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Informist, Wednesday, Jul. 1, 2026

 

By Janwee Prajapati

 

MUMBAI – Prices of government bonds ended mixed Wednesday. Prices of most bonds erased earlier gains to end slightly lower as the cut-off yield at the T-bill auction was higher than expectations, dealers said. A rise in swap rates and a fall in the rupee also pulled down bond prices, they said. However, most losses were pared on purchases by foreign portfolio investors and optimism over the potential inclusion of Indian government bonds in Bloomberg's flagship Global Aggregate Index, they said.

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 101.30, down from INR 101.34 Tuesday. The yield on the bond settled at 6.7563%, against 6.7501% at the end of the previous session. Some traders likely booked profits as the yield on the 10-year benchmark bond fell to the day's low of 6.7298%, dealers said. Some traders expect the bond's yield to fall to 6.60% if Indian bonds are added to Bloomberg's flagship Global Aggregate Index, dealers said. Traders expect such an announcement next month, dealers said.

 

Bond prices rose intraday, supported by purchases from foreign investors, who likely bought long-term bonds, limiting the fall in prices of bonds of other tenures, dealers said. Traders expected purchases from foreign investors after foreign banks net bought INR 35.42 billion of gilts on Tuesday, data from Clearing Corp. of India Ltd. showed. 

 

"The kind of price action we saw in G-sec is most likely due to foreign players," a dealer at a primary dealership said. "The only reason for them to buy Indian bonds right now is the expectation of Bloomberg (Global Aggregate index) inclusion, which is why they bought bonds yesterday (Tuesday) also." 

 

Foreign investors' interest in Indian government bonds is expected to improve after the government exempted them from capital gains tax and withholding tax earlier this month. The RBI also added the 6.68%, 2040, 7.24%, 2055, and 7.71%, 2066 gilts to the Fully Accessible Route, which has no limits on foreign investment. 

 

The total turnover in the gilt market was INR 504.80 billion, down significantly from INR 931.30 billion on Tuesday. Most traders were concentrated on the 6.94%, 2036 bond and the 6.68%, 2040 bond, as they together accounted for 72% of the total trade volume. The 6.68%, 2040 bond was the second most traded bond in the secondary market as traders covered their short positions after missing out on the fresh supply at the gilt auction Thursday, dealers said. A proxy for tracking short sales on a particular bond is the number of trades in the special repo segment of the Clearcorp Repo Order Matching System. The data at 1700 IST showed trades worth INR 53.72 billion in the 6.68%, 2040 gilt, down from INR 67.57 billion on Tuesday and sharply down from INR 80.32 billion ahead of the auction Thursday.

 

At the INR-240-billion Treasury bill auction Wednesday, mutual funds likely picked up the 182-day and 364-day T-bills for their portfolios. Foreign investors also likely bought T-bills, dealers said. However, the higher supply in 182-day and 364-day T-bills weighed on their cut-off yields at the auction, dealers said. The government sold 91-day, 182-day and 364-day T-bills totalling INR 240 billion in the first T-bill auction of the September quarter. The Reserve Bank of India set a cut-off yield of 5.25% on the 91-day T-bill, 5.47% on the 182-day bill, and 5.66% on the 364-day paper. An Informist Poll projected cut-off yields of 5.25% for the 91-day T-bill, 5.43% for the 182-day bill, and 5.61% for the 364-day paper.

 

"T-bill cut-offs were hardened (higher) because of higher supply," a dealer at a private sector bank said. "These higher cut-off (yields) are not about interest rate trajectory, it's just that higher supply will show up somewhere... Foreign participation was also limited." 

 

Bond prices opened lower, tracking an overnight rise in US Treasury yields, which rose 8 basis points, dealers said. Traders' attention pivoted from Brent crude oil prices as it continued to trade near pre-war levels on hopes of a US-Iran peace agreement soon, they said. However, some traders remain cautious, as fading prospects of a permanent US-Iran peace deal have led to increased bets on a US policy rate hike at its next policy meeting, dealers said.

 

Traders remain cautious ahead of the release of US economic data, which will likely influence the Federal Reserve's decision on whether to hike rates, dealers said. A rise in US policy rates will also nudge the RBI's Monetary Policy Committee to raise the repo rate, dealers said. Furthermore, traders await the release of India's inflation data, which is expected to be on the higher side, reflecting the rise in energy prices, the dealer said. Lower rainfall conditions will also contribute to higher inflation, dealers said. CPI inflation for June will be released on Jul. 13.

 

At 1700 IST, the benchmark 10-year US Treasury yield was below 4.48%, down from 4.39% at the same time Tuesday. Brent crude futures for August delivery were at $72.30 per barrel, down from $72.78 per barrel at the end of Indian trading hours Tuesday.

 

Back home, traders likely placed some short bets on the 6.94%, 2036 bond ahead of its auction on Friday, hoping to cover their positions at the auction, which also weighed on the bond price, dealers said. Some traders expect the cut-off yield on the 10-year bond at auction to be on the higher side, dealers said. 

 

OUTLOOK

On Thursday, bond prices will track overnight movement in US Treasury yields and any significant movement in Brent crude oil prices, dealers said. Traders will also track any development in the US-Iran peace agreement, they said. However, traders are likely to remain cautious ahead of the release of US economic data and the weekly gilt auction Friday.

 

Traders will also keep an eye on the June non-farm payrolls report, due Thursday. Investors will closely examine the data to assess the strength of the US economy, as it will have a bearing on US policy rate decisions, dealers said.

 

Traders also eye the INR 340-billion supply of the 6.94%, 2036 bond at auction Friday, which is likely to limit a fall in its yield, dealers said. Traders will track the movement in bond prices Thursday to determine the demand for the bond at the auction Friday.

 

Traders remain optimistic that Indian sovereign bonds will be added to Bloomberg's flagship Global Aggregate Index. If the inclusion proceeds, they expect India's Fully Accessible Route bonds to account for 0.8-1.0% of the index. Bloomberg had said in its September consultation note that a weight of 0.7% was under consideration.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.48%, 2035	97.9600	6.7782%	98.0000	6.7722%
6.94%, 2036	101.2950	6.7563%	101.3400	6.7501%
6.36%, 2031	99.7475	6.4216%	99.7375	6.4241%
6.68%, 2040	97.4700	6.9655%	97.3550	6.9786%
6.90%, 2065	93.3600	7.4227%	93.2000	7.4361%

 

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India Gilts: Mixed; 10-year gives up gains post higher-than-view T-bill ylds

 

	1535 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.3125	101.49	101.20	101.20	101.34
YTM (%)	6.7539	6.7298	6.7696	6.7696	6.7501

 

MUMBAI--1535 IST--Prices of government bonds prices were mixed, and the 10-year benchmark 6.94%, 2036 bond briefly reversed gains after cut-off yields at the Treasury bill auction were higher than traders' expectations. However, most losses were pared on purchases by foreign portfolio investors and optimism over the potential inclusion of Indian government bonds in Bloomberg's flagship Global Aggregate Index, they said. FPIs likely bought long-term bonds, and prices of these securities were up. Traders were also cautious after choppy trade Tuesday, dealers said. Some traders also booked profits at levels seen as attractive, they said.

 

"The T-bill auction cut-offs were higher than expected, so people became cautious. They are not taking aggressive positions and are booking profits cautiously," a dealer at a public sector bank said. The government sold 91-day, 182-day and 364-day T-bills totalling INR 240 billion in the first T-bill auction of the September quarter. The RBI set a cut-off yield of 5.25% on the 91-day T-bill, 5.47% on the 182-day bill, and 5.66% on the 364-day paper. This compared to 5.25%, 5.43% and 5.61% estimated for the three bills respectively, as per the medain in an Informist poll of 16 bond dealers. 

 

Despite the knee-jerk fall in prices after the cut-offs were published, bond prices recovered as hopes of India's inclusion in Bloomberg's flagship Global Aggregate Index continued to underpin sentiment. Dealers said expectations of sustained foreign portfolio investment in Indian government securities limited a fall in prices, and FPIs' purchases during the session kept trading volumes healthy. The bond market needed a fresh positive trigger for the 10-year benchmark yield to fall to 6.70% and below, after testing the level Tuesday, but sentiment remained stable, dealers said. 

 

"Foreign portfolio investors were seen buying particularly in the longer end of the curve," a dealer at a private sector bank said. The total turnover in the government securities market at 1535 IST was INR 420.45 billion, lower than INR 693.30 billion at 1535 IST Tuesday, data from Clearing Corp. of India Ltd. showed. The yield on the benchmark 10-year 6.94%, 2036 bond is expected to move in the range of 6.73-6.79% during the day, dealers said.  (Shumaila Firoz) 

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India Gilts: Up on likely FPI buys, Bloomberg index inclusion hope 

 

	1201 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.39	101.49	101.20	101.20	101.34
YTM (%)	6.7431	6.7298	6.7696	6.7696	6.7501

 

India Gilts: Up on likely FPI buys, Bloomberg index inclusion hope  

 

MUMBAI--1201 IST--Prices of government bonds were up as foreign investors likely purchased bonds in the 10-year and 15-year segments, dealers said. Moreover, traders were hopeful of Indian bonds' inclusion in Bloomberg's flagship Global Aggregate Index, which also buoyed sentiment, they added. US Treasury yields eased intraday, further lifting bond prices. 

 

The 10-year benchmark 6.94%, 2036 and 15-year benchmark 6.68%, 2040 bonds constituted almost 86% of the total trading volume Wednesday as foreign investors likely bought these bonds, according to dealers. Traders expected purchases from foreign investors after foreign banks net bought INR 35.42 billion of gilts on Tuesday, data from Clearing Corp. of India Ltd. showed. 

 

At the INR-240-billion Treasury bills auction, mutual funds likely picked up the six-month and one-year T-bills, dealers said. Banks were likely on the sidelines as they lack the appetite for T-bills at current levels, dealers said. Dealers expect the cut-off yield to be similar to the cut-off yields set at the T-bill auction the previous week, dealers said. 

 

"The auction was good... We are expecting the cut-off (yields) to be similar to last week's auction," a dealer at a primary dealership said. "The one-year T-bill always comes in lower than expected and gets swept off in few bids...we are expecting 5.60% unless someone bids aggressively at 6.62-63%."

 

The Reserve Bank of India is likely to set a cut-off yield of 5.25% on the 91-day Treasury bill at the auction Wednesday, according to the median of an Informist poll. The cut-off on the 182-day T-bill and 364—day T-bill is seen at 5.43% and 5.61% yield, respectively. The central bank will sell INR 90 billion of the 91-day T-bill, INR 80 billion of the 182-day T-bill and INR 70 billion of the 364-day T-bill at the auction. 

 

The yield on the benchmark 10-year 6.94%, 2036 bond is expected to move in the range of 6.72-6.78% during the day, dealers said. The total turnover in the government securities market at 1201 IST was INR 235.65 billion, only about 46% of INR 432.75 billion at 1230 IST Tuesday, data from Clearing Corp. of India Ltd. showed. (Janwee Prajapati)

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India Gilts: Recover most losses on likely FPI flows; higher US ylds weigh

 

	0935 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.335	101.35	101.20	101.20	101.34
YTM (%)	6.7507	6.7486	6.7696	6.7696	6.7501

 

MUMBAI--0935 IST--Prices of government bonds recovered most losses from early trade in a choppy session due to likely inflows from foreign portfolio investors, dealers said. Earlier, bond prices were pulled down due to an overnight rise in US Treasury yields and crude oil prices, dealers said.

 

The 10-year 6.94%, 2036 bond opened lower at INR 101.20 as against Tuesday's close of INR 101.34. However, the bond price recovered most losses and rose to a high of INR 101.33 on likely flows from FPIs, dealers said. The total turnover in the government securities market at 0930 IST was INR 55.20 billion, slightly higher than INR 49.55 billion at 0930 IST Tuesday, data from Clearing Corp. of India Ltd. showed. 

 

An overnight rise in US Treasury yields and crude oil prices weighed on bond prices Wednesday, dealers said. At 0930 IST, the yield on the 10-year benchmark US Treasury note was 4.47%, up over 8 basis points from the end of Indian gilt market hours Tuesday. Traders attributed the rise in US yields to US job openings data, a key metric for the US economy, which showed job openings were at a two-year high in May. 

 

Higher Brent crude oil prices also weighed on bond prices Wednesday, dealers said. Brent crude oil futures for September delivery continued to trade above $73 per barrel, similar to where it was at the end of Indian gilt market hours Tuesday. Lack of clarity on the US-Iran peace agreement kept oil prices up, which weighed on bond prices, dealers said.    

 

Traders are likely to trim positions Wednesday to make room for fresh supply of the 6.94%, 2036 bond at the auction this week, which may put further pressure on bond prices, dealers said. The government will sell INR 340 billion of the benchmark 10-year bond at an auction Friday.

 

On Wednesday, traders will continue to monitor developments related to the situation in West Asia, as any movement in crude oil prices could influence bond yields. The yield on the benchmark 10-year 6.94%, 2036 bond is expected to move in the 6.72-6.78% range during the day, dealers said. (Diksha Tripathy)

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India Gilts: Seen steady on caution; higher oil prices, US yields may weigh

 

MUMBAI – Prices of government bonds are seen opening steady as traders are likely to maintain caution after a choppy session Tuesday, dealers said. Traders are likely to refrain from placing aggressive bets in the market as they await clarity on a peace agreement between the US and Iran, they said. However, an overnight rise in Brent crude oil prices and US Treasury yields may weigh on bond prices, dealers said. 

 

The 10-year benchmark 6.94%, 2036 bond is seen opening near 6.75% and moving between 6.70% and 6.78%, dealers said. The 2036 bond had ended at INR 101.34 on Tuesday, little changed from INR 101.33 Monday. Its yield settled at 6.7501% Tuesday, against 6.7515% at the end of the previous session.

 

Tuesday, bond prices had risen sharply in the first half of the trading session. However, bonds gave up most gains in the second half of the session to end steady due to profit booking, dealers said. On Wednesday, traders are likely to remain cautious after the sharp rise and fall in prices Tuesday, both of which were unexpected at this scale, dealers said.

 

A rise in crude oil prices is likely to weigh on bond prices Wednesday, dealers said. Brent crude oil prices rose above $73 per barrel after trading near $72 per barrel at the end of Indian gilt market hours Tuesday, with no signs of a finalised peace deal between the US and Iran.

 

US Treasury yields also rose overnight, which is likely to put pressure on Indian gilts, dealers said. The yield on the 10-year benchmark US Treasury note was at 4.47% at 0800 IST, up from 4.39% at 1700 IST Tuesday. US job openings rose to a two-year high in May, but hiring remained subdued, which dampened consumers' perceptions of the labour market. The jobs data, a key metric for the US economy, likely led to a rise in US yields, dealers said. The June non-farm payrolls report, tracking jobs added in the month, will follow on Thursday. Investors will closely examine both to assess the strength of the US economy as that will have a bearing on US policy rate decisions, dealers said. Any movement of US Treasury yields and significant development in peace negotiations between the US and Iran will lend cues to the market during the day, dealers said.

 

Traders also await the INR 340-billion supply of the 6.94%, 2036 bond at an auction Friday, dealers said. Traders may trim positions to make room in their portfolios for the fresh supply of the 2036 bond at the auction, they said. This might put pressure on bond prices, dealers added.

 

Traders remain optimistic that Indian sovereign bonds will be added to Bloomberg's flagship Global Aggregate Index. If the inclusion proceeds, they expect India's Fully Accessible Route bonds to account for 0.8-1.0% of the index. Bloomberg had said in its September consultation note that a weight of 0.7% was under consideration. Traders eagerly await an announcement related to the inclusion of the bonds which could pull the 10-year 2036 bond yield down to 6.60% levels, they said.  (Diksha Tripathy)  

 

End

 

 

US$1 = INR 95.25

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

 

Edited by Saji George Titus

 

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