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Informist, Tuesday, Jul. 14, 2026

 

By Cassandra Carvalho

 

MUMBAI – Government bond yields rose for the second consecutive session Tuesday after near-month Brent crude oil futures jumped above $85 per barrel as strikes between the US and Iran intensified in West Asia. Bets of a rate hike by the Reserve Bank of India's Monetary Policy Committee in October or even in August increased, with the 10-year benchmark 6.94%, 2036 bond yield ending at its highest level since Jun. 23. The rise in yields was capped by purchases by state-owned banks as the 10-year yield topped the crucial 6.80% level, dealers said. 

 

The 10-year benchmark bond ended at INR 101.02, down from INR 101.47 Monday. The yield on the bond rose to 6.7945% from 6.7309% at the end of the previous session. The bond hit an intraday high of 6.8152% as some traders hit stop-losses at the 6.80% yield. The 10-year bond yield notched the second-biggest single-day rise since Apr. 2. The five-year benchmark 6.36%, 2031 bond ended at INR 99.52 or a yield of 6.4821%, marking a jump of nearly 8 basis points Tuesday as rate hike bets lowered appetite for short-term gilts.

 

"Crude could go to $90 a barrel, and so 10-year (yield) could go to 85-86 (6.85-6.86%)," a dealer at a state-owned bank said. "Just that expectations of Bloomberg inclusion are preventing that, and PSUs (state-owned banks) are buying at around 6.80%." Optimism of the inclusion of Indian sovereign bonds in Bloomberg's flagship Global Aggregate Index limited the rise in yields, dealers said, with some expecting the announcement this week. Several traders have pushed back the likely announcement to August or September.

 

Until the Bloomberg review is announced, foreign portfolio investors are seen purchasing gilts to front-run the possible inclusion, even if global risk appetite takes a hit amid the West Asia conflict, dealers said. FPIs were net sellers of gilts Monday for the first time since Jun. 3. Any hefty sales from these investors on Tuesday were unlikely, traders said. As of 1800 IST, FPIs net purchased gilts worth INR 4.36 billion through the Fully Accessible Route, according to data from Clearing Corp. of India. 

 

"Until the Bloomberg news comes, FPIs are likely to continue the buying momentum. Foreign banks have been very optimistic (on the inclusion) based on feedback in meetings," a trader at a primary dealership said. "If there is any selling, the more the news gets delayed, the more the pace of the selling will be."

 

Several traders are of the view that even if the index inclusion happens, bond yields are likely to rise after the announcement since the outcome is priced in. While also raising rate-hike bets, a renewed West Asia conflict could also mar foreign inflows through the measures the RBI had announced last month to shore up capital, dealers said. A fall in the rupee against the dollar to an eight-week low Tuesday pushed up bond yields, dealers said. Traders favoured buying the 10-year benchmark and the 15-year benchmark 6.68%, 2040 bond, while those with positions accumulated earlier this month sold gilts, dealers said. 

 

The rise in US Treasury yields ahead of US CPI inflation data for June, and US Federal Reserve Chair Kevin Warsh's testimony to Congress, pushed up gilt yields, dealers said. The yield on the benchmark 10-year US Treasury note was 4.62% at 1700 IST, down from 4.63% at 0900 IST, but up from 4.58% at 1700 IST Monday.      

 

Bidding at the weekly state bond auction was firm, with aggressive demand for several papers across the yield curve. State-owned banks purchased short-term state bonds for their held-to-maturity books, dealers said. Pension funds and insurance companies purchased long-term bonds. The cut-off yield on Maharashtra's 7.35%, 2031 bond reissue was set at 7.0383%, against an Informist Poll estimate of 7.13%. The RBI accepted only 3 of 60 competitive bids for the bond. 

 

The total turnover in the government securities market was INR 708.10 billion Tuesday, up from INR 556.30 billion Monday, data from Clearing Corp. of India showed.

 

OUTLOOK

On Wednesday, traders are expected to be cautious of developments in West Asia and their impact on Brent crude oil prices. Post-market hours, US Treasury yields fell after CPI inflation in the world's largest economy fell 0.4% on month in June, against the Wall Street Journal poll estimate of a 0.1?ll. The 12-month CPI inflation rate was 3.5%, compared to a forecast of 3.8%.

 

Domestic focus will continue to be on news regarding the inclusion of Indian gilts in Bloomberg's flagship index and foreign capital inflows following measures announced by the RBI last month. Traders will assess the outcome of meetings between the chiefs of banks with the RBI held Tuesday.

 

The depreciation of the rupee against the dollar is a concern for some traders, as the fall comes despite the RBI deploying various measures to prevent it. Traders will also track monsoon rainfall, as deficient southwest monsoon rainfall will contribute to higher inflation, they said.

 

The 10-year 2036 bond is seen moving between 6.75% and 6.90%, with 6.85% seen as the next crucial level for the gilt on the upside, dealers said.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.0175	6.7945%	101.4725	6.7309%
6.48%, 2035	97.7700	6.8075%	98.2100	6.7417%
6.36%, 2031	99.5150	6.4821%	99.8200	6.4040%
6.68%, 2040	97.0800	7.0108%	97.5675	6.9546%
6.90%, 2065	92.2000	7.5210%	92.8400	7.4665%

 

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India Gilts: Remain sharply down as Brent crude oil rises above $87/bbl

 

	1517 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.00	101.22	100.87	101.20	101.47
YTM (%)	6.7976	6.7661	6.8152	6.7689	6.7309

 

India Gilts: Remain sharply down as Brent crude oil rises above $86/bbl 

 

MUMBAI--1517 IST--Government bond prices remained sharply down, tracking an intraday rise in Brent crude oil price to over $87 per barrel, dealers said. Public-sector banks likely bought bonds near the psychologically crucial level of 6.80% on the 10-year benchmark 6.94%, 2036 bond, which limited the fall in bond prices, dealers said. However, the yield on the 6.94%, 2036 bond hit 6.8152%, the highest since Jun. 4 during intraday trade. Bond prices hardly moved after the result of the state bond auction was broadly in line with market expectations, dealers said.

 

At 1509 IST, the Brent crude oil futures contract for September delivery was at $86.57 per barrel, up from $84.78 per barrel at 0900 IST and $78.46 per barrel at the end of Indian trading hours Monday. The rise in overnight indexed swap rates also weighed on bond prices, dealers said.

 

At the INR 248-billion state bond auction, nine states raised INR 245.70 billion as Punjab accepted only a partial amount of INR 7.70 billion against INR 10 billion notified. The Reserve Bank of India set a cut-off yield of 7.51% on Andhra Pradesh's 10-year bond, similar to 7.50% expected by market participants, according to the median of an Informist Poll. The cut-off has a spread of 71 basis points with the 10-year benchmark 6.94%, 2036 bond.

 

Short-term bonds were wiped out by banks which bought them for their held-to-maturity books because of the lucrative yields, dealers said. However, 70% of the supply of state bonds at the auction had a maturity period of over 10 years. Pension funds and insurance companies likely wiped out the supply of long-term state bonds at the auction, dealers said. Traders largely expect firm demand for state bonds as long as the spread between the bonds and central government securities remains stable, dealers said. 

 

"The cut-off on the state bonds was in line with expectations," a dealer at a primary dealership said. "The spread is intact so far, but we will have to look for the supply in the second half (of the financial year 2026-27 (Apr-Mar)) which is generally higher."              

 

The total trade volume in the government securities market at 1517 IST was INR 589.65 billion, up from INR 408.55 billion at 1530 IST Monday, data from Clearing Corp. of India Ltd. showed. Traders remained hopeful of the inclusion of Indian sovereign bonds in Bloomberg's flagship Global Aggregate Index. If such an inclusion happens, the yield on the 6.94%, 2036 bond could fall to 6.65%, dealers said.  (Janwee Prajapati)

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India Gilts: Hit day's low, sharply down as Brent crude tops $85/bbl

 

	1230 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.0075	101.2200	100.9850	101.2000	101.4725
YTM (%)	6.7959	6.7661	6.7990	6.7689	6.7309

 

NEW DELHI--1230 IST--Government bond prices remained sharply lower and hit a fresh intraday low after Brent crude for September delivery rose further intraday, past $85 per barrel. Purchases from state-owned banks near 6.80% yield on the 10-year benchmark 6.94%, 2036 gilt limited losses, dealers said. Moreover, traders did not immediately expect second-round effects such as an increase in CPI inflation and higher government spending on account of the recent flare-up in hostilities across West Asia.

 

"It's a bit early to say whether inflation will be higher, whether the fiscal deficit will go up, but those questions have again resurfaced and the market has sold off," a dealer at a private-sector bank said. "But there is some comfort that the RBI has projected crude at $95 a barrel and we are only at $85 (a barrel) right now." So far in the current financial year started April, India's crude oil basket has averaged around $98 per barrel, though the average after the latest RBI projection on Jun. 5 has been less than $80 per barrel. 

 

Since second-round effects were seen limited so far, bond prices did not reflect immediate repo rate increases and long-term gilts fell broadly in line with rate-sensitive bonds maturing under five years, dealers said. Overnight indexed swap rates shot up due to the overseas triggers and were reflecting a 25-basis-point repo rate increase in October. Until Friday, the earliest rate hike was seen in December.

 

The uncertainty over the West Asia conflict also reduced risk appetite, with dealers now trimming bets the 10-year gilt would fall below 6.70% yield even if Bloomberg Index Services Ltd. announces the inclusion of Fully Accessible Route bonds on its flagship Global Aggregate Index, dealers said. Foreign portfolio investors may avoid fresh purchases on India's gilts as the 10-year benchmark Indian government bond yields were less than 220 basis points over the 10-year US Treasury note, which rose to its highest in nearly two months at 4.64%. Still traders remained hopeful of the inclusion of Indian sovereign bonds in Bloomberg's Global Aggregate Index and expected the announcement this week. Should active purchases be limited amid fears of a rate hike in the US, passive FPI investment is only likely to begin next year and would not increase demand for domestic bonds immediately, dealers said. 

 

With the intensity of attacks between the US and Iran rising over the past 10 days, traders also fear that Brent crude futures may rise further from the current $85 a barrel. The likely slowdown in traffic through the Strait of Hormuz may again push up prices of key imported commodities for India, potentially pushing up the subsidy burden for the government or pushing up prices, dealers said. Wholesale price inflation rose to 9.87% in June, the highest in the new series with base FY23.

 

Separately, the INR-248-billion state bond auction is expected to sail through, though cut-off yields are likely to rise from the previous week, in line with gilts. State bonds' spread over gilts at auction may remain similar to the previous week as asset-liability managers wanted to pick up the higher yields that those bonds offer, dealers said.

 

However, with state-owned banks picking up gilts, their bids were likely concentrated in state bonds maturing in 10 years or below. Some successful bidders at the state bond auction may also look to sell those securities in the secondary market after the result, dealers said. Traders avoided picking up state bonds amid the market volatility as they have lower trading volumes and lacked liquidity, they said.

 

With both domestic and global factors in play, trade volumes shot up. The total trade volume in the government securities market at 1230 IST was INR 369.35 billion, sharply up from INR 270.55 billion at 1240 IST Monday, data from Clearing Corp. of India Ltd. showed.  (Aaryan Khanna)

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India Gilts: Sharply down on rise in crude oil prices, escalation in W Asia

 

	0946 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.08	101.22	101.04	101.20	101.47
YTM (%)	6.7857	6.7661	6.7913	6.7689	6.7309

 

MUMBAI--0946 IST--Government bond prices fell sharply tracking a surge in Brent crude oil prices to over $85 per barrel, dealers said. The overnight rise in US Treasury yields also weighed on bond prices, dealers said. Overnight escalations in the West Asia war soured market sentiments. Losses were limited as public sector banks likely bought bonds at levels seen attractive, dealers said. 

 

"Bond prices are down because of Brent crude rising over $85 per barrel...people are afraid it might go to $90 per barrel," a dealer at a private sector bank said. "Given the escalations in West Asia, I do not think people will want to carry any investment positions...most of the positions are just intraday positions."   

 

At 0945 IST, Brent crude oil futures for September delivery were at $84.70 per barrel, lower from $85.63 per barrel in early trade Tuesday, but up from $78.46 per barrel at the end of Indian trading hours Monday. The Brent crude oil prices rose as the US carried out strikes on Iran for the third night in a row, following President Trump's announcement of a multi-day campaign and a new blockade of Iranian trade in the Strait of Hormuz. At 0945 IST, the yield on the 10-year benchmark US Treasury note rose to 4.63%, up from 4.59% at the end of Indian trading hours.   

 

Traders also remain cautious of selling from foreign investors as they are likely to seek safe-haven assets which will also pull down bond prices, dealers said. Foreign portfolio investors likely turned sellers on Monday, for the first time since Jun. 4. Foreign banks also net sold INR 8.73 billion worth of gilts Monday, dealers said.  

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to trade in a range of 6.75-6.80% during the day. Traders largely expect the yield on the 6.94%, 2036 bond to remain below the psychologically crucial level of 6.80% due to strong demand from public sector banks, dealers said.

 

The total trade volume in the government securities market at 0946 IST was INR 156.85 billion, higher than INR 62.45 billion at 0930 IST Monday, data from Clearing Corp. of India Ltd. showed. Traders remained hopeful of the inclusion of Indian sovereign bonds in Bloomberg's flagship Global Aggregate Index. If such an inclusion happens, the yield on the 6.94%, 2036 bond could fall to 6.65%, dealers said.  (Janwee Prajapati)

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India Gilts: Seen down as Brent crude above $85/bbl, rise in US yields

 

MUMBAI – Government bond prices are likely to open lower Tuesday, tracking an overnight surge in Brent crude above the key $85 per barrel mark, dealers said. Renewed tensions in West Asia are expected to dampen market sentiments. An overnight rise in US Treasury yields will also pull down bond prices, dealers said. However, optimism over the potential inclusion of Indian sovereign bonds in Bloomberg's Global Aggregate Index will likely limit the fall in bond prices, dealers said. Later in the day, focus will shift to the INR-248-billion state government bond auction result for further cues, dealers added.   

 

The 10-year benchmark 6.94%, 2036 is seen opening near 6.76% Tuesday and is expected to oscillate between 6.75-6.80% during the day. The yield on the 10-year benchmark bond is likely to face strong resistance at 6.75% on Tuesday due to purchases by public sector banks at the psychologically crucial level, dealers said. However, any further rise in Brent crude oil prices could push up the yield on the 6.94%, 2036 bond to 6.80%, dealers said.

 

The 6.94%, 2036 bond had ended at INR 101.47 Monday, down from INR 101.60 Friday. The yield was 6.7309% Monday, up from 6.7139% Friday. Bond prices ended lower Monday, tracking a rise in crude oil prices after the US and Iran resumed strikes. However, the fall in bond prices was limited by purchases from public sector banks, who considered the levels attractive, dealers said. These banks bought gilts worth INR 40.39 billion Monday.

 

Brent crude oil futures for September delivery were at $84.14 per barrel, slightly lower from $85.63 per barrel in early trade Tuesday, but up over 7% from the end of Indian trading hours Monday. The crude oil prices rose as the US carried out strikes on Iran for the third night in a row, following President Trump's announcement of a multi-day campaign and a new blockade of Iranian trade in the Strait of Hormuz. US Central Command said the latest strikes were aimed at imposing a heavy cost on Iranian forces and degrading their ability to attack civilians and commercial shipping in the Strait of Hormuz. In an interview with radio host Hugh Hewitt, Trump said the US would hit Iran "very hard" on Monday and Tuesday.

 

Traders are exercising caution amid renewed tensions in West Asia, which could prompt foreign investors to seek safe-haven assets and put pressure on emerging-market assets, dealers said. According to Clearing Corp. of India Ltd.'s data, foreign banks sold INR 8.73 billion worth of gilts Monday. At 0806 IST, the yield on the 10-year benchmark US Treasury note rose to 4.62%, up from 4.59% at the end of Indian trading hours.   

 

Later in the day, the focus will shift to the weekly auction of state government bonds, where nine states will raise INR 248 billion. Traders expect the market to absorb the supply, as the notified amount is lower than the indicated INR 251 billion in the Jul-Sept borrowing calendar. However, renewed tensions in West Asia will weigh on the bonds' cut-off prices at the auction, dealers said.  

 

Traders will also track the release of WPI inflation data for June, scheduled for 1200 IST on Tuesday. WPI inflation is expected to ease to 9.3% in June from 9.68% in May, according to an Informist Poll. May was the first month in which the commerce ministry released the new WPI series, with 2022-23 (Apr-Mar) as the base year.

 

Traders will also track any news regarding the inclusion of Indian gilts in Bloomberg's flagship index and foreign capital inflows following measures announced by the Reserve Bank of India last month. Most traders expect an inclusion which is likely to limit the fall in bond prices, dealers said. While some traders expect inclusion by Jul. 15, others have pushed back their expectations to the end of this month or even August or September, dealers said. The depreciation of the rupee against the dollar is also a concern for some traders, as the fall comes despite the RBI deploying various measures to prevent it.  (Janwee Prajapati)

 

End

 

US$1 = INR 96.20

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

 

Edited by Saji George Titus

 

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