last week. The RBI's efforts to bring more foreign capital into India are seen as reducing the case for aggressive rate hikes, dealers said. Moreover, a slew of measures announced by the RBI and the government last week were seen as positive for short-term gilts. The spread of the 10-year benchmark over the five-year gilt's yield is expected to widen up to 45 bps within a month, from 41 bps Friday. Foreign portfolio investors have bought INR 32.44 billion of the 6.36%, 2031 gilt so far this week, with further inflows likely next week, dealers said.       

 

"Some steepening is bound to happen in the short-term," a dealer at another state-owned bank said. "The market sees these RBI measures as a big positive and more flows are expected to come from FPIs starting next week, so soon we'll see some steepening there (in short-term bonds)."  

 

At the auction, the cut-off yield for the long-term paper was at 7.63%, against the market view of 7.62%. After the auction ended at 1130 IST, traders had prepared themselves for a slightly higher cut-off as bidding at the auction was weaker than initially expected. Sluggish insurance premium collections in the June quarter likely restricted the appetite of life insurers at the auction, dealers said.  

 

OUTLOOK

Gilts are not traded on Saturdays. On Monday, gilt prices are seen tracking developments in the war in West Asia and its impact on Brent crude oil prices, dealers said. A peace deal over the weekend could pull down the yield on the 10-year benchmark 6.94%, 2036 bond to 6.85%, while an escalation could push the yield closer to 6.98%, dealers said. Traders will also track the result of the INR 300-billion gilt switch auction Monday, they said.

 

The government will switch eight bonds worth INR 300 billion maturing between 2027 and 2030 with six longer-term gilts Monday in the third switch auction in FY27. One of the destination securities includes the erstwhile 10-year benchmark 6.33%, 2035 gilt. Traders expect a partial switch with low participation as not many of them own the source securities announced at the auction, dealers said.

 

Market sentiment is expected to remain positive, given the likelihood that FPI flows will sustain for at least the next two weeks, dealers said. The inflows are expected to increase the liquidity in the banking system, which is likely to support the market, they said. Demand for short-term gilts in the secondary market is expected to rise as well, with more inflows, dealers added. 

 

Next week, traders will also track the outcome of the first US Federal Open Market Committee meeting under new chair Kevin Warsh. Commentary on inflation amid the war in West Asia will also be watched, dealers said. 

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	97.2000	6.8906%	97.0200	6.9174%
6.94%, 2036	100.3050	6.8957%	100.1050	6.9240%
6.36%, 2031	99.4800	6.4880%	99.3500	6.5205%
6.68%, 2040	95.3400	7.2121%	95.2300	7.2248%
6.90%, 2065	90.8800	7.6353%	90.6800	7.6529%

 

---

India Gilts: Off highs on risk-trimming; CPI inflation in May below view

 

	1602 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.28	100.40	100.16	100.40	100.11
YTM (%)	6.8992	6.8824	6.9169	6.8824	6.924

 

	1602 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.20	97.26	97.08	97.20	97.02
YTM (%)	6.8906	6.8816	6.9086	6.8906	6.9174

 

MUMBAI--1602 IST--Prices of government bonds retreated a little but remained sharply up after India's CPI inflation for May was lower than expectations at 3.93%, but inched closer to the Reserve Bank of India's medium-term inflation target of 4%. The lower-than-view print is despite the Centre hiking retail fuel prices four times last month. An Informist Poll had estimated headline inflation at 4%. Core inflation was also within view at 3.8% last month. However, bond prices were off highs on profit-taking and traders trimmed exposure to risk ahead of the weekend. Some traders fear that a US-Iran peace deal may not be cemented over the weekend. 

 

"In case there is no deal over the weekend, there could be some sell-off on Monday, so people are just profit-booking," a dealer at a mutual fund said. "There's some news that came just before CPI that Iran will not fully reopen Strait of Hormuz, but there was also news they (US and Iran) are close to a deal, so there is no certainty of what will happen."

 

The 6.94%, 2036 bond yield has fallen about 7 basis points since the Monetary Policy Committee's decision on Jun. 5, making current levels ideal to take profits, dealers said. The lower-than-view CPI inflation print buoyed prices and assuaged some fears of a repo rate hike by the Reserve Bank of India's Monetary Policy Committee in August, dealers said. 

 

The total volume in the government securities market at 1602 IST was INR 813.95 billion, nearly double the volume at 1630 IST Thursday of INR 435.55 billion, according to data from the RBI's Negotiated Dealing System. The 6.94%, 2036 bond is seen in a range of 6.90-6.98% for the rest of the day.  (Cassandra Carvalho)

---

India Gilts: Up on fall in crude oil, US ylds; caution before CPI caps gains

 

--Dealers: Gilts remain sharply up but rise limited before CPI data 1600 IST 

--Dealers: PSU bks take profit in gilts, offset impact of crude price slump 

--Dealers: Rise in gilt prices capped on fears of higher govt borrowing FY27 

 

	1400 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.36	100.40	100.16	100.40	100.11
YTM (%)	6.888	6.8824	6.9169	6.8824	6.924

 

	1400 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.23	97.26	97.08	97.20	97.02
YTM (%)	6.8857	6.8816	6.9086	6.8906	6.9174

 

MUMBAI--1400 IST--Prices of government bonds were up tracking an intraday ease in Brent crude oil prices and US Treasury yields, dealers said. However, the rise in bond prices was capped as traders booked profits on their holdings ahead of the release of India's May CPI inflation data, dealers said. Prices were little changed after INR-320-billion weekly gilt auction was broadly in line with expectations, they said. Reports of India preparing for a higher fiscal deficit to 4.8% of GDP in financial year 2026-27 also weighed on the sentiment, dealers said.  

 

"The prices (government bond's) are not rising sharply despite the intraday fall in crude because of the CPI data scheduled today (Friday at 1600 IST)," a dealer at a private sector bank said.

 

Brent crude futures for August delivery fell to $85.80 per barrel intraday, the lowest in over three months, down from $92.14 per barrel at the end of Indian trading hours Thursday. The 10-year US Treasury yields were also down to 4.45%, down from 4.47% at 0900 IST, and down from 4.53% at 1700 IST Thursday. The fall in overnight indexed swap rates also supported bond prices, dealers said. 

 

At the weekly gilt auction, the result was broadly in line with expectations, dealers said. Insurance companies and mutual funds bought the 7.71%, 2066 paper along with bids from some banks to add it to their held-to-maturity books, dealers said. The short-term, 6.36%, 2031 bond was bid by primary dealerships and the banks for their asset-liability-management books, dealers said. The RBI set a cut-off yield of 6.5006% on the 6.36%, 2031 bond and 7.6345% on the 7.71%, 2066 gilt at the auction, respectively. The government had invited bids to sell INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of the 7.71, 2066 bond Friday.

 

Some public sector banks booked profit on their positions as they largely expect India's CPI inflation for May to be on the higher end of market expectations, dealers said. Some traders also expect inflation to be closer to 5%, though it is not factored in into bond prices, dealers said. Some traders said it was the fear of depreciation of the rupee which kept the Reserve Bank of India's Monetary Policy Committee from raising the repo rate at its last policy meeting. However, if the inflation print comes in significantly higher than expectations, then bets on a rate hike will increase in the next policy meeting, dealers said. Traders will also gauge the flows from foreign participants after revised foreign currency non-resident (bank) norms, dealers said. 

 

"Everybody is expecting a higher CPI number, so if inflation is somewhere near 4.05-4.10%, market will not react much," a dealer at a small finance bank said. "But if it (inflation) is above 4.20% then we will see an immediate 10-15 paise fall...market will panic."

 

The total volume in the government securities market at 1400 IST was INR 667.30 billion, sharply higher than INR 334.80 billion at 1430 IST Thursday, according to data from the RBI's Negotiated Dealing System. The 10-year 6.94%, 2036 bond is seen in a range of 6.90-6.98% for the rest of the day.  (Janwee Prajapati and Durgesh Nandan)

---

India Gilts: Pare some gains; cut-off yld on long-term gilt higher than view

 

	1314 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.325	100.40	100.16	100.40	100.11
YTM (%)	6.8929	6.8824	6.9169	6.8824	6.924

 

	1314 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.23	97.26	97.08	97.20	97.02
YTM (%)	6.8857	6.8816	6.9086	6.8906	6.9174

 

MUMBAI--1314 IST--Prices of government bonds gave up some gain as traders booked profits amid expectations of a higher-than-viewed inflation print for May scheduled at 1600 IST, dealers said. The cut-off yield on the long-term 7.71%, 2066 paper was slightly higher than market expectations, which weighed on bond prices, dealers said. 

 

The RBI set a cut-off yield of 6.5006% on the 6.36%, 2031 bond and 7.6345% on the 7.71%, 2066 gilt at the auction, respectively. According to an Informist Poll, the cut-off yield on the short-term gilt was seen at 6.5029% and 7.6200% on the 7.71%, 2066 gilt at the auction Friday.

 

The government had invited bids to sell INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of the 7.71, 2066 bond Friday. A robust demand was seen for the short-term paper from state-owned, private-sector, and foreign banks to add to their asset-liability management and held-to-maturity books, dealers said. The hope of more inflows from foreign portfolio investors after the Reserve Bank of India's slew of measures at the Monetary Policy Committee meeting is fuelling higher demand for short-term appears, dealers said. 

 

For the long-term paper, insurers and mutual funds were seen at the auction, dealers said. However, traders had expected the cut-off yield for the long-term paper to be slightly higher than the market expectations as bidding at the auction was at lower rates, dealers said. Sluggish insurance premium collections in the June quarter likely held insurers back from bidding aggressively at the auction, dealers said. 

 

"The auction was quite bullish," a dealer at a state-owned bank said. "Insurers were there for long-term paper, but June quarter is usually slow for them, so that might have impacted their participation."            

 

Bond prices were supported on intraday easing in Brent crude oil prices, dealers said. Brent crude oil futures for August fell to nearly a two-month low of $88.16 Friday and were at $88.63 per barrel at 1245 IST, lower than $89.30 per barrel at 0900 IST. 

 

The total volume in the government securities market at 1314 IST was INR 553.95 billion, sharply higher than INR 259.80 billion at 1330 IST Thursday, according to data from the RBI's Negotiated Dealing System. The 10-year 6.94%, 2036 bond is seen in a range of 6.90-6.98% for the rest of the day.  (Diksha Tripathy)

---

India Gilts: Surge on fall in Brent crude oil below $90/bbl, US ylds down

 

--Dealers: Gilts surge on fall in Brent oil prices below $90/bbl, US yld down 

--Dealers: Gains in gilts capped; report FY27 fisc gap may rise to 4.8% of GDP 

--CONTEXT: Govt sees FY27 fiscal deficit at 4.5% of GDP based on new series 

 

	0940 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.36	100.40	100.16	100.40	100.11
YTM (%)	6.888	6.8824	6.9169	6.8824	6.924

 

	0940 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.48%, 2035
PRICE (INR)	97.23	97.26	97.08	97.20	97.02
YTM (%)	6.8857	6.8816	6.9086	6.8906	6.9174

 

MUMBAI--0940 IST--Prices of government bonds were sharply up as Brent crude oil prices fell to near two-month low to trade below $90 per barrel, dealers said. US treasury yields also eased overnight, which supported bond prices, they said. A a sharp fall in overnight indexed swap rates to 5.96%, lowest since May 11, also supported bond prices. However, the surge in bond prices was capped due to reports of India preparing for a higher fiscal deficit in the current financial year, dealers said.  

 

"Yields are down because overnight crude is down, the US Treasury has fallen," a dealer at a state-owned bank said. At 0930 IST, Brent crude future for August delivery were at $88.81 per barrel, down sharply from $92.14 per barrel at the end of India trading hours Thursday. At 0930 IST, US Treasury yield was at 4.47% down from 4.52% at 1700 IST Friday. 

 

The fall in the US Treasury yield and Brent crude oil price was due to the hopes of an end to the US and Iran war, dealers said. Hopes of a peace deal increased after US President Donald Trump said a peace agreement with Iran could be reached as early as this weekend, just hours after warning of more strikes.

 

However, the sharp rise in bond prices were capped following media reports that said India was preparing for a higher-than-expected fiscal deficit this year, dealers said. According to the report, the fiscal deficit is likely to widen to 4.8% of GDP compared with the 4.3% goal set in February. This will lead to the government missing its target of 4.5% of GDP based on new series, as the war in Iran led to a rise in energy subsidy costs and adds pressure on government finances.

 

The total volume in the government securities market at 0940 IST was INR 175.05 billion, sharply higher than INR 59.65 billion at 0930 IST Thursday, according to data from the RBI's Negotiated Dealing System.  (Janwee Prajapati)

---

India Gilts: Seen higher on fall in crude oil; caution ahead of auction, CPI

 

MUMBAI – Government bond prices are seen opening higher Friday following an overnight fall in Brent crude oil prices to a near two-month low, dealers said. Hopes of an end to the almost four-month-long West Asia war will keep the market sentiment positive. However, traders are likely to be cautious ahead of the release of India's CPI inflation. Some traders will likely make some space in their portfolio for the fresh supply of gilts at auction, which will weigh on bond prices.  

 

The yield on the 10-year benchmark 6.94%, 2036 government bond is expected to open near 6.90% and oscillate between 6.89% and 6.94% during the day, dealers said. Thursday, the 6.94%, 2036 bond ended at INR 100.11, or 6.9240% yield. Prices of government bonds ended higher, tracking an intraday fall in Brent crude oil prices and US Treasury yields. 

 

Foreign banks turned net buyers Thursday after they had booked profit on some of their holdings Wednesday. However, public sector banks continued to book profit on their holdings as levels seemed attractive, dealers said. 

 

On the West Asia war front, US President Donald Trump said a peace agreement with Iran could be reached as early as this weekend, just hours after warning of more strikes. He said negotiations had reached Iran's top leadership and had support from several regional powers. Iranian Foreign Ministry spokesperson Esmaeil Baghaei confirmed that much of the draft was agreed upon, but stressed that Tehran wouldn't cross its "red lines" and that no final decision had been made.

 

If signed, the deal would mark the most substantial diplomatic move yet to end the three-month conflict that killed thousands and drove up energy costs. "We just made a great settlement of the war with Iran," Trump said, adding that the accord might be finalised during talks in Europe this weekend, potentially signed by Vice President J.D. Vance. The remarks follow earlier claims of progress from Trump that didn't materialise, leaving markets wary.

 

Following these advancements, Brent crude futures for August delivery fell to over $88 per barrel, down over 4% from $92.14 per barrel at the close of Indian trading hours Thursday. At 0810 IST, US Treasury yields also fell to 4.48%, down from 4.53% at 1700 IST Thursday. 

 

Traders will refrain from building positions aggressively ahead of the weekly gilt auction, demand at which is likely to be robust, dealers said. The 6.36%, 2031 bond will be bid aggressively by all market participants as they expect the yield curve to steepen, dealers said. However, some traders expect the bids to be at slightly higher yields, they said. Traders will also cover some of the short bets placed on this bond, dealers said.

 

Investors are likely to pick up the long-term bond at the auction. 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. The government will sell INR 210 billion of 6.36%, 2031 gilt and INR 110 billion of 7.71%, 2066 bond at the weekly gilt auction Friday.

 

Post the weekly gilt auction, traders will shift their focus to India's CPI inflation data for May, to be released at 1600 IST, which is expected to be on the higher side as it will incorporate the rise in energy prices, dealers said. Higher-than-expected inflation data will weigh on bond prices as it will lead to expectations of the Reserve Bank of India's repo rate hike at the next Monetary Policy Committee meeting, dealers said. An Informist poll showed retail inflation may have risen to the RBI's 4% target in May, with a reading between 4.0-4.5% already expected and factored in bond prices, dealers said. Elsewhere, the European Central Bank hiked its rates by 25 basis points. The central bank lifted inflation forecasts and cut growth projections, citing price pressures from the war in West Asia.  (Janwee Prajapati)

 

End

 

US$1 = INR 95.11

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.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

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