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Informist, Monday, Jun. 22, 2026

By Janwee Prajapati

MUMBAI – Prices of government bonds ended steady after moving in a thin band throughout the day amid the lack of any significant global or domestic triggers, dealers said. However, market sentiments were positive as Brent crude oil price was below $80 per barrel, dealers said. Traders avoided building aggressive positions owing to uncertainty about a peace agreement between the US and Iran, they said. Trade volume in the secondary market remained subdued, with most of the trades accumulated in the most liquid bonds.

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.65, up from INR 100.61 Friday. The yield on the bond settled at 6.8473%, against 6.8533% at the end of the previous trading session. The yield on the 6.94%, 2036 bond moved only about 2 basis points during intraday trade. The total turnover in the gilt market remained down for the second consecutive trading session at INR 443.35 billion. On Friday, the turnover was INR 499.55 billion.

"There are no cues in the market... people are not sure in which direction the market (yield on 6.94%, 2036 bond) will move," a dealer at a private-sector bank said. "The 85 (6.85% yield on the 10-year benchmark bond) level is strongly holding. Maybe we will see some movement after the SDL (state bond) auction result tomorrow."

Monday, the volume of trades in the 10-year benchmark 6.94%, 2036 bond was INR 222.50 billion, over 50% of the total trade volume in the secondary market, according to data from the RBI's Negotiated Dealing System. The second most traded bond was the 15-year benchmark 6.68%, 2040 bond. Traders restricted their trades to the most liquid papers as they remained uncertain about bond price movement amid uncertainty about the US-Iran peace deal, dealers said. Some traders also picked up the 15-year bond as they considered the levels lucrative. The 6.68%, 2040 bond closed at INR 95.97 or 7.1388% yield, a spread of nearly 30 basis points with the 10-year benchmark bond.

At the state bond auction Tuesday, traders expect demand from banks and long-term investors to be firm, dealers said. Banks are likely to pick up state bonds maturing in up to 10 years for their asset liability management books while they are likely to bid for bonds maturing in 10-15 years for their held-to-maturity books, dealers said. Demand for long-term state bonds is likely to be robust from insurers and pension funds, dealers said.

Some traders expect the spread between the cut-off yield on state bonds and gilts to remain at levels seen at the last auction, dealers said. At the state government bond auction Tuesday, the cut-off yield on Assam's 10-year bond was set at 7.66%, a spread of 80 basis points over the 6.94%, 2036 gilt issued by the Centre. Traders expect the spread to remain steady ahead of the release of the state borrowing calendar for the September quarter, which is likely to lend cues to bond prices, dealers said. Some traders expect the state borrowing quantum in September to be broadly in line with the indicative borrowing quantum in the June quarter, while others expect it to be higher, they said.

Traders expect the state borrowing calendar to be released Thursday or Friday with a quantum between INR 2.60 trillion and INR 3.30 trillion, dealers said. A sharply higher borrowing quantum will weigh on gilt prices, they said. States have raised INR 1.86 trillion through bonds so far in the June quarter, not counting Tuesday's upcoming auction, against the indicative calendar of INR 2.55 trillion.

With the minutes of the RBI's Monetary Policy Committee meeting in June being largely in line with expectations, some dealers expect the rate-setting panel to raise the repo rate only at its October meeting. Some others, however, do not expect a rate hike at all in the current calendar year, dealers said.

"I know inflation is likely to go up, but if you look at crude (oil prices), nobody had expected it to come down so quickly," a dealer at a state-owned bank said. "People were expecting it to come down gradually... so even if RBI goes for a hike, that (crude oil prices) won't be a reason."

Traders expect the yield on the 6.94%, 2036 bond to fall to 6.60% if India's Fully Accessible Route bonds are included in the Bloomberg Global Aggregate Index and foreign inflows continue, dealers said. However, others expect the yield on the 10-year benchmark bond to reverse from 6.80%, as it is a psychologically crucial level at which traders are likely to take profits, they said.

OUTLOOK

Tuesday, government bond prices will track the overnight movement in crude oil prices, dealers said. The volume of trades is likely to remain low as traders await clarity on the US-Iran peace agreement, dealers said. Later in the day, traders expect the INR 169-billion state bond auction result to lend cues. In case of the lack of any major triggers, traders expect the 6.94%, 2036 bond yield to remain in the 6.80-6.85% range throughout the week, they said.  

Even with a US-Iran peace deal, many traders think Brent crude is unlikely to remain around $80 per barrel due to continuing supply disruptions. The 10-year benchmark gilt yield is also seen to be unlikely to fall below 6.80%. Some traders do not expect crude oil prices to fall to pre-war levels. Instead they expect prices to continue to hover near the $75-$85 per-barrel mark, dealers said.

Traders also await the release of the state borrowing calendar for the September quarter. A higher-than-expected borrowing quantum will pull bond prices down, dealers said. Traders are divided on the size of state borrowing in Jul-Sept. Some expect it to be broadly in line with the borrowing quantum in the June quarter, dealers said. Others expect it to be slightly higher than the borrowing in the September quarter a year ago.

Market sentiment is expected to remain positive, given the likelihood of higher FPI inflows, dealers said. The inflows are expected to increase the liquidity in the banking system, which is likely to support bond prices, they said. 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, dealers said. 

Traders remained optimistic about the inclusion of Indian bonds in Bloomberg's flagship Global Aggregate Index, which is likely to improve foreign inflows, dealers said. If the inclusion does take place, dealers expect India's Fully Accessible Route bonds to account for 0.8-1.0% of the Bloomberg Global Aggregate Index. In its September consultation note, Bloomberg said a weightage of 0.7% was under consideration.

India Gilts: Steady; uncertainty on West Asia outcome caps bets, volumes subdued

MUMBAI--1519 IST--Prices of government bonds were steady as uncertainty surrounding the negoations between the US and Iran to end the war in West Asia kept market participants from taking large positions, dealers said. However, with Brent crude futures for August sustaining below $80 a barrel, traders did not trim their portfolios. 

Market activity may remain muted in the near term, with volumes seen staying weak until there is clarity on India's inclusion in the Bloomberg Global Aggregate index, dealers said. India is widely expected to be added to the flagship index as part of the ongoing review, with the next update scheduled for mid-2026. Some traders expect an announcement this month while others see it in the first half of July. Easing platform access for foreign portfolio investors and the government's exemption of withholding and capital gains tax on government securities has increased the chance of inclusion, dealers said. FPIs have added INR 333 billion worth of fully accessible route bonds to their holdings in June, including around INR 120 billion from holdings in bonds reclassified by the RBI this month. 

At 1519 IST, the total volume in the government securities market was INR 250.00 billion, lower than INR 359.90 billion at 1530 IST Friday, according to data from the RBI's Negotiated Dealing System. The volume in the 10-year benchmark 6.94%, 2036 gilt was INR 138.15 billion, which was almost 55% of the total trade volume. Traders preferred the benchmark security with most other bonds being "illiquid" and with no strong views on the domestic yield curve persisting, dealers said. The 10-year benchmark 6.94%, 2036 bond is seen in the range of 6.84-6.87% for the rest of the day, dealers said. 

Tuesday's state bond auction, where nine states are set to raise around INR 169 billion. Traders expect the spread between state bond loans and government securities to broadly mirror the previous auction, indicating no major shift in demand dynamics. Banks are likely to pick-up state bonds for their available-for-sale books, dealers said.

"Until the SDL (state bond) borrowing calendar is released, we do not expect any significant movement in spreads," a dealer at a private-sector bank said. "We are expecting INR 2.6 trillion-INR 2.8 trillion in the next quarter (September quarter) SDL auction calender." States have raised INR 1.86 trillion through bonds so far in the June quarter, not counting Tuesday's upcoming auction, against the indicative calendar of INR 2.55 trillion.  (Shumaila Firoz) 

India Gilts: Remain steady on lack of fresh cues on US-Iran peace talks 

MUMBAI--1133 IST--Prices of government bonds remained steady as market participants refrained from building aggressive positions amid lack of fresh global and domestic triggers, dealers said. Trade volume remained low as traders await more cues on peace talks between the US and Iran, dealers said. 

At 1133 IST, the total volume in the government securities market was INR 125.90 billion, lower than INR 156.20 billion at 1130 IST Friday, according to data from the RBI's Negotiated Dealing System. The volume in the 10-year benchmark 6.94%, 2036 gilt was INR 83.40 billion, sharply down from INR 104.80 billion at 1130 IST Friday. 

Dealers said the market is currently in a "wait-and-watch" position as minutes of Reserve Bank of India's Monetary Policy Committee meeting were not as hawkish as traders had expected. "August rate hike (by the MPC) is completely off-table now and UST (US Treasury yield) is also holding at same level... no cues for market to move," a dealer at a private sector bank said. At 1133 IST, the benchmark 10-year US Treasury yield was 4.48%, up from 4.46% at 1700 IST Friday.  

Market participants expect Brent crude oil prices to remain around $80 per barrel with $5 per barrel movement in either direction. "Market is not expecting (Brent) crude to fall to $60 level and we don't see further correction in crude prices," the dealer said.  

Traders await clarity on foreign inflows received through foreign currency non-resident bank deposits and on the possibility of inclusion of India's Fully Accessible Route bonds in the Bloomberg Global Aggregate Index. Traders will closely track any development related to the US-Iran war during the day as it is likely to impact crude oil prices. The benchmark 10-year 6.94%, 2036 bond is seen in the range of 6.84-6.87% during the day, dealers said.  (J. Navya Sruthi)

India Gilts: Steady amid uncertainty over US-Iran peace agreement

MUMBAI-–0930 IST--Prices of government bonds were steady amid uncertainty over the peace talks between the US and Iran, dealers said. Traders refrained from placing aggressive bets as they await more clarity on the peace deal, they said.

The total turnover in the government securities market at 0930 IST was INR 10.75 billion, significantly down from INR 47.55 billion at the same time Friday, as per data from the Clearing Corp. of India Ltd. With traders holding positions, volume was subdued in early trade, dealers said.

Bond prices were supported as Brent crude oil price remained below $80 per barrel, dealers said. The Brent crude futures contract for August delivery was at $79.32 per barrel at 0930 IST, down marginally from $79.92 a barrel at the close of Indian market hours Friday. Over the weekend, Brent crude had gone above $80 per barrel after US President Donald Trump threatened to resume military action against Iran and Tehran said it had shut the Strait of Hormuz again following a brief reopening under the interim peace arrangement.

"There are no major cues today (Monday) for the market," a dealer at a state-owned bank said. "There is no clarity on the US-Iran war front also. One day they say a peace deal has been made, the other day there are some violations, so now the market is holding and waiting for some clarity."

Traders will closely track any development related to the US-Iran war during the day. The benchmark 10-year 6.94%, 2036 bond is seen in the range of 6.84-6.88% during the day, dealers said.  (Diksha Tripathy)

India Gilts: Seen up as Brent falls below $80/bbl on progress in peace talks

MUMBAI – Prices of government bonds are seen opening higher with crude oil prices falling below the $80-per-barrel mark as Qatar released a statement citing progress in peace talks between the US and Iran, dealers said. However, uncertainty over the trajectory of war, which many thought was over after the preliminary ceasefire, is likely to weigh on market sentiment, dealers said.

The yield on the 10-year benchmark 6.94%, 2036 gilt is expected to open near 6.83% and move in a range of 6.83-6.90% during the day, dealers said. The benchmark 6.94%, 2036 bond ended at INR 100.61 on Friday, down from INR 100.71 Thursday. The yield on the bond settled at 6.8533%, up from 6.8387% Thursday.

Bond prices will take cues from movement in crude oil prices through the day, dealers said. Brent crude oil futures for August delivery were at $79.19 per barrel at 0800 IST, down from $79.92 a barrel at the close of Indian market hours on Friday. Crude oil prices eased after mediators Qatar and Pakistan said the first round of negotiations between the US and Iran aimed at securing a final peace agreement had ended with "encouraging progress". The talks began Sunday in Switzerland following last week's interim agreement between the two countries. In a joint statement issued Monday, Qatar and Pakistan said a "High Level Committee" had agreed on a roadmap to reach a final deal within 60 days, with technical-level discussions set to continue through the week.

Over the weekend, crude oil prices had climbed above $80 per barrel after US President Donald Trump threatened to resume military action against Iran and Tehran again closed the Strait of Hormuz following its brief reopening under the interim peace arrangement.

Despite the progress in negotiations, many traders believe Brent crude is unlikely to remain near $80 per barrel for long because of persistent supply disruptions. The Reserve Bank of India, in its latest projections, has assumed crude oil prices at $95 per barrel.

Market participants are likely to avoid aggressive positioning amid lingering uncertainty over the durability of the US-Iran peace process, which could keep trading volumes subdued Monday, dealers said. The RBI's Monetary Policy Committee also adopted a cautious stance amid the inflation risks stemming from the conflict in West Asia, according to minutes of the June policy meeting released Friday.

MPC members said it would be prudent to await greater clarity on developments in West Asia and the progress of the southwest monsoon before considering any policy response. RBI Governor Sanjay Malhotra noted that the rising inflation trajectory for 2026-27 (Apr-Mar) could warrant monetary policy action.

"The chances of a policy mistake remain heightened given the two-way risks on the inflation-growth outlook," external MPC member Saugata Bhattacharya said in the minutes. Given the current growth and inflation projections, policymakers must closely monitor whether higher input costs begin feeding into retail inflation, he said, adding that the extent of such transmission would depend on the intensity and duration of the energy shock.

While policymakers preferred to wait for more data to assess whether inflationary pressures were becoming broad-based, they flagged growing risks to the inflation outlook. Bond traders are expected to mirror this cautious approach, dealers said.

Bond prices may, however, draw support from expected foreign portfolio investor inflows. The anticipated inflows could improve liquidity conditions in the banking system and lend support to government securities, dealers said. If the US-Iran peace agreement holds, traders may also scale back expectations of an RBI rate hike in 2026.

Market participants are also awaiting Bloomberg Index Services' decision on the inclusion of Indian government bonds in its flagship Global Aggregate Index. In addition, an increase in non-resident dollar-denominated bank deposits with maturities of three to five years could support bond prices and push yields lower.

Traders also await the release of the state borrowing calendar for the September quarter, which may come out this week, dealers said. A larger-than-expected borrowing programme could weigh on bond prices, dealers said. Views remain divided on the likely borrowing quantum for Jul-Sep, with some expecting it to be broadly in line with the June quarter and others projecting it to exceed the level seen in the corresponding quarter last year.  (Diksha Tripathy)  End

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

Edited by Rajeev Pai

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