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Informist, Thursday, Jul. 16, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended up for the second straight session Thursday tracking a fall in oil prices and US Treasury yields, dealers said. Banks purchased bonds for their investment books, especially short-term bonds, while foreign portfolio investors also bought bonds, they said. 

 

The 10-year benchmark bond ended at INR 101.35, up from INR 101.17 Wednesday. The yield on the bond fell to 6.7478% from 6.7738% at the end of the previous session. The yield has fallen nearly 5 basis points in two sessions. The benchmark five-year 6.36%, 2031 bond ended 11 paise higher at INR 99.72.

 

"On the macro (economic) side, things are not looking good but no one can afford to go short (on bonds) because of foreign inflows, FPIs (purchases) and the Bloomberg inclusion (expectation)," a dealer at a state-owned bank said. 

 

 

Brent crude oil futures for delivery in August were at $84.55 a barrel at 1700 IST, against $84.75 a barrel at 0900 IST and down from more than $85 on Wednesday. Subsequently, the yield on the 10-year US Treasury note fell to 4.58% at 1700 IST from 4.61% at the same time Wednesday. Foreign portfolio investors also bought gilts along with domestic banks, dealers said. As of 1800 IST, FPIs net purchased gilts worth INR 2.49 billion through the Fully Accessible Route Thursday, as per data from Clearing Corp. of India. 

 

Some expectations that Bloomberg Index Services will include Indian government bonds in its flagship Global Aggregate Index in an announcement as early as this week buoyed prices, even though traders are wary of any further escalation in the West Asia war and its impact on India's inflation. Domestic banks purchased gilts and state bonds for their investment books, with some pumping in inflows received through foreign currency non-resident deposits into short-term securities, dealers said. Inflows through these deposits have picked up this week, with some banks choosing to park the funds in gilts before allocating it for other operational purposes, they said. Some banks said they are not immediately parking available funds from these deposits in gilts. Asset and liability managers of private sector banks bought gilts for their lucrative yield spreads over overnight market rates, they said. Foreign portfolio investors likely sold some long-term bonds to insurance companies, dealers said. 

 

"We're seeing balance sheet demand for five to six-year state bonds and G-sec because of the carry," a dealer at a brokerage firm said. "You're getting a six-half (6.50%) or 7% return on these bonds when your overnight rate is 5.25%, so that is a very good spread."

 

The total turnover in the government securities market was INR 521.25 billion Thursday, slightly lower than INR 590 billion on Wednesday, data from Clearing Corp. of India showed.

 

OUTLOOK

On Friday, traders will track oil prices at market open. Close attention will be on the INR-320-billion weekly gilt auction, at which the government will sell INR 110 billion of the 6.03%, 2029 bond, INR 110 billion of the 6.68%, 2033 bond and INR 100 billion of the 7.24%, 2055 bond. Traders are cautious of developments in West Asia and the movement of US Treasury yields closer to the US Federal Open Market Committee's July meeting. News regarding the inclusion of Indian gilts in Bloomberg's flagship index and foreign capital inflows following measures announced by the RBI last month will also be tracked. Several traders have pushed back their expectations of the Bloomberg review being published this month to August or even September. 

 

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 the progress of monsoon rainfall, as deficient southwest monsoon rainfall will contribute to higher inflation, they said. However, domestic inflation is largely in check currently, dealers said, barring the imported inflation from a rise in oil prices. Traders now look to gauge whether the RBI's Monetary Policy Committee will raise the repo rate in October to curb inflation and stabilise the depreciating rupee. 

 

The 10-year 2036 bond is seen moving between 6.70% and 6.80%, dealers said.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.3500	6.7478%	101.1650	6.7738%
6.48%, 2035	98.1300	6.7538%	98.0000	6.7732%
6.36%, 2031	99.7200	6.4298%	99.6125	6.4572%
6.68%, 2040	97.4000	6.9739%	97.2400	6.9923%
6.90%, 2065	92.4875	7.4964%	92.3600	7.5073%

 

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India Gilts: Remain sharply up on intraday fall in Brent crude oil prices

 

	1534 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.31	101.40	101.22	101.22	101.17
YTM (%)	6.7534	6.7412	6.7667	6.7660	6.7738

 

MUMBAI--1534 IST--Government bond prices continued trading higher tracking an intraday fall in Brent crude oil prices, dealers said. Brent crude oil prices remained below the key $85 per barrel level throughout the day, which also buoyed market sentiment, dealers said. Some traders likely made some space in their portfolios for the fresh supply of gilts at the weekly gilts auction Friday, which limited the rise in bond prices, dealers said.  

 

"Market is decent today, only 2–3 basis points movement till now," a dealer at a state-owned bank said. "Brent is lower than $85 per barrel. The rupee is also behaving...so there is nothing negative in the market right now."  

 

Brent crude oil futures for September delivery fell to the day's low of $83.83 per barrel from $84.75 per barrel at 0900 IST and $84.22 per barrel Wednesday.

 

The government will sell INR 320 billion worth of three gilts at the weekly gilt auction Friday. Traders expect the demand for the bond to be firm, continuing the better than expected results of previous auctions. Some traders likely made space in their portfolios ahead of the weekly gilt auction Friday, which capped the rise in bond prices, dealers said. However, traders largely refrained from placing aggressive short bets as they did not expect any further fall in bond prices given the likelihood of Indian sovereign bonds' inclusion in the Bloomberg's Global aggregate Index, dealers said. 

 

Traders await Bloomberg's decision on the inclusion of Indian gilts in its flagship index, with most traders betting on a favourable decision. The Bloomberg announcement on the inclusion of Indian bonds is expected any time between this week and September, dealers said. Traders also expect a liquidity boost due to inflows from non-resident Indians into foreign-currency non-resident bank deposits, dealers said. Traders expect the inflows to pick up in the upcoming month, which is likely to trickle down to government securities, dealers said.

 

Traders also assessed the eight source securities chosen for INR 300 billion for switch auction Monday, dealers said. Some traders expect participation at the auction to be firm, as banks likely hold the selected securities in their portfolios. Most of the securities chosen are in-the-money or profitable for these banks, given the recent rise in bond prices after the West Asia war simmered down, dealers said.    

 

"Switch papers are good...everyone will be participating," a dealer at a private sector bank said. "We will focus mainly on the 7.06%, 2028 bond, the 7.37%, 2028 bond and the 7.17%, 2028 bond at the auction." 

 

The total trade volume in the government securities market at 1534 IST was INR 418.90 billion, lower than INR 476.35 billion at 1530 IST Wednesday, data from Clearing Corp. of India Ltd. showed. The 6.94%, 2036 bond is seen trading in a 6.72-6.77?nd through the day.  (Janwee Prajapati)

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India Gilts: Remain sharply up; Bloomberg index inclusion positioning rises

 

	1250 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.36	101.40	101.22	101.22	101.17
YTM (%)	6.7464	6.7412	6.7667	6.7660	6.7738

 

NEW DELHI--1250 IST--Government bond prices remained sharply higher as Brent crude futures sustained below $85 per barrel and US Treasury yields were lower overnight after soft inflation data for June, dealers said. With no flare-up in hostilities in West Asia, traders wanted to stock up on fully accessible route bonds, anticipating that Bloomberg Index Services Ltd. may announce India's inclusion on its flagship Global Aggregate Index this week.

 

"One of the driving forces is the expectation that Bloomberg (index inclusion) is going to happen anytime. Lot of people had to get out those positions when oil moved," a dealer at a private sector bank said. "Since the war has quieted down over the last two days, people are preparing their portfolios again for the index inclusion."

 

Some traders expect rupee bonds to have 0.7% weight on the index, which is tracked by around $3 trillion of passive investment, a weightage that Bloomberg had recommended in September when it began the consultation process for inclusion. Others said the attractiveness of government securities had increased due to the government's measures exempting foreign investors from capital gains and withholding tax. The fully accessible route bond pool had also expanded with the Reserve Bank of India adding the 15-, 30- and 40-year bonds to a list that has no limits for foreign investment and is index-eligible. This could increase the final weightage of India's inclusion to 0.8-1.2%, dealers said.

 

If a weightage of 0.7% is announced, the yield on the 10-year benchmark 6.94%, 2036 gilt may fall to around 6.65-6.68%, dealers said. A higher weightage could drag the 10-year benchmark yield to 6.60%, its lowest since March. The gains may be more prominent if the inclusion is announced Thursday or Friday, but with traders continuing to buy bonds almost universally expecting an acceptance from the global index, delay could lead to the inclusion being completely priced in and hefty profit-booking, dealers said.

 

The total trade volume in the government securities market at 1250 IST was INR 285.15 billion, similar to INR 275.50 billion at 1230 IST Wednesday, data from Clearing Corp. of India Ltd. showed. The 6.94%, 2036 bond is seen trading in a 6.72-6.76?nd through the day.  (Aaryan Khanna)

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India Gilts: Up as US yields fall, Brent crude oil prices below $85/bbl

 

	1001 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.33	101.36	101.22	101.22	101.17
YTM (%)	6.7510	6.7468	6.7667	6.7660	6.7738

 

MUMBAI--1001 IST--Government bond prices were up tracking a fall in US Treasury yield and Brent crude oil prices, dealers said. Traders' risk appetite increased as there was no major escalation in the West Asia conflict overnight, dealers said. Some traders also covered some short bets which also helped bond prices, dealers said. Hope of inclusion of Indian bonds in Bloomberg's Global Aggregate index also continued to support bond prices, dealers said. 

 

"The market is positive because there is no major escalation in West Asia," a dealer at a private sector bank said. "US yield is also down and there are a lot of FPI inflows coming." 

 

At 1000 IST, the yield on the 10-year benchmark US Treasury note fell to 4.56%, down 5 basis points from the close of Indian trading hours Wednesday. Brent crude futures for September delivery also fell below the key $85 per barrel in early trade, down slightly from the $85.19 per barrel at the end of Indian trading hours Wednesday.    

 

The total trade volume in the government securities market at 1001 IST was INR 103.45 billion, lower than INR 165.80 billion at 1030 IST Wednesday, 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, which also buoyed bond prices, dealers said. Such an inclusion could push the yield on the 6.94%, 2036 bond to 6.65%, dealers said.

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to trade in a range of 6.72-6.77% during the day. Traders expect the yield on the 10-year benchmark bond to be sticky at 6.75% as some traders who bought bonds near 6.80% would book profits. However, if the key 6.75% level breaks, then the yield on the 6.94%, 2036 bond is likely to fall to 6.72%, dealers said. 

 

Some dealers said the yield could move towards 6.80% in the coming days if tensions in West Asia continue and crude oil prices remain elevated. However, most of the traders do not expect the yield to rise above 6.80% on the bond as the conflict in West Asia is unlikely to continue for long, which will lead to a fall in Brent crude oil prices, dealers said.  

 

Moreover, the Reserve Bank of India announced INR 300 billion worth of switch auction at the end of trading hours Wednesday, which also lifted market sentiment, dealers said. Traders expect the participation at the auction to be firm as banks have most of the papers chosen for the switch auction in their portfolios.  (Janwee Prajapati)  

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India Gilts: Seen tad up on fall in US yields; Brent crude oil steady

 

MUMBAI – Government bond prices are likely to open slightly higher on the back of an overnight decline in US Treasury yields, dealers said. At 0800 IST, the yield on the 10-year benchmark US Treasury note was 4.56%, down 5 basis points from the end of Indian trading hours Wednesday. Brent crude oil prices were largely stable overnight, which is also expected to support bond prices. Market sentiment remained positive amid hopes that Indian bonds would be included in Bloomberg's Global Aggregate Index, dealers said. However, traders are likely to avoid taking aggressive positions amid tensions in West Asia.

 

The 10-year benchmark 6.94%, 2036 is seen opening near 6.76% Thursday and is expected to move between 6.75% and 6.80% during the day. The yield on the 10-year benchmark bond is unlikely to fall below the crucial 6.75% level Thursday as traders who had bought the bond near 6.80% level will likely book profits, dealers said. The yield on the 10-year benchmark bond is unlikely to sustain above the psychologically crucial level of 6.80% due to strong demand from public sector banks, dealers said.

 

Public sector banks are likely to continue purchases after three consecutive sessions of buying as they consider the yield on the 10-year benchmark bond attractive, dealers said. Public sector banks bought gilts worth INR 22.17 billion Wednesday, according to data from the Clearing Corp. of India Ltd. However, any further rise in Brent crude oil prices could push up the yield on the 6.94%, 2036 bond to over 6.80%, dealers said.

 

Wednesday, the 6.94%, 2036 bond had ended at INR 101.17, up from INR 101.02 Tuesday. The yield on the bond was 6.7738% Wednesday, down from 6.7945% Tuesday. Bond prices ended higher Wednesday as Brent crude oil prices eased, and foreign portfolio investors likely bought gilts, dealers said. 

Brent crude oil futures hovered above the crucial $85 per barrel level in early trade, almost unchanged from the end of Indian trading hours Wednesday. Crude prices are above $85 per barrel level on concerns that attacks in West Asia could disrupt supply through the Strait of Hormuz. US strikes on Iranian military installations stoked fears of a renewed full-scale conflict. 

 

On Wednesday, the US targeted Iran's coastal defences and missile sites after reimposing a naval blockade of its ports. Iran responded by threatening to cut more regional energy exports, calling the situation an "existential war" with America. The US reinstated its blockade of Iran and abandoned a plan to levy a 20?e to cover the cost of protecting ships of other countries transiting the Strait of Hormuz, dealers said.

 

However, some traders see the current rise in crude oil prices as short-lived, as reflected in strong gilt purchases by state-owned banks. However, others fear Brent crude oil prices might surge to $90 per barrel, which some dealers expect could nudge the Reserve Bank of India's Monetary Policy Committee to hike the repo rate in its October meeting. Earlier, traders had pared bets on any policy rate hike in the current calendar year.

 

Traders await Bloomberg's decision on the inclusion of Indian gilts in its flagship index, with most traders betting on a favourable decision. Traders also expect overnight rates to ease due to a liquidity boost from inflows into foreign-currency non-resident bank deposits. The Bloomberg announcement on the inclusion of Indian bonds is expected any time between this week and September, dealers said. (Janwee Prajapati)

 

End

 

US$1 = INR 96.3450

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

 

Edited by Avishek Dutta

 

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