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Informist, Friday, Jul. 10, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended sharply higher across tenures on Friday due to purchases by foreign portfolio investors and as momentum to buy gilts picked up once again in a week of choppy trading, dealers said. Cut-off prices at the INR-320-billion gilt auction were slightly better than expectations, reflecting firm appetite for fresh supply of gilts for the third consecutive week, they said. 

 

The 10-year benchmark bond ended at INR 101.60, up from INR 101.33 Thursday but down from the intraday high of INR 101.69. The yield on the bond fell to 6.7139% from 6.7517% at the end of the previous session. The bond yield ended the week flat, after trading in a wide range of 6.68-6.77%. 

 

"People have accepted that these tweets from (US President) Trump are just going to come around. The major thing is oil prices and how ships come out of the Strait of Hormuz, and with (oil) prices coming off, that fiscal number (borrowing) what people were expecting is also reducing," a dealer at a small finance bank said. Bond traders were jittery earlier this week after US President Donald Trump said the ceasefire with Iran was over and oil prices subsequently jumped.

 

Long-term and short-term bonds ended sharply higher Friday. The 7.71%, 2066 bond ended 31 paise higher at INR 103.47, after INR 110 billion of its fresh supply Friday. The five-year benchmark 6.36%, 2031 bond ended 18 paise higher at INR 99.88, after INR 210 billion of its fresh supply. Insurers and foreign portfolio investors were purchasing long-term bonds after recent profit sales in this segment, dealers said. As of 1830 IST, FPIs net purchased gilts worth INR 7.41 billion Friday through the Fully Accessible Route, according to data from Clearing Corp. of India. Long-term bond yields have space to compress over that of the 10-year benchmark bond by about 5 basis points in the near term, dealers said. 

 

The scope for a rise in prices of short-term gilts looks a little less certain in the near term as traders await significant inflows through foreign currency non-resident (bank) deposits to materialise, dealers said. Roughly $3 billion to $4 billion of inflows have come into the banking system through these deposits, since the RBI announced the swap facility last month, market participants estimate. However, most of these flows have been pushed into disbursements and some of the liquidity has been drained due to the central bank's foreign exchange management operations, dealers said. Data released by the RBI Friday showed that banks' credit growth hit a two-year high of 18.6% on year as of Jun. 30.  

 

"The flows from FCNR haven't been that much that we can put it in three- to five-year G-sec, whatever we've got has gone into banks' cash management," a dealer at a state-owned bank said. 

 

A fall in Brent crude oil prices to about $75 per barrel from about $78 per barrel mid-week has soothed fears of imported inflation and boosted risk appetite from both domestic and foreign investors, dealers said. The rise in crude oil prices despite US President Donald Trump calling off the ceasefire with Iran was also contained, and traders expect oil prices to be of concern only if Brent rises above $80 per barrel. The outlook on oil prices is also seen favourable for bond prices, with the International Energy Agency Friday stating that global oil demand is projected to decline by 1 million barrels per day in 2026.

 

The total turnover in the government securities market was INR 704.10 billion on Friday, up from INR 578.45 billion at the end of Indian gilt market hours Thursday, data from Clearing Corp. of India Ltd. showed.

 

OUTLOOK

Gilts are not traded Saturdays. On Monday, traders will track Brent crude oil and US Treasury yields, dealers said. Any escalation in the West Asia war would pull down bond prices and push the yield on the 10-year benchmark bond to 6.80%, dealers said. Traders are also likely to remain cautious ahead of the release of India's inflation data for June at 1600 IST Monday, dealers said. The print is expected to be on the higher side, reflecting the rise in energy prices due to the West Asia war. India's CPI inflation inflation is seen rising to 4.3% in June from 3.93% in May, according to the median of estimates in an Informist Poll of 11 economists. Traders expect a similar print of about 4.4%. Deficient southwest monsoon rainfall will also contribute to higher inflation, they said.

 

The 10-year 2036 bond is seen moving between 6.68% and 6.78%, with 6.78% seen as the next crucial level for the gilt on the upside, with some dealers betting on a fall to 6.68% on the downside, dealers said.

 

Bond prices are likely to take cues from any news about the inclusion of Indian government bonds in Bloomberg's Global Aggregate Index. Most traders expect an inclusion, though some technical difficulties for foreign portfolio investors purchasing bonds persist, dealers said. Traders have pushed back the expected announcement date to the end of this month or even August or September, compared to prior expectations of next week, they said. 

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.5950	6.7139%	101.3250	6.7517%
6.48%, 2035	98.3200	6.7253%	98.0850	6.7601%
6.36%, 2031	99.8800	6.3887%	99.7000	6.4343%
6.68%, 2040	97.6200	6.9486%	97.4100	6.9727%
6.90%, 2065	93.0500	7.4488%	92.7500	7.4741%

 

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India Gilts: Caution before CPI caps gains despite firm auction cut-offs

 

	1606 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.64	101.69	101.41	101.44	101.33
YTM (%)	6.7073	6.7007	6.7397	6.7355	6.7517

 

MUMBAI--1606 IST--Government bond prices remained sharply higher after the cut-off prices at the weekly gilt auction came in slightly above market expectations, indicating strong demand for both short- and long-term securities, dealers said. Optimism over the possible inclusion of Indian sovereign bonds in Bloomberg's Global Aggregate Index also supported sentiment, they said. However, profit-booking ahead of the weekend and caution over inflation data due Monday capped further gains, dealers said. 

 

Dealers said traders preferred to book profits after the auction as they were cautious ahead of Monday's release of India's June inflation data. They expect inflation to come in the 4.3%-4.5% range, with higher fuel and commodity prices due to the conflict in West Asia likely to keep the reading elevated. "Inflation is likely to be in the 4.3%-4.5% range, and remain on the higher side because of higher fuel and other commodity prices during the conflict," a dealer at a public-sector bank said. 

 

Dealers said a higher-than-expected inflation print could push yields higher next week, prompting traders to trim positions and book profits ahead of the weekend. They added that while expectations of India's inclusion in the flagship Bloomberg index continue to support prices, fresh gains are likely to depend on inflation data and developments in West Asia.

 

The Reserve Bank of India's cut-off prices at the weekly gilt auction were better than what dealers had expected, reflecting healthy demand across maturities. "The auction was better than market expectations, and hopes of India's inclusion in Bloomberg's Global Aggregate Index also supported bond prices," a dealer at a private-sector bank said.

 

The total volume in the government securities market was INR 620.05 billion at 1606 IST, against INR 519.80 billion at 1630 IST Thursday, data from the Clearing Corp. of India Ltd. showed. The yield on the benchmark 10-year 6.94%, 2036 bond is expected to move in the 6.69-6.75% range during the day, dealers said.  (Shumaila Firoz) 

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India Gilts: Up more after better-than-view cut-offs; likely FPI purchases

 

	1500 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.62	101.65	101.41	101.44	101.33
YTM (%)	6.7104	6.7062	6.7397	6.7355	6.7517

 

MUMBAI--1500 IST--Government bond prices rose further after the cut-off prices at the INR-320-billion gilt auction Friday came in slightly higher than expected, dealers said. Foreign portfolio investors were likely buying gilts, although profit-booking capped gains. Caution ahead of the weekend, amid fears of an escalation in the war in West Asia, also limited gains. Robust demand at the past three consecutive weekly gilt auctions reinforced confidence that gilt demand would remain strong, they said.   

 

The Reserve Bank of India set a cut-off price of INR 99.75 on the five-year benchmark 6.36%, 2031 bond, slightly higher than an Informist Poll estimate of INR 99.73. The central bank set the cut-off price on the 7.71%, 2066 bond at INR 103.23, largely in line with the poll estimate of INR 103.22. Some traders speculated that large banks and insurers have scooped up supply within single-digit bids. Asset and liability managers at private-sector banks and state-owned banks purchased the five-year bond, dealers said. Demand for forward rate agreements in the 2066 bond was around INR 15 billion, dealers said. 

 

While the auction indicated firm demand for the 2031 bond, the gilt's yield is unlikely to sustain a fall below the key 6.40% level in the near term unless significant inflows from foreign-currency non-resident bank deposits materialise and are channelled into gilts. The bond's yield hit a low of 6.3683% Friday. Flows are expected to pick up pace in the next two weeks, dealers said. However, some traders still had bond swap positions in the bond, by buying the bond and paying fixed rates in overnight indexed swap rates, dealers said. A fall in overnight indexed swap rates Friday aided the rise in bond prices, they said.

 

"This was more of a trading call, whoever has emptied their AFS (available for sale books) after a rally has bought (2031 bond) at auction, expecting to sell again if prices rise," a dealer at a state-owned bank said. 

 

Focus is now on Monday's June inflation print, with some expecting it to undershoot the consensus estimate of around 4.3%. Traders are also cautious ahead of the weekend, in case tensions between the US and Iran flare up and push oil prices higher, dealers said. Foreign portfolio investors likely bought gilts, and the momentum was strong. Most traders see more scope for a fall in yield on the 10-year benchmark bond than on other tenures. However, traders do not expect the 10-year benchmark gilt yield to mark a sustained fall below the key 6.70% level Friday. Expectations of India's inclusion in Bloomberg's flagship Global Aggregate Index remain firm, but traders have pushed back the expected announcement date to the end of this month or even August, they said. 

 

The total volume in the government securities market was INR 489.95 billion at 1500 IST, similar to INR 471.00 billion at 1530 IST Thursday, data from the Clearing Corp. of India Ltd. showed. The yield on the benchmark 10-year 6.94%, 2036 bond is expected to move in the 6.69-6.75% range during the day, dealers said.  (Cassandra Carvalho) 

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India Gilts: Remain up; demand for 6.36%, 2031 bond seen firm, widespread

 

	1219 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.4575	101.49	101.41	101.44	101.33
YTM (%)	6.733	6.7285	6.7397	6.7355	6.7517

 

MUMBAI/NEW DELHI--1219 IST–-Prices of government bonds remained up tracking a fall in crude oil price as the US and Iran reportedly continued talks towards de-escalation in West Asia, dealers said. Expectations of firm demand for the 6.36%, 2031 bond at auction also buoyed prices of gilts maturing up to 10 years.

 

The government had offered to sell INR 210 billion of the 6.36%, 2031 gilt and INR 110 billion of the 7.71%, 2066 gilt at auction 1030-1130 IST. Investor interest was primarily focused on the five-year benchmark bond due to asset-liability management demand. State-owned and foreign banks have begun receiving inflows through foreign currency non-resident bank deposits and are likely to invest them into the five-year gilt, dealers said. Current yield levels also offer large banks a healthy rate of return over the deposit rates, they said.

 

Traders also expected the government bond yield curve to steepen over the next few weeks due to the inflows, which may elicit some interest from them as the 2031 bond will not be auctioned for another four weeks. However, the uncertainty caused by US President Donald Trump's comments and the flare-up of the West Asia war dissuaded some market participants. Some traders avoided bidding aggressively for the bond, fearing expectations of rate hikes in India may be brought forward from the current pricing of December.

 

The 2031 bond's price rose during and after the bidding ended, also suggesting robust demand, dealers said. Foreign banks may be keen to buy the gilt as well after staying on the sidelines in their proprietary trading books over the last few weeks, largely buying gilts only on behalf of foreign portfolio investors. The Reserve Bank of India is likely to set a cut-off of INR 99.73 on the 6.36%, 2031 gilt and INR 103.22 or 7.46% yield on the 7.71%, 2066 bond at the auction Friday, according to the median of an Informist Poll of 18 participants.

 

"At the weekly gilt auction, traders expect demand for the longer-tenor bond to remain firm as elevated yields continue to attract long-term investors such as insurers and pension funds," a dealer at a public-sector bank said.

 

The view on demand for the long-term bond was more mixed. Banks and even mutual funds are likely to avoid the gilt with geopolitical tensions resurfacing this week, though long-term investors are seen picking up the 40-year benchmark gilt after its yield rose, dealers said. Some demand is also expected through bond forwards and forward rate agreements, with overnight indexed swap rates remaining benign and near their lowest in four months, they said.

 

While some insurers were keen on picking up the 7.71%, 2066 bond, they are likely to demand a higher return to pick up the fresh supply at the auction. The erstwhile 40-year 6.90%, 2065 gilt and the 50-year 7.43%, 2076 bonds yield higher than the 2066 gilt at auction, which may lead to bids at lower prices by long-term investors, dealers said. 

 

Trade volume was subdued as market participants stayed on the sidelines ahead of the auction result and Monday's release of India's June inflation data, dealers said. The total volume in the government securities market was INR 210.20 billion at 1219 IST, against INR 314.85 billion at 1230 IST Thursday, data from the Clearing Corp. of India Ltd. showed. The yield on the benchmark 10-year 6.94%, 2036 bond is expected to move in the 6.70-6.76% range during the day, dealers said.  (Shumaila Firoz and Aaryan Khanna) 

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India Gilts: Up on fall in crude oil prices; demand at auction seen firm

 

	0921 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.43	101.48	101.42	101.44	101.33
YTM (%)	6.7369	6.7299	6.7383	6.7355	6.7517

 

MUMBAI--0921 IST--Prices of government bonds rose tracking an overnight fall in Brent crude oil prices and hope of a peace deal between the US and Iran, dealers said. Some traders likely made space in their portfolios for the fresh supply of gilts at the auction, which capped the rise in bond prices, dealers said. Traders remain cautious ahead of the release of India's June inflation data Monday, dealers said.    

Trade volume was subdued as traders refrained from building aggressive positions ahead of the weekly gilt auction result, dealers said. The total volume in the government securities market at 0921 IST was INR 11.83 billion, lower than INR 43.95 billion at 0930 IST Thursday, data from Clearing Corp. of India Ltd. showed.

 

The market is better since there was no further escalation (in the West Asia war)," a dealer at a private sector bank said. "There is sufficient demand at the (weekly gilt) auction, underwriting expectations are lower... I think the five-year paper can see a 1–2 basis point tail (higher cut-off yield at auction)."   

 

At the weekly gilt auction, the government will sell INR 210 billion of the 6.36%, 2031 gilt and INR 110 billion of the 7.71%, 2066 gilt. Some traders expect the cut-off on the 5-year paper to be slightly lower than the market levels, while the cut-off on the 40-year paper is likely to be in line with the market levels. Demand for the 2031 paper is seen from banks for their asset liability management books and trading books, dealers said. Traders expect the long-term bonds to be well bid by the insurers after the 'Others' segment of the market segment picked up INR 64.43 billion of gilts in the secondary market Wednesday, dealers said.

 

Some traders are cautious of picking up the five-year paper ahead of the release of India's June inflation data as higher inflation print will weigh on short-term bond prices, dealers said. Traders will likely trim their positions later in the day, due to caution ahead of the weekend and the release of inflation data which will weigh on bond prices, dealers said. Inflation data is largely expected to be higher in June as it will reflect the rise in energy prices, dealers said.

 

If the inflation print is higher than the market expectation of 4.3%, traders expect the yield on the 10-year benchmark 6.94%, 2036 bond to rise to 6.80%. On other hand, if Indian sovereign bonds are included in Bloomberg's flagship Global Aggregate Index, the yield on the 6.94%, 2036 bond can fall to 6.60%, dealers said. The yield on the benchmark 10-year 6.94%, 2036 bond is expected to move in the 6.70-6.76% range during the day, dealers said. (Janwee Prajapati)

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India Gilts: Seen up as oil prices fall; hopes of peace in West Asia rise

 

MUMBAI – Government bond prices are likely to open higher tracking an overnight fall in Brent crude oil prices amid hopes of a potential peace deal between the US and Iran, dealers said. The rise in bond prices is likely to be capped as traders will make some space in their portfolios for the fresh supply of gilts that will be auctioned Friday, dealers said. Traders will await the auction result for further cues. Later in the day, traders are likely to trim positions on caution ahead of the weekend and India's June inflation data Monday, dealers said. 

 

The 10-year benchmark 6.94%, 2036 is seen opening near 6.73% Friday and is expected to move in a 6.72-6.76% range during the day. Some traders are likely to cover short positions on expectations of a possible US-Iran deal, which could push prices higher, dealers said. Others, however, may hold back and wait for clarity on the West Asia conflict before taking any big bets, they said. Traders do not expect the yield on the 6.94%, 2036 bond to rise above 6.76% as public sector banks are expected to buy bonds at these levels, dealers said. These banks bought INR 12.57 billion worth of gilts Thursday.

 

Most traders avoided building aggressive positions Thursday amid the escalation in the West Asia war, dealers said. Bond prices ended off the day's highs Thursday, tracking the price of Brent crude oil, which rose above $78 per barrel after falling intraday. However, bond prices were higher as public sector banks bought gilts at levels seen as attractive, dealers said. The 6.94%, 2036 bond had ended at INR 101.33 Thursday, up from INR 101.24 Wednesday. The yield was 6.7517% Thursday, down from 6.7636% Wednesday.

 

The most tracked Brent crude oil futures for September delivery were trading slightly over $76 per barrel, down from $78.73 per barrel Thursday. Crude oil prices fell after US officials said no new strikes were reported as diplomatic discussions remain underway. Thursday, Iran carried out attacks on US military facilities in Gulf states in response to earlier US strikes on Iranian military infrastructure. The latest exchange put further pressure on a ceasefire that is just three weeks old. Both sides emphasised the need to avoid further escalation and resume diplomatic efforts.

 

Back home, the result of the weekly gilts auction is likely to lend cues to bond prices, dealers said. Demand is likely to be firm for the 6.36%, 2031 bond from banks for their asset and liability management, dealers said. Moreover, the expectation of a steepening in the yield curve will also nudge traders to pick up the five-year bond at the auction, dealers said. Meanwhile, insurers and pension funds are likely to bid for the 2066 bond, they said. The government will sell INR 210 billion of the 6.36%, 2031 bond and INR 110 billion of the 7.71%, 2066 bond Friday.

 

Later in the day, some traders will likely trim their positions on caution ahead of the weekend and the release of India's June inflation data, dealers said. Traders largely expect inflation to be higher in June as it will reflect the rise in pump fuel prices, dealers said. If the inflation print is higher than the market expectation of 4.3%, traders expect the yield on the 10-year benchmark 6.94%, 2036 bond to rise up to 6.80%.  (Janwee Prajapati)

 

End

 

US$1 = INR 95.3250

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

 

Edited by Avishek Dutta

 

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