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Informist, Wednesday, Jun. 17, 2026

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds gave up most gains and ended steady as Brent crude oil prices rose near the end of the Indian trading session Wednesday, dealers said. Some traders booked profits on their holdings near 6.85% yield on the 10-year benchmark 6.94%, 2036 bond, which also weighed on bond prices, dealers said. Traders remained cautious ahead of the US Federal Open Market Committee meeting decision at 2330 IST Wednesday. Traders also refrained from building aggressive positions amid uncertainty over the US-Iran final peace agreement, dealers said.     

 

The benchmark 6.94%, 2036 bond ended at INR 100.54, up slightly from INR 100.52 Tuesday. Its yield settled at 6.8626%, down from 6.8651% Tuesday. The yield on the 6.94%, 2036 bond moved between 6.8472% and 6.8636% during the day. The total turnover in the gilt market was INR 561.15 billion, up from INR 450.80 billion Tuesday.

 

Brent crude oil prices rose towards the end of the Indian trading session. At 1700 IST, the most-traded August Brent crude oil futures contract was at $79.36 per barrel, down from $80.82 per barrel at the same time Tuesday, but up from the day's low of $77.75 per barrel.

 

Public sector banks likely continued to book profits on their holdings near the 6.85% yield on the 10-year benchmark, which kept gains capped, dealers said. Some foreign investors likely bought short-term bonds maturing in up to three years, dealers said. Some traders also picked up floating-rate bonds as they considered the levels attractive, dealers said. Traders largely expect the 6.94%, 2036 bond yield to move in the 6.80-6.85% range, dealers said. The yield on the 6.94 36bond could fall to 6.80% if the US and Iran successfully sign a peace agreement on Friday, dealers said. 

 

"The range today (Wednesday) was only 5-10 paise (price on 6.94%, 2036 bond)," a dealer at a private sector bank said. "Sentiment is positive, but the market needs a big push to break the 6.85% yield (on 6.94%, 2036 bond)... if FOMC (Federal Open Market Committee meeting) has no surprise, then we will continue to be in this range."

 

At the US FOMC meeting, traders will closely track the policy rate decision and the tone of commentary from newly appointed Federal Reserve Chair Kevin Warsh, dealers said. Traders widely expect the FOMC to hold the policy rate steady at its meeting Wednesday. A hawkish shift in the central bank's dot plot could complicate the policy outlook, dealers said. An unexpected rate hike by the Fed could push US Treasury yields higher and weigh on Indian government bond prices, dealers said. The odds of an October hike had slipped following the announcement of a peace pact between the US and Iran.

 

Back home, the Reserve Bank of India set a lower-than-expected cut-off yield on the 364-day Treasury bills at auction, which was likely driven by robust demand from banks and primary dealerships, dealers said. Demand for the 364-day T-bill was also supported as dealers pared bets on a potential rate hike, tracking a fall in crude oil prices, they said. The central bank set a cut-off yield of 5.2603% on the 91-day T-bill, 5.5005% on the 182-day T-bill and 5.7887% on the 364-day T-bill.  

 

The cut-off yield set on the 91-day T-bill was higher than market expectations. Some traders said the higher cut-off yield on the three-month T-bills was likely due to low liquidity in the banking system. However, the cut-off yield on the 91-day T-bill was nearly 4 basis points lower than the cut-off set last week. Mutual funds likely bought the 91-day T-bill at the auction, dealers said. 

 

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 238.81 billion Tuesday, down from INR 1.51 trillion Monday. Liquidity surplus in the banking system on Tuesday was the lowest since Mar. 19, except for the deficit seen between Mar. 20 and Mar. 22.

 

"(Trade) volumes could have been higher today (Wednesday), but liquidity in the system is tight (low), which kept trading activity subdued," a dealer at a private sector bank said. "The market also remained largely non-volatile due to the low liquidity conditions." 
 

Some traders were concerned about the delay in monsoon over many parts of the country, which will weigh on inflation and, in turn, could lead to increased bets on a rate hike, dealers said. The India Meteorological Department has projected southwest monsoon rainfall to be below normal at 90% of the long-period average. While the market does not expect the central bank to raise the repo rate at its next policy meeting in August, they still expect the RBI to hike rates by 75 basis points in FY27. Some traders do not expect any rate hikes in the current calendar year if the Brent crude oil prices fall to near the pre-war levels, dealers said.

 

Some traders expect the state borrowing calendar for the Jul-Sept quarter to be released in the last week of June, which will also provide cues for bond prices, dealers said. While some traders expect the state borrowing quantum for the quarter to be similar to that in the June quarter, others expect it to be slightly higher, dealers said. In the June quarter, states and union territories planned to raise INR 2.55 trillion through bonds. The actual borrowing quantum in the June quarter was broadly in line with the indicative calendar due to the introduction of the Benchmark Issuance Strategy pilot study, dealers said.  

 

"I think the borrowing calendar will be released by Jun. 26," a dealer at a private sector bank said. "The borrowing quantum could be similar to this quarter (June quarter) because the government would not want the state to increase their borrowing after they have issued measures to stabilise the market."

 

OUTLOOK

On Thursday, gilt prices will likely track crude oil prices, as traders remain cautious about whether the US-Iran peace deal will be signed on Friday. Even with a US-Iran peace deal, many traders think Brent crude is unlikely to sustain below $80 per barrel due to ongoing supply disruptions. The 10-year benchmark gilt yield is also seen as unlikely to fall below 6.80%. Traders expect the bond yield curve to steepen further, with strong demand expected at the shorter end. 

 

Traders will also track the outcome of the first US FOMC meeting under new Fed Chair Warsh, wherein a status quo on interest rates is expected. Commentary on inflation in the wake of the likely end to the war in West Asia will also be watched, dealers said. 

 

At the weekly gilt auction on Friday, traders expect the demand to be firm for short-term bonds. The long-term bonds are also likely to be absorbed as the quantum is low, dealers said. However, some traders said demand at the auction will also depend on the FOMC decision. The government will sell INR 110 billion of 6.03%, 2029 bonds, INR 110 billion worth of 6.68%, 2033 bonds, INR 50 billion of 7.24%, 2055 bonds and INR 50 billion of 7.50%, 2056 green bonds at the auction Friday.

 

Market sentiment is expected to remain positive, given the likelihood that FPI flows will be sustained for at least two weeks, dealers 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, they added. If the US-Iran peace deal holds, traders are likely to pare bets of a rate hike by the RBI's Monetary Policy Committee in 2026.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.5400	6.8626%	100.5225	6.8651%
6.48%, 2035	97.2600	6.8818%	97.2900	6.8773%
6.36%, 2031	99.5300	6.4756%	99.5500	6.4705%
6.68%, 2040	95.5925	7.1826%	95.5700	7.1852%
6.90%, 2065	91.0700	7.6187%	91.1300	7.6134%

 

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India Gilts: Steady; inflation fears persist despite fall in crude oil

 

	1541 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.57	100.65	100.57	100.65	100.52
YTM (%)	6.8584	6.8472	6.8580	6.8472	6.8651

 

MUMBAI-–1541 IST--Prices of government bonds retreated a little as Brent crude oil rose above $79 per barrel, dealers said. However, the market does not expect crude oil to go above $80 per barrel because of the lack of fresh triggers and an agreement for a peace deal between the US and Iran.

 

At 1547 IST, the most active August Brent crude oil futures contract was at $79.27, down from $80.82 per barrel at 1700 IST Tuesday but up from the day's low of $77.75 per barrel, which was also the lowest level since Mar. 2. Despite lower crude oil prices, dealers still expect June inflation to rise over 4%, which is above the Reserve Bank of India's medium-term inflation target.

 

"Domestic petrol, diesel prices are higher as hikes started only in mid-May. So this month's inflation may cross 4%," a dealer at a private-sector bank said. In June, the RBI raised its CPI inflation forecast for the financial year 2026-27 (Apr-Mar) to 5.1%, from 4.6?rlier. CPI inflation was 3.93% in May.

 

Indian Oil Corp. Ltd. raised retail fuel prices four times in May. In sum, the state-owned oil marketing company raised the price of petrol by INR 7.35 per litre and diesel by INR 7.53 per litre.

 

Apart from firm fuel prices, expected deficient rainfall during the southwest monsoon and its impact on foodgrain output will add to the inflation pressure, dealers said. The India Meteorological Department expects rainfall during June and September to be 10?low normal.

While the market does not expect the RBI to raise the repo rate at its next policy meeting, due August, they still expect the central bank to hike rates by 75 basis points in FY27. "Starting October we can see RBI hiking rates because by then we will have clarity about monsoon and impact on inflation," a dealer at a state-owned bank said.

 

Wednesday, the yield on the 6.94%, 2036 bond fell to 6.8472%, the lowest since Mar. 25. The total turnover in the government securities market at 1541 IST was INR 471.00 billion, against INR 329.55 billion at 1530 IST Tuesday.

 

Dealers do not expect the yield on the 10-year benchmark bond to be sustained below 6.85% as "all good news is priced in". "Right now we need clarity on when will the Strait (of Hormuz) open, and we should also wait for FPI flows," the dealer at the private-sector bank said.

 

Traders now await the decision of the US Federal Open Market Committee, scheduled to be announced 2330 IST, for more cues, dealers said. In the medium term, market participants are eyeing Bloomberg's review for the possible inclusion of Indian gilts in its flagship bond index.  (J. Navya Sruthi)

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India Gilts: Up as oil near pre-war levels; 10-year yld lowest since Mar 25

 

	1355 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.59	100.65	100.57	100.65	100.52
YTM (%)	6.8559	6.8472	6.8580	6.8472	6.8651

 

MUMBAI-–1355 IST--Prices of government bonds remained higher as Brent crude oil prices fell and neared pre-war levels, dealers said. Brent crude oil prices fell to $77.75 per barrel, the lowest since Mar. 2. However, they do not expect prices to rise further due to lack of major triggers till Friday, when the signing of the peace agreement between the US and Iran is due. 

 

"We can see (Brent) crude at $77.75 (per barrel) which is almost near before the war level, but we should wait till they sign the agreement," a dealer at a private bank said. "It is difficult for yield (on the 10-year benchmark bond) to break the 6.85% level today (Wednesday)," the dealer said. "Even if it does, I don't expect it to sustain," the dealer added. 

 

The yield on 6.94%, 2036 bond fell to 6.8472%, which is the lowest seen since Mar 25. The total turnover in the government securities market at 1355 IST was INR 390.75 billion, against INR 207.20 billion at 1330 IST on Tuesday. Traders attributed the higher volume to positive market sentiment. The 10-year benchmark 6.94%, 2036 bond yield is seen in the range of 6.83-6.90% for the rest of the day, dealers said.    

 

Moreover, the cut-off yield on 91-day and 182-day Treasury bills was broadly in line with the market's expectations, while that on the 364-day was slightly lower than expectations, dealers said. The cut-off on the 91-day T-bill was expected to be around 5.25% and the Reserve Bank of India set the cut-off at 5.26% and the cut-off on the 182-day T-bill was 5.50%, against the estimate of 5.49% yield.

 

However, with firm demand from private banks for the 364-day T-bill, the cut-off was better than expected, a dealer at a state-owned bank said. The cut-off on the 364-day T-bill was 12 bps lower than the cut-off set last week. According to the Informist poll, the cut-off on the 364-day T-bill was seen at INR 94.4921, or 5.85% yield. Market participants await the full auction result for more cues.

 

The cut-off yield on the 91-day T-bill is nearly 4 basis points lower than the cut-off set last week, while that on the 182-day T-bill is nearly 5 bps lower than the cut-off set on Jun. 10.  (J. Navya Sruthi)

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India Gilts: Up as oil stays below $80/bbl; inflation risks restrict upside

 

	1205 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.58	100.65	100.57	100.65	100.52
YTM (%)	6.857	6.8472	6.858	6.8472	6.8651

MUMBAI-–1205 IST--Prices of government bonds were slightly higher Wednesday as Brent crude oil prices fell below the crucial level of $80 per barrel, dealers said. However, persisting inflation concerns due to weather-related risks restricted further upside in prices of government bonds, they said.

 

"Even though (Brent) crude oil prices fell below $80 per barrel, there is still risk because of El Nino related inflation," a dealer at a private insurance company said. "Market also wants clarity on peace deal, and is waiting till Friday. So, no one is taking aggressive positions currently," the dealer said.  

 

At 1205 IST, the most active August Brent crude oil futures contract was at $78.94 per barrel, down 2.4% from the close of Indian trading hours Tuesday. Traders are likely to remain cautious ahead of the decision of the US Federal Open Market Committee, scheduled at 2330 IST on Wednesday.

 

"There may not be rate hike by FOMC but commentary is expected to be hawkish," a dealer at a primary dealership said. "10-year has already priced in tightening, so FOMC (outcome and tone) is unlikely to have major impact on our market," a fund manager at an asset management company said. 

 

The total turnover in the government securities market at 1205 IST was INR 224.70 billion, against INR 91.70 billion at 1130 IST on Tuesday. Traders attributed the higher volume to improved market sentiment, with Brent crude falling below $80 per barrel.

 

Traders expect the cut-off on the 91-day Treasury bill to be at the higher end of the expected range due to the low liquidity surplus in the banking system, dealers said. "We are expecting cut-off at 5.25-5.26% level because of the liquidity crunch, and we also have GST outflows around 21st (Sunday)," the dealer at the primary dealership said.  

 

The net liquidity absorbed from the banking system by the RBI – a proxy for the liquidity surplus – was INR 238.81 billion Tuesday, down from INR 1.51 trillion Monday. Liquidity in the banking system Tuesday was at the lowest surplus since Mar. 19, barring the deficit seen between Mar. 20 and Mar. 22.

 

According to the median of 14 bond dealers in an Informist poll, the Reserve Bank of India is likely to set a cut-off of INR 98.7080, or 5.25% yield, on the 91-day Treasury bill at the auction Wednesday. Estimates for the cut-off on 91-day paper were between 5.20% and 5.29%. The cut-off on the 182-day T-bill is seen at INR 97.3355, or 5.49% yield, and that on the 364-day T-bill is seen at INR 94.4921, or 5.85% yield.  (J. Navya Sruthi)

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India Gilts: Up as Brent crude oil falls below $80/bbl; profit-taking weighs

 

	0935 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.59	100.65	100.57	100.65	100.52
YTM (%)	6.8556	6.8580	6.8472	6.8472	6.8651

 

MUMBAI – Prices of government bonds were up Wednesday tracking an overnight fall in the price of Brent crude oil, dealers said. However, some traders took profits, which capped the rise in bond prices, they said. Traders are likely to remain cautious ahead of the decision of the US Federal Open Market Committee scheduled to be announced 2330 IST, dealers said. 

 

The total turnover in the government securities market at 0935 IST was INR 78.10 billion, against INR 14.50 billion at 0930 IST Tuesday. Traders attributed the higher volume to improved market sentiment, with Brent crude falling below $80 per barrel and a preliminary peace deal between the US and Iran, dealers said.

 

At 0920 IST, the Brent Crude futures contract for August delivery was at $78.54 per barrel, down from $80.88 per barrel at 1700 IST Tuesday. However, some traders do not expect the crude oil price to stay below $80 per barrel for long, even if the US-Iran peace agreement materialises, amid concern over lingering supply disruptions.

 

Some traders are likely to have taken profits when the yield on the 10-year benchmark 6.94%, 2036 bond was near 6.85%, dealers said. State-owned banks were likely among the major profit-takers in early trade as they had bought when the yield on the 10-year benchmark bond had risen over 7%, they said.

 

"Some profit booking, I think mostly by PSUs (public-sector banks) at 6.85% (yield on the 10-year benchmark bond)," a dealer at a state-owned bank said. "Today (Wednesday), traders will actually lighten (sell) their positions before FOMC (US Federal Open Market Committee meeting) as there is no clarity on guidance over rate hike, inflation going forward."

 

Traders will closely watch the first FOMC meeting under new Federal Reserve Chair Kevin Warsh. While the market widely expects the Fed to keep interest rates unchanged, any hawkish shift in the central bank's dot plot could complicate the policy outlook, dealers said. An unexpected rate hike by the Fed could push US Treasury yields higher and weigh on Indian government bond prices, dealers said. The 10-year benchmark 6.94%, 2036 bond is seen in the range of 6.83-6.90% for the rest of the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen up as crude oil falls below $80/bbl; US FOMC meeting eyed

 

MUMBAI – Prices of government bonds are expected to open slightly higher Wednesday, tracking a decline in Brent crude oil below the $80 per-barrel mark, dealers said. However, some traders are likely to take profits, which may cap the rise in bond prices, they said. Market participants are also likely to refrain from placing aggressive bets ahead of the outcome of the US Federal Open Market Committee's policy meeting, dealers said.

Traders will closely watch the first FOMC meeting under new Federal Reserve Chair Kevin Warsh. While the market widely expects the Fed to keep interest rates unchanged, any hawkish shift in the central bank's dot plot could complicate the policy outlook, dealers said. Expectations of near-term rate cuts have largely faded amid a resilient US labour market and persistent inflation pressures. Market participants will also closely track the Fed's commentary on inflation. An unexpected rate hike by the Fed could push US Treasury yields higher and weigh on Indian government bond prices, dealers said.

 

The yield on the 10-year benchmark 6.94%, 2036 gilt is expected to open near 6.85% and move in a range of 6.83-6.90% during the day, dealers said. The bond had ended at INR 100.53 Tuesday, up slightly from INR 100.49 Monday. Its yield settled at 6.8651%, down from 6.8704% Monday. The 10-year benchmark bond yield has fallen over 15 basis points so far in June. 

Government bond prices are likely to continue taking cues from crude oil, which has been the key driver of market sentiment since the start of the war in West Asia, dealers said. The Brent crude futures contract for August delivery was at $79.16 per barrel at 0700 IST, down from $80.88 per barrel at 1700 IST Tuesday. Some traders, however, do not expect crude oil to remain below $80 per barrel for long, even if a US-Iran peace agreement materialises, citing concerns over lingering supply disruptions.

Wednesday, the government will sell INR 240 billion of Treasury bills at an auction. While some traders expect cut-off yields to remain broadly in line with those at last week's auction, others see scope for a marginal decline. Dealers said the Reserve Bank of India is unlikely to reject bids across all tenors--91-day, 182-day, and 364-day--given strong demand from banks and mutual funds. However, if that does happen, it could weigh on bond prices.

Market participants will also monitor developments relating to the potential inclusion of Indian government bonds in the Bloomberg Index Services flagship Global Aggregate Index. Earlier this month, the RBI and the government announced a series of measures aimed at attracting foreign investors, with government sources indicating that the steps were intended to support India's case for inclusion in the index. Bloomberg, which had deferred a decision on including Indian bonds in January, had said it would provide the next update in mid-2026. Dealers expect the review to take place as early as next week. The movement of the rupee will also remain on traders' radar.

Overall sentiment is expected to remain positive, supported by expectations of sustained foreign portfolio investment inflows over the next couple of weeks, dealers said. Such inflows are likely to improve banking system liquidity and offer support to the government securities market. Demand for short-term bonds in the secondary market is also expected to rise as foreign inflows increase, they said. If the US-Iran peace agreement holds, traders may further pare expectations of any rate hikes by the RBI's Monetary Policy Committee in 2026, lending additional support to bond prices.  (Diksha Tripathy)  End

 

US$1 = INR 94.53

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

 

Edited by Saji George Titus

 

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