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Informist, Monday, Jun. 15, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended off highs Monday as traders took the opportunity to book profits, with the benchmark 10-year 6.94%, 2036 gilt yield hitting a 12-week low of 6.85%. Bond prices were sharply up most of the day, tracking a fall in oil prices after the US and Iran announced a peace deal, dealers said. Traders pared bets of the Reserve Bank of India's Monetary Policy Committee raising the repo rate in August, though some uncertainty on whether the peace deal would be signed persisted, they said. Traders are closely tracking oil prices to see whether the recent fall will be sustained, they said. 

 

"We're seeing 6.85% (yield on the 10-year benchmark) as a technical support which won't break so soon," a dealer at a state-owned bank said. "There's been quite a rally, so there's profit-booking and volumes are also good." 

 

The benchmark 10-year 6.94%, 2036 bond ended at INR 100.49, up from INR 100.31 Friday, but off the day's high of INR 100.63. Its yield settled at 6.8704%, down from 6.8957% Friday, but higher than 6.8501% in early trade. The 10-year benchmark bond yield has fallen 13 basis points so far in June. The total turnover in the gilt market was INR 704.85 billion, lower than INR 924.85 billion Friday, but still above the daily average of INR 652.49 billion seen so far this month.

 

Foreign inflows aided the robust volume and price rise during the day, dealers said. As of 1700 IST, foreign portfolio investors net purchased gilts worth INR 122.02 billion through the Fully Accessible Route on Monday, according to data from Clearing Corp. of India. This figure also reflects the reclassification of the 6.68%, 2040 gilt; 7.24%, 2055 gilt; and 7.71%, 2066 gilt after the RBI added these bonds to the Fully Accessible Route on Jun. 5.

 

The five—year benchmark 6.36%, 2031 gilt yield fell to a day's low of 6.41%, but ended at 6.47% on profit-booking. However, most traders expect the bond's yield to fall further by around 10 to 20 bps, driven by demand from banks' asset and liability management desks, foreign portfolio investors, and mutual funds, dealers said. 

 

"The yield curve will continue to steepen, I think five-year (bond yield) can fall 10 bps more because mutual funds are buying five-year and long-term, not the 10-year," a dealer at another state-owned bank said. 

 

Brent crude oil futures for delivery in August were $82.86 per barrel at 1700 IST, down from $87.10 at the same time Friday, after the US and Iran announced the signing of the peace agreement on Friday. The RBI may have to revise down its inflation forecasts for 2026-27 (Apr-Mar), if crude prices fall and the Strait of Hormuz is reopened, dealers said. Wholesale inflation in India — released Monday — was higher than expected at 9.68%, against an Informist Poll estimate of 9.4%. However, traders ignored the print, they said. 

 

Fears of fiscal slippage by the Centre in FY27 persisted after a report by Bloomberg Friday said the Centre could let its fiscal deficit rise to 4.8% of GDP this year, which capped a gain in bond prices, dealers said. Bonds were little changed after the switch auction results were published. Several banks did not hold the source securities and hence did not participate in the auction, they said. 
 

OUTLOOK

On Tuesday, prices are expected to track crude oil prices, with traders cautious about whether the US-Iran peace deal will be signed by Friday. Traders are not expecting Brent crude oil prices to sustain a fall below $80 a barrel in the near-term, even if a deal is signed, since supply chains are likely to remain disrupted. Similarly, the 10-year benchmark gilt yield is not seen sustaining a move below 6.80%, though some traders see 6.75% as the floor. The yield is unlikely to fall to its pre-war level of 6.66%, they said. The bond yield curve could, however, steepen further, with demand seen as robust for the shorter end of the curve. 

 

Tuesday, traders will also track the result of the INR-216-billion state bond auction. The supply is lower than indicated for the week in the borrowing calendar, but these securities are not in favour, as most tenures are long-term, dealers said. 

 

Traders will also track the outcome of the first US Federal Open Market Committee meeting under new chair Kevin Warsh on Wednesday, wherein a status quo on interest rates is expected. Commentary on inflation amid the war in West Asia will also be watched, 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. This will depend on Bloomberg's review of India for the possible inclusion of gilts in its flagship bond index, they said. The FPI 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. If the peace deal holds, traders are likely to pare bets of rate hikes by the MPC this calendar year, with bets of a hike in August lowered Monday.  
 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.4850	6.8704%	100.3050	6.8957%
6.48%, 2035	97.2925	6.8768%	97.2000	6.8906%
6.36%, 2031	99.5600	6.4679%	99.4800	6.4880%
6.68%, 2040	95.5200	7.1910%	95.3400	7.2121%
6.90%, 2065	90.9500	7.6292%	90.8800	7.6353%

 

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India Gilts: Remain up; Aug rate hike fears ebb after US-Iran peace deal

 

	1610 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.5300	100.63	100.50	100.60	100.31
YTM (%)	6.8641	6.8683	6.8501	6.8543	6.8957

 

India Gilts: Remain up; Aug rate hike fears ebb after US-Iran peace deal

 

MUMBAI--1610 IST--Prices of government bonds remained higher than Friday's close on the back of lower crude oil prices after the US and Iran announced they had agreed to a memorandum of understanding to end the war in West Asia, dealers said. With crude oil prices likely to fall and imported inflation expected to ease, most traders now do not expect the Reserve Bank of India's Monetary Policy Committee to hike the policy repo rate from 5.25% in August. 

 

A significant section of the market had anticipated a rate hike at the next policy review after the RBI raised its CPI inflation forecast for the financial year 2026-27 (Apr-Mar) to 5.1%, from 4.6?rlier. This may still prompt rate hikes later in the year, especially with the southwest monsoon expected to be deficient, pushing up food inflation, dealers said. However, economists at Nomura said the RBI's rate hikes are still not on the table despite rising inflation, according to a report by Dow Jones.

 

"We were expecting a rate hike in August, but now chances are very low after the deal," a dealer at a state-owned bank said. "The effects of El Nino can be seen in August and any rate hike action will be only in October."

 

Most traders disregarded the jump in WPI inflation to 9.68% in May from 8.26% in April under a new series, since the central bank does not track wholesale price rise. Moreover, the pass-on to retail inflation has been modest, dealers said. In May, CPI inflation was at 3.93%, data released Friday showed. The reading was below both market estimates and the RBI's medium-term inflation target of 4% despite the war in West Asia completing three months by the end of May. With the peace deal in place, the central bank may either lower its inflation estimates for FY27 or say that risks to inflation are now evenly balanced, rather than to the upside, as it had guided after meetings of the Monetary Policy Committee in April and June.

 

"...we expect RBI to revise it (CPI) to 4.80-4.90?ter this (peace) deal," a dealer at another public-sector bank said. "Every $10 per barrel increase in crude oil prices adds 25-30 basis points to inflation and now with crude below $85 (per barrel) it is premature to think of a rate hike in August policy." While raising its inflation forecast, the central bank had in June forecast India's crude oil basket to average $95 a barrel from $85 a barrel in April. 

 

At 1544 IST, the most-traded Brent crude oil contract for August delivery was $82.94 per barrel, down from $83.36 per barrel at 0900 IST and down over 4% from Friday's settlement. Traders are now waiting for the reopening of the Strait of Hormuz Friday following the scheduled signing of the agreement, though some are wary that the deal may not hold, dealers said.

 

Meanwhile, dealers said there was weak participation at the gilt switch auction as source securities listed by the central bank at the auction were not available with most participants. Two large state-owned banks said they were not participating heavily at the auction. The government switched only INR 127.07 billion of short-term gilts with long-term bonds against the notified amount of INR 300 billion.

 

Dealers expect the yield on the 10-year benchmark 6.94%, 2036 bond to remain within the 6.85-6.90?nd. They also expect the spread of the erstwhile benchmark 6.48%, 2035 bond over the newer 6.94%, 2036 bond to widen by 2-3 basis points with traders likely to favour the on-the-run security. Currently, the yield spread between the bonds was less than 1 basis point. The total volume in the government securities market at 1610 IST was INR 619.75 billion, lower than the volume of INR 853.60 billion at 1630 IST Friday, according to data from the RBI's Negotiated Dealing System.  (J. Navya Sruthi)

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India Gilts: Remain up as crude oil eases intraday; profit taking weighs 

 

	1305 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.555	100.63	100.50	100.60	100.31
YTM (%)	6.8606	6.8501	6.8683	6.8543	6.8957

 

MUMBAI--1305 IST--Prices of government bonds were up, as Brent crude oil prices eased below the key $85 per barrel level, dealers said. Brent crude oil prices fell to a three-month low following the peace agreement between the US and Iran. However, the rise in bond prices was capped as traders booked profits on their holdings, dealers said. Some traders said slightly higher-than-expected May WPI data also weighed on bond prices, they said.         

 

At 1305 IST, Brent crude futures for August delivery were at $82.87 per barrel, down slightly from $83.36 per barrel at 0900 IST, and sharply below INR 87.10 per barrel at the end of Indian trading hours Friday. 

 

"(India's May) WPI was broadly similar to what people had expected," a dealer at a primary dealership said. "But this WPI data has not incorporated the entire impact of the war, so people will expect the next (WPI) print to be even higher." Some traders expect the WPI data to rise in the coming months, which will likely pull up bond yields by 2-5 basis points, dealers said. India's May WPI data based on the new series was at 9.68%, higher than 8.26% in April. According to an Informist poll, traders had expected the print to be 9.40%. 

 

At the INR-300-billion switch auction, traders expect only a partial switch with relatively low participation, as many market participants do not hold the source securities being offered at the auction, dealers said. Some traders do not expect any significant impact of the switch auction result on bond prices, dealers said. According to an Informist poll, market participants expect the cut-off to be broadly INR 5 paise to INR 15 paise higher than Financial Benchmarks India's closing prices Friday. 

 

"I do not think this switch will be successful," a dealer at a private sector bank said. "I think only about 12 to 15 crore (INR 12 billion to INR 15 billion of bonds) will be switched at the auction."   

 

On the yield curve, traders are likely to prefer the shorter end, which will steepen the curve, dealers said. Public sector banks are likely to refrain from purchasing longer-tenure bonds as they expect long-term bond prices to ease from current levels, they said.  

 

The total volume in the government securities market at 1305 IST was INR 377.10 billion, lower than the volume of INR 481.15 billion at 1230 IST Friday, according to data from the RBI's Negotiated Dealing System. The 6.94%, 2036 bond is likely to be in a range of 6.80–6.90% for the rest of the day. Some traders expect the yield on the 10-year paper to hover around 6.85–6.86% due to profit booking at these levels, which will restrict the rise in bond prices, dealers said. Any positive news on the global front which will further ease Brent crude oil prices to $70-$75 per barrel is likely to pull down the yield on the 10-year bond to 6.70-6.75%, dealers said.  (Janwee Prajapati)

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India Gilts: Sharply up as oil prices, US ylds fall on West Asia peace deal

 

--Dealers:Gilts sharply up, OIS dn on oil price fall as US, Iran reach deal

--Dealers: Profit-taking near 6.85% yld on 6.94%, 2036 gilt caps gains

 

	0930 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.52	100.63	100.51	100.60	100.31
YTM (%)	6.8655	6.8501	6.8669	6.8543	6.8957

 

MUMBAI--0930 IST--Prices of government bonds opened sharply up following a significant fall in Brent crude oil price and US Treasury yields after the announcement of a peace deal between the US and Iran in West Asia, dealers said. However, gains were capped as traders took profits near 6.85% yield on the 10-year benchmark 6.94%, 2036 gilt, they said.

 

The improved sentiment is expected to help the trade volume in the market during the day, dealers said. The total volume in the government securities market at 0930 IST was INR 119.20 billion, down from INR 175.05 billion at 0930 IST Friday, according to data from the RBI's Negotiated Dealing System.

 

"The market is tracking crude, which is driving all other factors today (Monday), including US yields and OIS (overnight indexed swaps)," a dealer at a state-owned bank said. "To some extent, there is some profit booking also by almost all categories of market participants."

 

The price of Brent crude oil tumbled after US President Donald Trump announced a peace deal that would lead to reopening of the Strait of Hormuz. The fall in crude oil price helped bond prices, dealers said. The Brent crude oil futures contract for August delivery was at $83.26 per barrel at 0930 IST, down over 4% from $87.10 per barrel at the end of Indian gilt market hours Friday. The yield on the 10-year benchmark US Treasury note also fell to 4.43%, down over 3 basis points from 1700 IST Friday.

 

Traders will also track the outcome of the INR 300-billion gilt switch auction scheduled for Monday. The government plans to switch eight securities maturing between 2027 and 2030 with six longer-duration bonds in the third switch auction of FY27. One of the destination securities is the erstwhile benchmark 10-year 6.33%, 2035 gilt. Traders expect only a partial switch with relatively low participation as many market participants do not hold the source securities being offered at the auction, dealers said.

 

The volume in the market is expected to rise later in the day, dealers said. The 10-year benchmark 6.94%, 2036 bond is expected to move in a range of 6.80%-6.90%, they said.  (Diksha Tripathy)

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India Gilts: Seen sharply higher as oil prices tumble on US-Iran peace deal

 

MUMBAI – Prices of government bonds are seen opening sharply higher Monday, tracking a significant fall in Brent crude oil prices to an over three-month low after the US and Iran announced a ceasefire agreement early on Monday, dealers said. Bond prices are likely to be supported by a fall in US Treasury yields as well, dealers said. 

 

Market sentiment is expected to remain positive as traders finally have the much-awaited ceasefire announcement they have been looking for to take directional positions, dealers said. However, some traders may book profits, which could limit gains in bond prices during the session, they said.

 

The yield on the benchmark 6.94%, 2036 gilt is expected to open near 6.85% and trade in a range of 6.80-6.90% during the day, dealers said. The bond had ended at INR 100.31, or 6.8957% yield, Friday. The closing yield was the lowest since Apr. 21. Government bonds had ended higher Friday after an intraday decline in Brent crude oil prices and US Treasury yields.

 

Early on Monday, US President Donald Trump announced a long-awaited peace deal with Iran, aimed at ending the war, lifting the US blockade of Iran, and reopening the Strait of Hormuz. The preliminary agreement triggered a sharp fall in oil prices.

 

"The Deal with the Islamic Republic of Iran is now complete," Trump said in a post on Truth Social early Monday, shortly after Pakistani Prime Minister Shehbaz Sharif announced that an agreement had been reached. Trump said the Strait of Hormuz would be reopened on Friday following the formal signing of the agreement. The announcement was first made by Sharif and later confirmed by Trump. However, neither Iran nor the US has yet released the text of the agreement. Traders will closely monitor further details of the peace deal, which could provide additional cues to the market, dealers said.

 

Following the development, Brent crude oil prices fell more than 4% to their lowest level in over three months. At 0700 IST, Brent crude futures for August delivery were at $83.57 per barrel, sharply lower than $87.10 per barrel at 1700 IST on Friday. Meanwhile, the yield on the benchmark 10-year US Treasury note fell 3 basis points after the peace deal announcement. At 0700 IST, the 10-year US Treasury note was at 4.43% yield, compared with 4.46% at the close of Indian gilt market hours on Friday. The decline in both oil prices and US Treasury yields is expected to support domestic bond prices, dealers said, although some traders may remain cautious until more details of the agreement emerge. Some traders are likely to maintain caution ahead of the meeting of the Federal Open Market Committee this week under new chair Kevin Warsh. Commentary on inflation will be closely tracked following the resolution of the West Asia war. 

 

Back home, market participants will also track the outcome of the INR 300-billion gilt switch auction scheduled for Monday. The government plans to switch eight securities maturing between 2027 and 2030 with six longer-duration bonds in the third switch auction of FY27. One of the destination securities is the erstwhile benchmark 10-year 6.33%, 2035 gilt. Traders expect only a partial switch with relatively low participation, as many market participants do not hold the source securities being offered at the auction, dealers said.

 

Apart from the peace deal, market sentiment is also expected to draw support from continued foreign portfolio investor inflows due to the measures announced by the Reserve Bank of India, which dealers believe are likely to remain strong for at least the next two weeks. The inflows are expected to add liquidity to the banking system and support demand for government bonds. Demand for shorter-duration gilts in the secondary market may also increase as fresh inflows enter the system, dealers added.  (Diksha Tripathy) 

 

End

 

US$1 = INR 94.71

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

 

Edited by Saji George Titus

 

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