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Informist, Tuesday, Jul. 7, 2026

 

By Cassandra Carvalho

 

MUMBAI – Government bond prices ended off the day's low Tuesday but halted a three-day rise as US Treasury yields and Brent crude oil prices rose, dealers said. While the offshore triggers weighed on government bonds, they were not substantial enough to decisively move prices, which made for sluggish trade, dealers said. The 10-year benchmark bond yield broadly moved in the range of 6.68-6.70%, with both yields seen as strong technical levels limiting a move on either side, they said. Purchases from foreign portfolio investors limited the fall in bond prices, but the size of daily purchases from these investors has been falling, dealers said.  

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 101.73, down from INR 101.81 Monday. The yield on the bond settled at 6.6958%, up from 6.6851% at the end of the previous session. The yield on the 10-year benchmark US Treasury note was 4.50% at 1700 IST, up from 4.46% at the same time Monday. The Brent crude oil futures contract for delivery in September was at $72.65 per barrel at 1700 IST, inching above $73 during the session and up from $71.98 at the end of gilt market hours Monday.

 

"Crude is up, US yields are up. I feel that traders are light (in positioning), intraday shorts would have built up. We are seeing traders trying to break 6.70% constantly, but buying is coming in--maybe from investors--so it's not able to go beyond," a dealer at a private-sector bank said.

 

Some expectations of a further fall in yields dissipated with traders choosing to sell bonds at a profit at current levels, dealers said. However, in the near term, there was no negative trigger either for bond yields to surge, unless the 10-year US Treasury yield marks a sustained rise above 4.5%, they said. A recent fall in the rupee against the dollar was of concern to some traders, but the rupee rose 43 paise Tuesday due to foreign inflows and intervention by the RBI, limiting a fall in bond prices. Until Bloomberg Index Services publishes its decision on the inclusion of Indian government bonds in its flagship Global Aggregate Index, bond prices are seen moving in a thin band, dealers said. 

 

Traders await the movement of US Treasury yields after the release, due Wednesday, of the minutes of the US Federal Open Market Committee's meeting held last month. Traders unwound their bond swap trades by selling bonds and receiving fixed rates in overnight indexed swap rates after the five-year OIS fell below its technical level of 6.14% Monday, dealers said.

 

"We are pricing in an inclusion in Bloomberg (Global Aggregate Index), now we will have to see what the FOMC minutes show, whether (Fed Chair Kevin) Warsh scales back, people are expecting hawkish commentary after what he said at the meeting," a fund manager at an insurance company said. 

 

At the INR 213.50-billion state bond auction, cut-off yields were on expected lines. State-owned banks purchased state bonds for their available-for-sale and held-to-maturity books, dealers said. Demand from insurance companies was also firm, they said. However, most of the issuances were concentrated in paper maturing in more than 10 years, while several states are not seen as fiscally strong, which kept appetite for the bonds in check, some dealers said.

 

While most bonds ended lower, the five-year benchmark 6.36%, 2031 bond ended steady in spite of INR 210 billion of its fresh supply Friday. Foreign portfolio investors are likely to have bought short-term bonds, some dealers said. A fall in the five-year OIS rate also aided the bond's price, dealers said. The total turnover in the gilt market Tuesday was INR 686.45 billion, down from INR 781.60 billion Monday. As of 1800 IST, FPIs net purchased gilts worth INR 7.47 billion through the Fully Accessible Route Tuesday, according to data from Clearing Corp. of India Ltd.  

 

OUTLOOK

Wednesday, bond prices will track overnight movement in US Treasury yields at the open ahead of the release of the minutes of the US FOMC's June meeting. Any significant movement in Brent crude oil price will also provide cues, dealers said. However, domestic focus will largely be on foreign inflows and any news regarding the inclusion of Indian bonds in Bloomberg's Global Aggregate Index. Traders expect Bloomberg to publish its review between Jul. 15 and the end of the month. Most traders expect an inclusion, though some technical difficulties for FPIs purchasing bonds persist, dealers said.

 

Until clarity on the triggers mentioned above emerge, bond prices are seen moving sideways, with technical support for the 10-year benchmark gilt at 6.68% and resistance of 6.70%, limiting the scope for strong movement, dealers said.

 

Traders are also likely to remain cautious ahead of the release of India's June inflation data Monday, dealers said. The data are expected to be on the higher side, reflecting the rise in energy prices, they said. Deficient southwest monsoon rainfall will also contribute to higher inflation, they said.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.7275	6.6958%	101.8050	6.6851%
6.48%, 2035	98.3175	6.7254%	98.4050	6.7123%
6.36%, 2031	99.9725	6.3649%	99.9650	6.3667%
6.68%, 2040	97.7575	6.9328%	97.8500	6.9223%
6.90%, 2065	93.1400	7.4412%	93.2775	7.4296%

 

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India Gilts: Remain down; state bond auction result in line with market view

 

	1553 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.73	101.87	101.62	101.81	101.81
YTM (%)	6.6961	6.6767	6.7114	6.6843	6.6851

 

MUMBAI-–1553 IST--Prices of government bonds remained down amid an intraday rise in US Treasury yields and Brent crude oil price, dealers said. However, the result of the auction of state government securities was broadly in the line with market expectations, which limited the fall in bond prices, dealers said.

 

The Reserve Bank of India set cut-off yields of 7.40-7.42% for states' nine-year bonds at the auction, which is similar to the median in an Informist Poll of 7.42%. The short-term state bonds at the auction were likely picked up by state-owned banks to add to their held-to-maturity books after these banks had lightened their portfolio by taking profits in the previous trading session, dealers said. Insurers likely bought long-term bonds at the auction, dealers said.

 

"The auction was broadly in line with expectations, though short-term papers saw a slightly aggressive response," a dealer at a state-owned bank said. "Some participants may be expecting yields in the secondary market to fall further."

 

Tuesday, selling was largely concentrated in the 10-year benchmark 6.94%, 2036% bond, which continued to witness the highest trading volumes in the secondary market, while activity in the 15-year benchmark remained comparatively lower, dealers said. "Most of the selling is in the 10-year benchmark because that's where the volumes are," the dealer said. Traders expect the yield on the 10-year benchmark bond to settle above 6.70% Tuesday amid profit-taking, they said. 

 

Bond prices were pulled down during the day following an intraday rise in US yields, dealers said. The yield on the 10-year benchmark US Treasury note was 4.50% at 1550 IST, up from 4.48% at 0900 IST. Brent crude oil futures for September delivery also touched the day's high of $73.31 per barrel during the day, and was at $72.75 per barrel at 1550 IST, up marginally from $72.53 per barrel at 0900 IST.

 

The total volume in the government securities market at 1550 IST was INR 607.30 billion, against INR 569.15 billion at 1545 IST Monday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year benchmark 6.94%, 2036 bond is expected to move in the 6.65-6.72% range during the remainder of the day, they said.  (Shumaila Firoz)

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India Gilts: Down on profit booking; state bond auction results awaited

 

	1313 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.69	101.87	101.67	101.81	101.81
YTM (%)	6.7010	6.6767	6.7034	6.6843	6.6851

 

MUMBAI--1313 IST--Prices of government bonds fell as traders booked profit at levels seen as attractive, dealers said. An intra-day rise in Brent crude oil prices and 10-year benchmark US Treasury yields also weighed on bond prices, dealers said. Traders await the result of the state bond auction which will lend further cues to bond prices, dealers said.

 

The yield on the 10-year benchmark 6.94%, 2036 bond failed to fall below the crucial level of 6.68% as public sector banks likely ramped up profit booking at levels seen as attractive, dealers said. Some traders now expect the yield to rise up to 6.75% if there are no positive cues ahead, dealers said. Public sector banks net sold INR 52.79 billion worth of gilts in the secondary market Monday as they booked profits on their holdings, dealers said.  

 

In the secondary market, most of the trade volume was concentrated in the 10-year 6.94%, 2036 bond, with the 15-year benchmark 6.68%, 2040 bond being the second most traded paper. Both the papers combined constituted almost 82% of the total trade volume Tuesday. Traders stuck to the most liquid paper as they remain uncertain of Indian bonds' inclusion in Bloomberg's Global Aggregate Index, dealers said. However, most of the traders were hopeful of such an inclusion, dealers said. Following that, traders expect the yield on the 10-year benchmark bond to fall to 6.60%, dealers said. 

 

Foreign portfolio investors likely picked up short-term bonds, which supported the prices of these bonds, dealers said. "I think they (foreign participants) are buying short-term bonds and the 10-year bond (6.94%, 2036 bond)...the 7.02%, 2031 bond has nearly INR 7 billion trades in the (Clearing corp. of India's) reported deals segment," a dealer at a small finance bank said. Mutual funds also likely picked up short-term bonds as they considered the levels attractive, dealers said.

 

At the INR 213.50 billion auction of state government bonds, banks likely bought the papers for their held-to-maturity and available-for-sale books, dealers said. "Demand from PSUs (public sector banks) will be there because they have sold (bonds) from their HTM (held-to-maturity books) so they will have space," a dealer at a state-owned bank said. "Investor demand will also be there...most of the papers are over 10-year (maturing in over 10-year)." 

 

Some traders also remain cautious ahead of the release of Federal Open Market Committee minutes, dealers said. However, with a ceasefire in West Asia and lower crude oil prices, traders expect the minutes to be less "hawkish", dealers said. Traders do not expect any major impact on Indian bond prices. 

 

The total volume in the government securities market at 1313 IST was INR 436.20 billion, against INR 331.50 billion at 1230 IST Monday, 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 6.65-6.75% range during the day, dealers said.  (Janwee Prajapati)

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India Gilts: Remain in thin band; state bond auction result awaited

 

	1145 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.785	101.87	101.74	101.81	101.81
YTM (%)	6.6878	6.6767	6.694	6.6843	6.6851

 

MUMBAI--1145 IST--Prices of government bonds remained in a thin band Tuesday as the market lacked fresh domestic triggers, with traders awaiting the outcome of the weekly state government bond auction for further direction, dealers said. The impact of an overnight rise in crude oil prices and US Treasury yields was offset by optimism over the inclusion of Indian bonds in Bloomberg's Global Aggregate Index soon, they said. 

 

"There is good demand for state bonds. Market sentiment has improved compared with the last SDL (state bond) auction, so cut-offs should also be better this time," a dealer at a public sector bank said. At the state government bond auction last week, the cut-off yields on states' 13-year bonds were set at 7.53-7.62%, a spread of 57-66 basis points over the gilt of similar maturity issued by the Centre.

 

At the auction at 1030-1130 IST, 13 states invited bids to raise INR 213.50 billion in total on Tuesday, marginally higher than the amount in the indicative calendar. Banks were keen to pick up state bonds on offer maturing in five to 16 years, while insurance companies are likely to go for longer-tenure securities, dealers said. State bonds offer attractive yields compared with gilts of similar tenures and have been in favour of public sector banks while they have sold gilts at a profit, they said.

 

Traders said the movement in gilt prices later in the day will depend on the outcome of the state bond auction. While the yield on the 10-year benchmark 6.94%, 2035 gilt was around 6.68% in early trade, some dealers expect it to ease further later this week if optimism surrounding the Bloomberg index inclusion persists. 

 

"The (state bond) auction will decide the immediate direction, but given the positive market sentiment, I think the 10-year yield can move towards 6.65% later this week," a dealer at a private-sector bank said. That would take the benchmark gilt to its lowest since the war began on Feb. 27. 

 

The total volume in the government securities market at 1145 IST was INR 318.35 billion, against INR 331.50 billion at 1230 IST Monday, 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 6.65-6.70% range during the day, they said.  (Shumaila Firoz) 

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India Gilts: Steady amid lack of cues; higher US yields, crude oil weigh

 

	0930 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.82	101.84	101.74	101.81	101.81
YTM (%)	6.6836	6.6805	6.6940	6.6843	6.6851

 

MUMBAI--0930 IST--Prices of government bonds were steady in early trade due to a lack of significant domestic cues, dealers said. The overnight rise in US Treasury yields and Brent crude oil prices weighed on bond prices. Traders remain hopeful about India's inclusion in Bloomberg's Global Aggregate Index by mid-July, which has supported bond prices, dealers said. 

 

"There is positive sentiment due to the BBG (Bloomberg's Global Aggregate Index) inclusion hopes," a dealer at a private sector bank said. "... I don't think we will break 6.65% (yield on the 10-year benchmark 6.94%, 2036 bond) today (Tuesday). There has been only one side movement (rise in bond prices), so I think there will be some reversal... but if we close around 6.65%, then we will move towards 6.60%." 

 

The yield on the 10-year benchmark US Treasury note rose to 4.48%, up from 4.47% at the end of Indian trading hours Monday. The yield on the US Treasury rose in the run-up to the release of Federal Open Market Committee minutes. Brent crude futures for September delivery rose slightly to $72.50 per barrel in early trade, up from $71.97 per barrel at the end of Indian trading hours on Monday.

 

At the state bond auction Tuesday, 13 states will raise INR 213.50 billion of bonds, most of which have more than 10-year maturity. The notified amount is about INR 4 billion higher than the indicative calendar amount for the September quarter. However, traders expect the entire supply to be absorbed by the market, given the small quantum, dealers said. Demand for state bonds is likely to be robust from long-term investors, dealers said. Banks are also likely to buy state bonds after they trimmed their holdings in gilts, they said. 

 

The yield on the 10-year benchmark gilt is likely to hover near 6.68% as public sector banks will book profits at attractive levels, dealers said. Public sector banks net sold INR 52.79 billion worth of gilts in the secondary market Monday as they booked profits on their holdings, dealers said.     

 

The total volume in the government securities market at 0930 IST was INR 92.25 billion, against INR 70.70 billion at the same time Monday, data from Clearing Corp. of India Ltd. showed. Traders will 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 6.65-6.70% range during the day, dealers said.  (Janwee Prajapati)

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India Gilts: Seen steady on lack of cues; state auction results awaited

 

MUMBAI – Government bond prices are likely to open steady on lack of any significant domestic cues, dealers said. However, traders expect the sentiment to remain positive due to hopes of Indian bond inclusion in Bloomberg's Global Aggregate index, they said. An overnight rise in US Treasury yields and Brent crude oil prices will likely weigh on the bond prices, dealers said. Traders will refrain from aggressive position building ahead of the state government bond auction result, they said. 

 

The 10-year benchmark 6.94%, 2036 is seen opening near 6.68% and is expected to move in a 6.65-6.70% range during the day. The bond had ended at INR 101.81 Monday, up from INR 101.62 Friday. At the end of the previous session, its yield settled at 6.6851%, as against 6.7108% Friday. Yield on the 10-year benchmark breached and fell below the sticky 6.70% level Monday due to a fall in US Treasury yields and purchases made by foreign portfolio investors aided a rise in bond prices. Traders expect the yield on the 10-year benchmark bond to fall to 6.65% which is a crucial level as it is lower than the level seen ahead of the start of West Asia war. However, profit booking at 6.65% level will likely cap any further fall, they said.

 

The yield on the 10-year benchmark US treasury note rose to 4.49%, up almost 2 basis points from the end of Indian trading hours Monday. The yield on the US Treasury likely rose in the run-up to the release of Federal Open Market Committee minutes.

 

Brent crude futures for September delivery rose slightly to $72.30 in early trade as against $71.97 per barrel at the end of Indian trading hours Monday. Traders have largely shifted their focus away from crude oil prices as they expect it to trade in the $70–$75 per barrel range. However, any significant movement in crude oil prices will also impact bond prices, dealers said. Brent crude oil prices are likely to move as traders readjust their positions ahead of a potential resumption of US-Iran talks following the funeral of Iran's former Supreme Leader Ali Khamenei.

 

On the domestic front, 13 states are in line to raise INR 213.50 billion at the weekly auction of state government bonds, which is slightly higher than INR 209.50 billion as per the indicative calendar for the September quarter. Almost 81% of the auction supply is concentrated in more than 10-year papers. Traders largely expect the spread between the state government bonds and central government bonds to remain similar to last week's auction, dealers said. Investors and pension funds are seen picking up long-term bonds, whereas banks are likely to bid for the relatively shorter tenure papers, dealers said. Banks usually prefer state bonds maturing in up to 15-years for their held-to-maturity books due to attractive yields, dealers said.  

 

Focus will be largely on foreign inflows and any news regarding the inclusion of Indian bonds in the Global Aggregate Index. Traders expect Bloomberg to publish its review between Jul. 15 and the end of the month. Market sentiment is likely to remain positive as most traders expect an inclusion. 

 

Concerns over subdued rains ebbed. However, traders will likely remain cautious ahead of the release of India's June inflation data, dealers said. Traders await the release of India's June inflation data, which is expected to be on the higher side, reflecting the rise in energy prices, the dealer said. However, some traders do not expect any significant impact of a higher inflation print as inflation is likely to ease going ahead due to a fall in energy prices, dealers said. CPI inflation data for June will be released on Jul. 13.  (Janwee Prajapati)  End

 

US$1 = INR 94.9675

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

 

Edited by Rajeev Pai

 

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