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Informist, Friday, Jul. 17, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended lower on Friday after cut-off prices on the 7.24%, 2055 gilt and the three-year 6.03%, 2029 gilt at the weekly gilt auction were lower than expected, indicating weakening investor appetite for bonds, dealers said. Intraday, near-month Brent crude oil futures inched above $86 per barrel, weighing on bond prices. Traders trimmed exposure to risk ahead of the weekend, on fears that the West Asia conflict could escalate, they said. 

 

The 10-year benchmark bond ended at INR 101.12, down from INR 101.35 Thursday. The yield on the bond rose to 6.7799% from 6.7478% at the end of the previous session. The yield has risen nearly 7 basis points this week. The 6.03%, 2029 bond ended 24 paise lower at INR 99.59 after INR 110 billion of its fresh supply Friday. The 7.24%, 2055 bond ended 37 paise lower at INR 98.08. The 6.68%, 2033 bond – which was also auctioned Friday – ended 6 paise lower at INR 100.27. 

 

"The seven-year (cut-off price) was a bit aggressive, there was a slight tail in three-year but not that bad," a trader at a primary dealership said. "The selling is also because of Brent going above 85 levels, touching 86." 

 

The RBI set a cut-off price of INR 99.61 on the 2029 bond, lower than an Informist poll estimate of INR 99.65. The weighted average price of the bond, however, was INR 99.69, as foreign portfolio investors purchased the bond, dealers said. Banks' demand was aggressive for the 2033 bond, which was reflected in its higher-than-view cut-off price, they said. The cut-off price on the bond was INR 100.31, up from consensus estimate of INR 100.29. Banks' asset and liability management likely bid for the 2029 bond but at higher yields, dealers said, while several state-owned banks bid for the 2033 bond to match their foreign currency non-resident bank deposits with some considering the tenure of the bond about six years. 

 

Bond prices also fell tracking an intraday rise in Brent crude oil prices to about $86 per barrel from below $85 per barrel Thursday. Moreover, several traders were expecting Bloomberg Index Services to publish its review of Indian government bonds in its flagship Global Aggregate Index Friday, and sold gilts after lack of any such news, dealers said. Foreign portfolio investors bought short-term gilts, dealers said. Traders purchased short-term gilts due to inflows from foreign currency non-resident bank deposits, especially foreign banks, they said. However, towards the end of trade, a rise in overnight indexed swap rates further pulled down bond prices, they said. The five-year OIS rate ended 4 basis points higher at 6.38%. 

 

"People were expecting the Bloomberg news to come today (Friday), but it didn't, so there was a sell-off," a dealer at another primary dealership said. The total turnover in the government securities market was INR 387.75 billion Wednesday, lower than INR 521.25 billion on Thursday, data from Clearing Corp. of India showed.

 

OUTLOOK

Gilts are not traded Saturdays. On Monday, traders will track oil prices at market open. 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 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. 

 

However, despite macroeconomic headwinds, traders are refraining from aggressive short positions due to the expectation that Bloomberg will include Indian sovereign bonds in its flagship Global Aggregate Index. Demand from banks due to inflows from foreign currency non-resident bank deposits is also likely to support demand for gilts, along with purchases by foreign portfolio investors. "There's this view in market that we will see $20 billion-$25 billion flows within the next two weeks," a dealer at a corporate house said.  

 

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

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.1200	6.7799%	101.3500	6.7478%
6.48%, 2035	97.9750	6.7772%	98.1300	6.7538%
6.36%, 2031	99.6100	6.4583%	99.7200	6.4298%
6.68%, 2040	97.1550	7.0022%	97.4000	6.9739%
6.90%, 2065	92.1800	7.5227%	92.4875	7.4964%

 

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India Gilts: Dn as oil up intraday, cut-off price at auction lower than view

 

	1433 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.24	101.38	101.23	101.37	101.35
YTM (%)	6.7631	6.7435	6.7645	6.7449	6.7478

 

India Gilts: Dn as oil up intraday, cut-off price at auction lower than view

 

MUMBAI--1433 IST--Government bond prices were down, tracking an intraday rise in Brent crude oil prices, which rose above the crucial $85 per barrel level, dealers said. Moreover, the cut-off prices set at the INR-320-billion weekly gilt auction were slightly lower than expectations, which also weighed on bond prices, dealers said. Trade volume in the secondary market remained subdued as traders refrained from building aggressive positions on caution ahead of the weekend, dealers said. Traders await an announcement of the inclusion of Indian sovereign bonds in Bloomberg's Global Aggregate index, which is the most important key trigger for the market, dealers said.  

 

At the weekly gilt auction, the government sold 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. Demand at the auction was firm from banks and foreign investors for the three-year and seven-year bonds, whereas insurers and pension funds picked up the long-term paper. Demand for the long-term bonds was also supported by some forward rate agreements in this paper, dealers said. The Reserve Bank of India set a cut-off of INR 99.61, INR 100.31, and INR 98.16 on the 6.03%, 2029 bond, the 6.68%, 2033 bond and the 7.24%, 2055 bond respectively. The cut-off prices were slightly lower than expectations for the three-year and 29-year bonds, dealers said. However, the cut-off for the seven-year bond was slightly higher than expected, likely due to demand from foreign participants, dealers said.        

 

Traders remained hopeful of the inclusion of Indian sovereign bonds in Bloomberg's flagship Global Aggregate Index, which limited losses, dealers said. Such an inclusion could pull down the yield on the 6.94%, 2036 bond to 6.65%, dealers said. However, traders noted that the delay in announcement of the inclusion is likely to weigh on bond prices, dealers said. Some traders expect bond prices to rise by INR 20 paise following a delayed announcement, whereas they expect the bond price to fall by INR 50 paise to INR 60 paise if the announcement does not happen, dealers said.

 

"Bond prices have already risen in hopes of the inclusion and, therefore, any further delay will lead to a correction in bond prices," a dealer at a small finance bank said. "The yield on the 10-year benchmark bond is likely to trade in a broad range of 6.70%-6.83%...it can fall to 83 (6.83%) if there is any negative news."

 

Trade volume in the secondary market remained subdued throughout the day on caution ahead of the weekend, dealers said. Traders refrained from placing aggressive short bets ahead of the weekend as they expect bond prices to remain supported by hopes of bond inclusion in Bloomberg's flagship index and inflows from non-resident Indians into foreign-currency non-resident bank deposits, dealers said. 

 

Trade volume picked up slightly in the secondary market after the auction result. The total trade volume in the government securities market at 1433 IST was INR 225.80 billion, lower than INR 361.10 billion at 1430 IST Thursday, data from Clearing Corp. of India Ltd. showed. The 6.94%, 2036 bond is seen trading in a range of 6.72-6.78% through the day.  (Janwee Prajapati)

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India Gilts: In thin band, volumes low on caution before auction result

 

	1250 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.34	101.38	101.30	101.37	101.35
YTM (%)	6.7498	6.7435	6.7547	6.7449	6.7478

 

NEW DELHI--1250 IST--Government bond prices were in a thin band with trade volumes sharply down on caution ahead of the result of the INR-320-billion weekly gilt auction, dealers said. Demand at the auction was expected to be firm as investors were keen to pick up the supply that best matches their liabilities, with the 7.24%, 2055 gilt recovering early losses after bidding ended at 1130 IST. Reserve Bank of India Governor Sanjay Malhotra comments in an interview Friday did not have much impact on gilt prices.  

 

The government offered to 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 at the auction 1030-1130 IST. The three- and seven-year benchmark gilts were in favour with banks' asset-liability managers, both due to domestic deposit growth and inflows into foreign currency non-resident deposits, dealers said.

 

Foreign banks had received sizeable inflows through the FCNR(B) deposits in July and may be more aggressive in bidding for the three-year bond. The Reserve Bank of India has incentivised banks' raising 3-5 year FCNR(B) deposits between June and September. After a slow start, inflows were seen picking up and would keep short-term bonds in favour, dealers said. Banks would want to pick up the 2029 bond as it matches the incoming deposits directly and its supply comes only once in four weeks, while being illiquid in the secondary market, they said. 

 

However, some traders feared that investors would demand higher yields to pick up the bond after a sharp slide in yields over the past few weeks. The underwriting fee cut-off for the 6.03%, 2029 gilt was set at 0.44 paisa Friday, against the median of 0.25 paisa in an Informist Poll. Some banks also expected the bond's yield to reprice higher in the coming days, speculating a large foreign bank may sell a chunk of its holdings to fund its stake acquisition in an Indian bank, dealers said. 

 

"We're hearing demand is generally good at the auction but it may not blow anyone away," a dealer at a primary dealership said. "Banks should be there in the first two papers (2029 and 2033 gilts) and long-term investors would want to pick up the bunched supply of the 30-year rather than approach the secondary market. There's also some bond forward demand but I wouldn't say very aggressive."

 

The five-year overnight indexed swap rate, which banks pay to hedge bond forward and forward-rate trades on their portfolios, has risen 18 basis points this week tracking a jump in crude oil prices as West Asia tensions have sprung to the fore and the US and Iran have traded strikes. This is likely to keep derivative demand for the 30-year benchmark bond below INR 20 billion, dealers said. Meanwhile, banks which feared they would not get stock of the three-year paper were also bidding for the seven-year benchmark, which was also relatively attracted. 

 

Traders were in a wait-and-watch mode ahead of the auction result and did not closely track the intraday movement in US Treasury yields and crude oil prices, unlike earlier this week, dealers said. The total trade volume in the government securities market at 1250 IST was INR 136.60 billion, half that from INR 272.30 billion at 1230 IST Thursday, data from Clearing Corp. of India Ltd. showed. The 6.94%, 2036 bond is seen trading in a 6.72-6.78?nd through the day. 

 

Separately, RBI Governor Malhotra's remarks Friday were in line with previous statements and did not change traders' expectation on the trajectory of monetary policy, dealers said. In an interview with Doordarshan News, the apex banker highlighted the government and the RBI's policies have been growth-supportive in recent years. He also termed inflation as comfortable, even as it rose due to the supply-side impact of the West Asia war. India's CPI inflation was at 4.38% in June from 3.93%, with Malhotra highlighting that policymakers track both headline and core inflation.  (Aaryan Khanna)

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India Gilts: Steady amid no major escalation in West Asia, auction eyed

 

	0945 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.35	101.38	101.35	101.37	101.35
YTM (%)	6.7477	6.7435	6.7484	6.7449	6.7478

 

MUMBAI--0945 IST--Government bond prices were steady due to a lack of any major escalation in West Asia and caution ahead of the weekly gilt auction, dealers said. Traders refrained from building aggressive positions ahead of the result of the INR 320 billion of the weekly gilt auction, dealers said. An overnight decline in US Treasury yields and Brent crude oil prices below the crucial $85-per-barrel level supported bond prices. Traders will track the interview by Reserve Bank of India Governor Sanjay Malhotra with Doordarshan for further cues, dealers said.    

 

Brent crude oil futures for September delivery were at $84.96 per barrel, similar to the level at the end of India trading hours Thursday. Brent crude oil prices remain steady despite Tehran's warning to hit the regional infrastructure of US allies if US President Donald Trump carried out threats to strike power plants and bridges in Iran. At 0936 IST, the yield on the 10-year benchmark US Treasury was at 4.55%, down from 4.58% at 1700 IST Thursday.  

 

"Volumes are not much today. Everybody is waiting for the auction," a dealer at a primary dealership said. "Demand will be firm from banks for the three-year and seven-year papers. We will also track the Governor's interview before the auction." The RBI's Governor will speak to Doordarshan on DD News TV Channel Friday at 1000 IST. 

 

At the weekly auction, 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 expect banks to bid firmly for the three-year and seven-year papers for their asset-liability management books. The long-term bond will be well bid by the pension funds and insurance companies, dealers said.  

 

Public sector banks are likely to book profits at attractive levels as they bought the bond when yields were near 6.80%, dealers said. These banks sold INR 34.03 billion worth of gilts Thursday. The total trade volume in the government securities market at 0945 IST was INR 43.30 billion, as against INR 50.40 billion at 0930 IST Thursday, data from Clearing Corp. of India Ltd. showed. The 6.94%, 2036 bond is seen trading in a 6.72-6.78?nd through the day. 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 pull down the yield on the 6.94%, 2036 bond to 6.65%, dealers said. (Janwee Prajapati) 

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India Gilts: Seen down as Brent crude above $85/bbl, cautious before auction

 

MUMBAI – Government bond prices are likely to open marginally lower, tracking a rise in Brent crude above $85 per barrel in early trade amid fresh escalation in the West Asia conflict, dealers said. A slight overnight decline in US Treasury yields is, however, expected to provide some support to bond prices. Some traders may also trim positions ahead of the weekly gilt auction on Friday, which could weigh on prices, dealers said. Overall sentiment is likely to stay positive on hopes of the inclusion of Indian sovereign bonds in the Bloomberg's Global Aggregate Index, they added.

 

Brent crude oil futures for September delivery rose to $85.05 per barrel, higher than $84.65 at the end of Indian trading hours Thursday. Crude oil prices rose after Tehran warned it would hit regional infrastructure of US allies if US President Donald Trump carried out threats to strike power plants and bridges in Iran. The comments followed fresh cross-border strikes between the two nations. At 0730 IST, the yield on the 10-year benchmark US Treasury yield was 4.56%, lower than 4.58% at 1700 IST Thursday.  

The 10-year benchmark 6.94 36bond is seen opening around 6.75% on Friday and is expected to trade in a 6.72%-6.77% range during the day, dealers said. Traders expect the 10-year yield to hold the key 6.75% level. A break below this level could see the yield on the 10-year benchmark fall to 6.72%. If the yield on the 6.94 36bond declines to 6.72%, public sector banks are likely to book profits, as they bought the bond when yields were near 6.80%, dealers said. These banks sold INR 34.03 billion worth of gilts Thursday. The yield on the 10-year benchmark bond is not expected to rise above 6.77% Friday, as traders do not expect a sharp rise in Brent crude oil prices.

 

Thursday, the 6.94%, 2036 bond had ended at INR 101.35, up from INR 101.17 Wednesday. The yield on the bond was 6.7478% Thursday, down from 6.7738% Wednesday. Bond prices ended higher for two consecutive sessions Thursday tracking a fall in Brent crude oil prices and US Treasury yields, dealers said. Bond purchases from foreign portfolio investors also contributed to the rise in bond prices, dealers said. 

 

At the weekly auction, 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 expect demand for the bonds to be firm, continuing the better than expected results at previous auctions. Banks are likely to pick up the short-term paper at the auction as they bought these bonds in the secondary market for their investment books Thursday, dealers said. The long-term paper is likely to be well bid by the pension funds and insurance companies, dealers said.

 

Some traders will likely make some space in their portfolios ahead of the weekly gilt auction Friday, which will cap the rise in bond prices, dealers said. However, traders will largely refrain from placing aggressive short bets as they do 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, which will also support bond prices, dealers said. Traders expect these inflows to pick up next month and gradually flow into government securities, dealers said.  (Janwee Prajapati)

 

End

 

US$1 = INR 96.28

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

 

Edited by Avishek Dutta

 

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