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Informist, Thursday, Jul. 23, 2026

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices fell sharply by the end of trade, tracking a rise in Brent crude futures to above $98 per barrel, a six-week high, and US Treasury yields climbing to their highest in two months, dealers said. Caution ahead of the weekly gilt auction Friday contributed, even as losses were limited for most of the day due to robust investor appetite, they said.

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.68, down from INR 100.97 Tuesday. Its yield rose to 6.8413% Thursday from 6.8012% the previous day, closing at its highest level since Jun. 22. 

 

"The market seems to have woken up to crude at $98 (per barrel)," a dealer at a primary dealership said. "There is plenty of demand, levels are well protected, but there was no other trigger and buying has been there in the market since yesterday while crude has risen 5%, so something had to break."

 

Brent crude for September delivery was at $98.64 per barrel at 1700 IST Thursday after approaching $99 intraday, sharply up from $94.60 per barrel at the same time Wednesday. Oil prices have been on the boil this week on the escalation of military strikes between the US and Iran, with signs of a peace deal and a return to a ceasefire seemingly low, according to media reports.

 

Short-term gilts remained in favour, with investor demand stemming from banks' inflows into 3-5 year foreign currency non-resident bank deposits. Foreign and private-sector banks had received the most inflows under the scheme, along with State Bank of India, and picked up gilts as assets to match the liabilities, dealers said. Banks were using the inflows to fund lending and purchases in corporate bonds as well, but preferred gilts as there would be no additional risk weights added to the deployment, they said.

 

Though the buying was initially concentrated in short-term gilts earlier this week, domestic investors were also picking up bonds maturing up to 15 years to maximise yield returns, dealers said. These bonds were being parked in the available for sale book, either to be replaced by short-term gilts at a later date or be sold after the corresponding 3-5 year liability gets reversed, they said. The Reserve Bank of India data showed FCNR(B) deposits under the special scheme attracted $17.41 billion between Jun. 8 and Jul. 17, with another $2 billion-$4 billion of flows likely having come this week, dealers said. 

 

On the contrary, long-term bonds have been out of favour as US Treasury yields have risen, especially those on bonds maturing in 20 years and more. This has slowed the pace of foreign portfolio investors' purchases in July, which were robust in June, dealers said. Life insurers' purchases through bond forwards and forward-rate agreements have also slowed as the five-year overnight indexed swap rates has shot up tracking crude, reducing the effective return for the investor, they said. Traders from banks and mutual funds have trimmed their positions to limit hefty marked-to-market losses as the prices of these bonds fall more sharply per basis point increase in yield, dealers said. 

 

"US yields are going up very sharply, especially in the long-end," a dealer at a foreign bank said. "There is a broad-based pressure on that segment and so while the belly (of the yield curve) has been protected, 30-year has been bleeding." 

 

OUTLOOK

On Friday, bond prices are likely to take cues from the movement in crude oil prices and US Treasury yields, with the developments in West Asia again taking a centrestage, dealers said. The volatility may be limited before the weekly gilt auction at 1030-1130 IST.

 

Continued inflows due to FCNR(B) deposits may limit the negative impact if the global situation worsens but investors may also look to capture higher yields. Brent crude for September delivery touched $100 per barrel after Indian market hours, while the 10-year US Treasury yield was up at 4.72%, its highest since January. Some dealers expect stop-losses to be triggered on the 10-year 6.94%, 2036 gilt if it rises above 6.85% yield. 

 

Data released by the RBI showed that its schemes to attract foreign capital launched in early June had drawn inflows of $20.72 billion by Jul. 17. FCNR(B) deposits alone brought in $17.41 billion since the concessional swap window for banks was rolled out on Jun. 8, the RBI said. Short-term bonds are expected to remain in favour with the pace of these inflows seen increasing in the coming days, even if longer-term bonds are more sensitive to global triggers, dealers said. The yield on the 10-year benchmark 6.94%, 2036 gilt is seen in a range of 6.77-6.90% Friday. 

 

Demand for bonds maturing in under three years is not seen robust, as the foreign exchange inflows have come in without a corresponding rise in rupee liquidity with banks, despite their conversion of the funds using the concessional swap windows provided by the RBI. The total inflow number under the schemes suggests an increase in banking system rupee liquidity by nearly INR 2.0 trillion, while the frictional liquidity was near neutral Wednesday. Dealers also remain expectant of further flows on the view that Bloomberg will announce the inclusion of Indian sovereign bonds in its flagship Global Aggregate Index soon.

 

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

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.6825	6.8413%	100.9675	6.8012%
6.48%, 2035	97.5200	6.8458%	97.8200	6.8006%
6.36%, 2031	99.4450	6.5012%	99.5600	6.4714%
6.68%, 2040	96.7600	7.0480%	97.0600	7.0132%
7.24%, 2055	97.4400	7.4560%	97.7000	7.4336%

 

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India Gilts: Falls more as Brent climbs to $98/bbl; 10-year yld at 1-mo high

 

	1610 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.71	100.92	100.70	100.83	100.97
YTM (%)	6.8370	6.8085	6.8384	6.8205	6.8012

 

NEW DELHI--1610 IST--Government bond prices fell further as Brent crude futures climbed to a fresh six-week high, with the September contract rising past $98 per barrel as hostilities between the US and Iran continued to increase, dealers said. The sustained rise in oil prices through the week pushed up the yield on the 10-year benchmark 6.94%, 2036 bond to a one-month high of 6.8384% intraday.

 

Through the week, bond prices have been kept afloat by firm investor demand as banks receiving foreign currency non-resident bank deposits deploy the inflows into buying gilts up to 15 years, which was also the case through the day, dealers said. State-owned banks had been aggressively buying the 6.94%, 2036 gilt as its yield rose above 6.82%, limiting losses. However, fears of rate hikes and fiscal slippage as Brent crude futures neared $100 a barrel finally led to enough selling pressure to top the psychologically crucial levels, dealers said.

 

Despite the over 11% rise in crude prices this week, the 10-year gilt's yield is up only around 6 basis points, a sign of robust investor appetite, dealers said. Traders also avoided directionally placing short bets based on crude prices alone, with the potential of a peace deal between the US and Iran seen quickly bringing down crude oil prices.

 

"It's very difficult to say how much appetite is there from banks. It is heavily dependent on individual bank inflows on FCNR," a dealer at a private-sector bank said. "But traders are completely out of the market. They are on the sidelines. There is no conviction to short (short sell) at these levels due to the strong support and the volatility on crude."

 

However, traders trimmed their portfolio ahead of the weekly gilt auction on Friday, which will have to be absorbed by long-term investors, dealers said. The government will sell INR 170 billion of a new 15-year, 2041 gilt and INR 110 billion of the 7.43%, 2076 gilt at 1030-1130 IST Friday. The 10-year US Treasury yield also rose to a two-month high of 4.68%, weighing on gilt prices, dealers said. Foreign portfolio investors were net sellers of fully accessible route gilts on Tuesday for only the second time since Jun. 3 as the interest rate differential between the safe haven asset and emerging market debt narrowed.

 

The total trade volume in the government securities market at 1610 IST was INR 408.40 billion, lower than INR 534.10 billion at 1630 IST Wednesday, data from Clearing Corp. of India Ltd. showed. The 10-year benchmark 6.94%, 2036 bond is seen trading in a 6.78-6.85?nd through the day. (Aaryan Khanna)

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India Gilts: Remain down on rise in oil prices; PSU banks' buys limit losses

 

	1315 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.82	100.92	100.79	100.83	100.97
YTM (%)	6.8219	6.8085	6.8261	6.8205	6.8012

 

MUMBAI--1315 IST--Prices of government bonds remained down, tracking a rise in Brent crude oil prices to near $97 per barrel, dealers said. Public sector banks likely bought bonds at levels seen as attractive, which limited the fall in bond prices, dealers said. Some traders covered their short bets, which also helped bond prices. Some traders made space in their portfolios for fresh supply of the new 15-year bond at its auction Friday, dealers said. 

 

"The market is range-bound today, even when crude is up because of technicals," a dealer at a private sector bank said. "Market is not based on fundamentals any more, prices are moving purely based on technicals...6.80-6.82% (yield on the 10-year benchmark 6.94%, 2036 bond) is a crucial level, if this level is broken (yield rises above 6.82%) we can see 6.90% also."

 

Brent crude oil futures for September delivery rose to the day's high of $97.37 per barrel from $96.28 per barrel at 0900 IST. Brent crude oil prices were up almost 3% on Thursday from the end of Indian trading hours Wednesday.  

 

Traders limited most of their activity to the 10-year benchmark, as nearly 60% of the total volume was concentrated in this paper, amid escalation in the West Asia war, dealers said. Foreign participants likely moved from the short end of the yield curve to the 10-year to 15-year segment, dealers said. "There is not much sweet in the short term now, it has rallied already," a dealer at a small finance bank said. "Traders are keeping most of their trades in the 10-year paper due to liquidity...15-year paper has a slightly higher duration."

 

Traders also positioned for the INR 280 billion gilt auction Friday as they expect demand for both the bonds to be firm, dealers said. The government will sell INR 170 billion of the new 15-year 2041 gilt at the auction. Some traders expect the coupon on the new 15-year bond to be 7.01-7.02% or 2 basis points below the yield on the 6.68%, 2040 bond in the secondary market. Most traders expect demand for the bond to be robust as they expect foreign participants to buy this bond, dealers said. The 15-year benchmark bond has been one of the most actively traded securities in the secondary market as several foreign participants ramped up purchases of the 6.68 40bond after it was added to the Fully Accessible Route for foreign investors last month, dealers said. At 1300 IST, the trade volume in the 6.68%, 2040 bond was almost 12% of the total trade volume. 

 

The total trade volume in the government securities market at 1315 IST was INR 216.45 billion, lower than INR 315.65 billion at 1230 IST Wednesday, data from Clearing Corp. of India Ltd. showed. The 10-year benchmark 6.94%, 2036 bond is seen trading in a 6.78-6.85?nd through the day.  (Janwee Prajapati)

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India Gilts: Down on rise in Brent crude to over $96/bbl, rise in US yields

 

	0925 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.81	100.85	100.79	100.83	100.97
YTM (%)	6.8233	6.8180	6.8261	6.8205	6.8012

 

MUMBAI--0925 IST--Prices of government bonds were down as Brent crude rose to a more than six-week high and US Treasury yields rose overnight, dealers said. Trading volumes remained subdued in early trade as traders stayed cautious amid no signs of a potential US-Iran peace deal, dealers said. The decline was limited due to likely buying by state-owned banks at levels seen as attractive, dealers said. Traders are also holding out hope for continued foreign inflows, which lent support to bond prices, dealers said.

 

Brent crude oil futures for September delivery were at over $96 per barrel in early trade Thursday, up from $94.61 per barrel at the end of Indian trading hours Wednesday. At 0925 IST, the yield on 10-year benchmark US Treasury yield was 4.67%, up 3 basis points from 4.64% at 1700 IST Wednesday. Oil prices were up as the US launched a new round of strikes on Iran and Yemen's Houthis targeted oil tankers in the Red Sea. The US military carried out a 12th straight night of attacks on Iran.

 

Trade volume remained subdued given this escalation in the West Asian war, dealers said. The total trade volume in the government securities market at 0925 IST was INR 33.50 billion, against INR 39.65 billion at 0930 IST Wednesday, data from Clearing Corp. of India Ltd. showed. The 10-year benchmark 6.94%, 2036 bond is seen trading in a 6.78-6.85?nd through the day. Traders do not expect the yield on the 10-year paper to rise above the crucial 6.85% yield as they expect robust demand from traders and state-owned banks at this level. However, a fall in bond yield to 6.78% is likely if crude oil prices ease, dealers said.

 

"I do not think we will see 6.85% (yield on the 6.94%, 2036 bond) today," a dealer at a primary dealership said. "We will see a strong resistance at around 6.82-6.83% (yield on the 10-year benchmark bond). Even yesterday (Wednesday) somebody was holding the levels at 6.80-6.81%." 

 

Short-term bonds are likely to remain in favour after data from the Reserve Bank of India showed its measures to attract foreign capital, launched in early June, garnered $20.72 billion in inflows by Friday. FCNR (B) deposits accounted for $17.41 billion of this, after the concessional swap facility for banks was introduced on Jun. 8, the data showed. The five-year benchmark 6.36%, 2031 bond was the second most traded bond in the secondary market with over 20% of trade concentrated in this paper. At 0925 IST, the 6.36%, 2031 paper was down only 5 paise from the previous close despite a sharp rise in crude oil prices.  (Janwee Prajapati)

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India Gilts: Seen down on rise in Brent crude oil to over six-week high

 

MUMBAI – Government bond prices are expected to open lower Thursday, tracking higher crude oil prices — a trend seen through the week, dealers said. US Treasury yields also strengthened overnight, which will also pull down local bond prices, dealers said. Traders are likely to set aside room in their portfolios for the new issue of the 15-year bond, one of the most sought-after tenors, which will also weigh on bond prices, dealers said. Trading volumes are likely to stay subdued until there is more clarity on a potential West Asia peace deal, dealers said.

 

Brent crude oil futures for September delivery were over $96 per barrel in early trade Thursday, up from $94.61 per barrel at the end of Indian trading hours Wednesday. Oil prices are up more than 8% this week and are at their highest in more than six weeks as the US launched a new round of strikes on Iran and Yemen's Houthis targeted oil tankers in the Red Sea. The US military carried out a 12th straight night of attacks on Iran. This came hours after US President Donald Trump threatened to destroy an Iranian bridge or power plant every time Iran fires at ships in the Strait of Hormuz, escalating the situation. At 0745 IST, the yield on 10-year benchmark US Treasury yield was 4.66%, up from 4.64% at 1700 IST Wednesday. 

 

The 10-year benchmark 6.94 36bond is expected to open around 6.81% Thursday and oscillate between 6.80% and 6.85% through the day, dealers said. Wednesday, the 6.94%, 2036 bond had ended at INR 100.97, down from INR 101.02 Tuesday. The yield on the bond was 6.8012% Wednesday, up from 6.7938% Tuesday. 

 

Bond prices recovered from the day's low Wednesday as public sector banks and foreign investors picked up 5-year and 15-year papers. However, the 10-year benchmark bond ended in the red due to a rise in crude oil prices. Traders expect bond prices will not fall much as foreign investors and public sector banks are likely to continue their purchases Thursday as well. However, with no clarity yet on a West Asia peace deal traders are likely to avoid aggressive bets and this will keep trade volumes light, dealers said.

 

The yield on the 6.94%, 2036 bond is unlikely to sustain a rise above 6.85% as there will likely be robust demand from state-owned banks at these levels, dealers said. Some traders are also likely to cover their short positions at this level which is seen as attractive, dealers said. However, a fall in bond yields below 6.80% will prompt traders to book profits, which will limit the rise in bond prices.

 

Data from Clearing Corp. of India Ltd. showed foreign portfolio investors net purchased INR 14.63 billion of gilts via the Fully Accessible Route Wednesday — the highest in 10 straight sessions. They had been marginal net sellers Tuesday. Traders said concerns over a delay in the announcement on the inclusion of India's sovereign bonds in Bloomberg's Global Aggregate Index, along with the escalating hostilities in West Asia, could prompt foreign investors to pull money out of emerging markets.  (Janwee Prajapati)

 

End

 

US$1 = INR 96.57

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

 

Edited by Akul Nishant Akhoury

 

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