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Informist, Friday, Jul. 24, 2026

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended higher after a volatile session marked by firm appetite for bonds despite rising global risks, continuing the trend seen through the week, dealers said. Bond prices rebounded from early losses after the INR 280-billion weekly gilt auction sailed through, with cut-offs in line with expectations, later helped by an intraday fall in oil prices 

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.80, up from INR 100.68 Thursday. The bond traded in a wide band of INR 100.51-INR 100.90 Friday. Its yield fell to 6.8253% Friday from 6.8413% the previous day. This week, the benchmark yield has risen less than 5 basis points even as Brent crude futures have shot up by over 10%.

 

Brent crude for September fell to below $98 per barrel from over $100 a barrel earlier in the day, buoying gilt prices by the end of trade, though some traders avoided fresh purchases ahead of the weekend, dealers said. Some traders covered short sales, while others trimmed their bond holdings in the last hour, they said. 

 

Some traders were worried that the conflict between the US and Iran currently underway would widen over the weekend, with US President Donald Trump threatening bigger strikes. In addition to the Strait of Hormuz, disruptions in oil supply through the Red Sea have also driven up oil prices, which are seen as pushing up domestic inflation and threatening fiscal slippage in India. Moreover, traders who had picked up the 6.94%, 2036 gilt near INR 100.80 earlier in the week booked profit as the bond's price rose above that level, limiting gains. 

 

"We've seen that the INR 100.80 level has been quite key this week, (it) has seen some buying from private banks," a dealer at a primary dealership said. "Looking at the price action when we rose above that point, people who were stuck with those positions were emptying their trading books before the weekend came." 

 

Bond prices had opened lower as Brent crude futures surged to $100 per barrel for the first time since late May and the 10-year US Treasury yield hit a six-month high as the war in West Asia escalated. These losses swung into gains after the bidding for the weekly gilt auction suggested firm demand from investors for the new 15-year, 2041 gilt on offer. The bulk of the buying this week and on Friday came from banks picking up gilts for their asset-liability management as foreign currency non-resident bank deposits continue to accrue funds, dealers said.

 

The RBI set the coupon on the new bond at 7.06%, in line with the median of an Informist Poll, with a partial allotment of 44.3% at the cut-off. State-owned banks led the bidding for the 2041 gilt. This suggested the auction stock was not cornered by investors below the cut-off, though it reflected firm demand, dealers said. Most traders who wanted to pick up the bond to offset short sales in the 6.68%, 2040 gilt had to cover those sales in the secondary market with the partial allotment. The 7.06%, 2041 bond ended at INR 100.20 or 7.0385% yield at the end of its first day of trade after its INR 170 billion supply sailed through. 

 

Meanwhile, life insurers, provident and pension funds all bid strongly for the INR 110 billion on offer for the 7.43%, 2076 gilt at the auction. Demand for the 50-year security was firm as these long-term investors found the yield on the bond attractive after the 12-basis-point rise since its last auction, dealers said. The cut-off price was also in line with expectations and had limited impact on secondary market prices as traders had not expected any of the supply to fall to them, dealers said.

 

On the other side of the yield curve, the 6.36%, 2031 gilt was a laggard through the day even though the bond had been the biggest beneficiary of FCNR(B)-linked purchases earlier this week. Traders attributed this to a large chunk of sales from foreign portfolio investors, which came as a surprise, considering they had picked up nearly INR 27 billion of the gilt in the two weeks ended Thursday. Clearing Corp. of India data at 1912 IST showed FPIs sold INR 16.17 billion of the five-year benchmark gilt Friday. The total net sales of fully accessible route bonds by foreigners, at INR 19.00 billion Friday, were the highest since Apr. 2. 

 

"There was flow-based selling in the five-year paper, that much is there," a dealer at a foreign bank said. "But what led to such a big sale, I couldn't tell you – right now, every ALM (asset-liability manager) is looking for 2029-2031 bonds to park their FCNR(B) funds."

 

Total turnover on the RBI's Negotiated Dealing System–Order Matching system was INR 704.15 billion Friday, sharply up from INR 472.60 billion Wednesday. There were no trades using the central bank's e-rupee pilot Wednesday, as has been the case for months. 

 

OUTLOOK

Gilts are not traded on Saturdays. On Monday, bond prices are likely to take cues from movements in crude oil prices and US Treasury yields over the weekend, with developments in West Asia again in focus, dealers said. Some offshore investors may limit the size of their bets in India's bond market ahead of the US Federal Open Market Committee's rate decision Wednesday, they said. 

 

Continued inflows due to FCNR(B) deposits may limit the negative impact if the global situation worsens and investors may also look to capture higher yields. Brent crude for September delivery topped $100 per barrel Friday before easing, with the 10-year US yield also easing from a multi-month high. The yield on the 10-year benchmark 6.94%, 2036 gilt is seen in a range of 6.77-6.98% Monday.  

 

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. Traders speculated another $5 billion of inflows were captured by banks this week. Short-term bonds are expected to be 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. 

 

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 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		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.7950	6.8253%	100.6825	6.8413%
6.48%, 2035	97.6700	6.8235%	97.5200	6.8458%
6.36%, 2031	99.4875	6.4906%	99.4450	6.5012%
6.68%, 2040	96.9200	7.0295%	96.7600	7.0480%
7.24%, 2055	97.5400	7.4475%	97.4400	7.4560%

 

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India Gilts: Up on fall in Brent crude oil; auction result in line with view

 

	1438 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.86	100.88	100.51	100.57	100.68
YTM (%)	6.8162	6.8137	6.8652	6.8571	6.8413

 

MUMBAI--1438 IST--Government bond prices rose, tracking an intraday pullback in Brent crude oil prices, dealers said. Short-covering by traders also lent support to bond prices, dealers said. Gains were capped, however, as some traders booked profits on their holdings, dealers said. Moreover, trading was restrained amid caution ahead of the weekend, given the escalation in the West Asia conflict, dealers said. The result of INR-280-billion weekly gilt auction was in line with market expectations, dealers said.

 

"We are up only because of the crude (Brent crude oil prices)...there is nothing else right now," a dealer at a primary dealership said. "At this moment, there is no certainty crude can go to $90 per barrel or $105 per barrel over the weekend. With Trump (US President Donald Trump) around without any markets for two days, it's better not to take any weekend positions." Brent crude oil futures for September delivery hit the day's low of $98.27 per barrel, down nearly 3% from $101 per barrel at 0900 IST and similar to $98.72 per barrel at the end of Indian trading hours Thursday. 

 

At the weekly gilt auction Friday, demand for the new 15-year paper was robust from all market participants, with aggressive bidding by public sector banks, dealers said. Traders picked up the 15-paper as they expected foreign participants to buy this bond after its inclusion in fully accessible route bonds, dealers said. Demand for the 50-year security was seen firm from insurers and pension funds as they considered the yield on the bond attractive, dealers said.

 

The Reserve Bank of India set the coupon on the new 15-year bond at 7.06%, in line with market expectations, while the cut-off yield on the 50-year bond was set at 7.62%, lower than the market estimate of 7.63%, according to the median in an Informist poll. The partial allotment in the 15-year bond was at 44%, signalling strong demand for the bond at the auction. The government sold INR 170 billion of the new 15-year, 2041 bond and INR 110 billion of the 7.43%, 2076 bond at the weekly gilt auction Friday. The 7.06%, 2041 bond was dealt at INR 100.20 or 7.0382% yield in the secondary market.

 

The total trade volume in the government securities market at 1438 IST was INR 445.00 billion, against INR 260.30 billion at the same time Thursday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.78-6.86% during the day. Traders expect the yield on the 6.94%, 2036 bond to fall to 6.78% if Brent crude oil prices fall to the crucial $95 per barrel level, dealers said. However, the fall in bond yields was capped as traders who bought the bond over 6.85% level likely booked profit on their holdings, dealers said. More than half the trades were confined to the most liquid, 6.94%, 2036 as uncertainties hovered around the West Asian conflict, dealers said.  (Janwee Prajapati)

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India Gilts: Recover losses, rise on robust auction demand, dip in crude

 

--Dealers: Gilts recover losses, up as bidding at auction stronger than view

--Dealers: Gilts up on short covering as Brent futures ease below $100/bbl

 

	1225 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.78	100.78	100.51	100.57	100.68
YTM (%)	6.8281	6.8271	6.8652	6.8571	6.8413

 

NEW DELHI--1225 IST--Government bond prices recovered all losses and rose as demand at the INR 280-billion weekly gilt auction was better than expected, dealers said. Persistent demand from banks for bonds maturing in up to 15 years to deploy funds received through foreign currency non-resident bank deposits pulled up gilt prices, with an intraday fall in crude prices helping, they said.

 

A large state-owned bank was speculated to have bid for around INR 30 billion of the new 15-year, 2041 gilt up for auction. Along with some demand seen from foreign investors, the fresh supply is likely to sail through, dealers said. An Informist poll showed the median coupon estimate was 7.06%, slightly higher than the last when-issued deal struck at 7.05%.

 

Some dealers attributed the firm bidding to bets that India's bonds would soon be added to Bloomberg's Global Aggregate Index. With bond prices not falling, traders covered their short sales near 6.85% yield on the 10-year benchmark 6.94%, 2036 gilt. A slight dip in Brent crude futures for September delivery to under $100 per barrel at 1200 IST also spurred short covering, after the contract reached $101.19 per barrel in early Asian trade, dealers said.

 

"The biggest reason is that people are saying the auction went well, demand was better than expected," a dealer at a private sector bank said. "If auction doesn't come into the hands of traders, obviously there is some short covering happening in the secondary market and now crude has also come down slightly."

 

Some traders were also looking to buy the new 15-year bond while holding their short sales on the off-the-run 15-year benchmark 6.68%, 2040 gilt, dealers said. Earlier in the day, demand for the bond was expected to be poor, which had weighed on gilt prices.

 

The 7.43%, 2046 bond was also well bid at the auction by insurers and pension funds, dealers said. Investors were looking to lock in higher returns as the 50-year benchmark yield has risen by 12 basis points since its last auction on Jun. 25. An Informist poll pegged the cut-off at INR 97.44, or 7.63%, similar to its last traded price Friday. 

 

"For long-term investors, buying a G-sec above 7.60% is a happy occurrence," a dealer at a foreign bank said. "Neither crude nor Trump (US President Donald Trump's comments) nor rate hikes can move it, it's just a question of demand-supply. And for INR 110 billion of supply today, there was enough demand."

 

The total trade volume in the government securities market at 1225 IST was INR 235.55 billion, against INR 159.60 billion at 1230 IST Thursday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.80-6.88% during the day.  (Aaryan Khanna)

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India Gilts: Down as Brent crude tops $100/bbl, US ylds rise; losses limited

 

	0955 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.56	100.59	100.51	100.57	100.68
YTM (%)	6.8585	6.8550	6.8652	6.8571	6.8413

 

NEW DELHI--0955 IST--Government bond prices fell as Brent crude futures rose above $100 per barrel for the first time since late May, and the 10-year US Treasury yield also climbed to a six-month high of 4.71%. Losses were limited in thin early trade due to demand from state-owned banks as the 10-year benchmark 6.94%, 2036 gilt's yield rose above 6.85%, dealers said.

 

The effective closure of the Strait of Hormuz and continued attacks between the US and Iran pushed crude prices higher, along with concerns over further supply disruptions. This caused bond traders to begin pricing in domestic interest rate increases starting October as inflation is expected to rise, while the government may also need to spend more to offset the impact of the global crisis on the local economy, dealers said. At the same time, some asset-liability managers considered levels lucrative to add to their portfolios on hopes of consistent foreign currency non-resident bank deposits as well as hoping for Bloomberg Index Services to announce India's inclusion in its flagship Global Aggregate Index by the end of the month.

 

"Lots of people have been targetting this level to buy for the last two days, but the yield has not risen to this level until now," a dealer at state-owned bank said. "But maybe some traders will hit stop-losses soon, everyday prices are falling because crude is a big pressure point, now it is at $100 (per barrel)."

 

The fall in prices is expected to worsen after the bidding for the weekly gilt auction begins, dealers said. Traders do not see much value in buying the new 15-year, 2041 bond at auction as the outgoing 15-year benchmark 6.68%, 2040 bond's spread over the 10-year gilt is only around 20 basis points, much lower than 33 bps at the end of June. The 2041 bond was dealt at 7.05% in when-issued trade Friday, less than 20 bps over the 6.94%, 2036 bond's yield in the secondary market. Meanwhile, the 50-year 7.43%, 2076 gilt is seen attracting life insurers and pension and provident funds, which hold the bond to maturity, as yields have risen this week, dealers said. 

 

The total trade volume in the government securities market at 0955 IST was INR 46.70 billion, against INR 33.00 billion at 0930 IST Thursday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.80-6.90% during the day.  (Aaryan Khanna) 

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India Gilts: Seen down as Brent crude over $100/bbl, cautious before auction

 

MUMBAI – Government bond prices are expected to open lower Friday for a third straight session as Brent crude surged past $100 per barrel, dealers said. US Treasury yields also climbed above 4.70% for the second consecutive session, marking a six-month-high, which is likely to weigh further on bond prices, dealers said. Trading activity is likely to stay subdued Friday as traders will stay cautious ahead of the result of the INR-280-billion weekly auction of gilts and the weekend, dealers said.

 

The 10-year benchmark 6.94 36bond is expected to open around 6.85% Friday and trade between 6.85% and 6.90% through the day if Brent crude oil price stays around $100 per barrel, dealers said. Thursday, the 6.94%, 2036 bond had ended at INR 100.68, down from INR 101.97 Wednesday. The yield on the bond was 6.8413% Thursday, up from 6.8012% Wednesday. 

 

Some dealers expect stop-losses to be triggered on the 10-year 6.94%, 2036 gilt if it rises above the 6.85% yield. Traders are likely to continue covering their short positions due to uncertainty over a potential peace agreement between the US and Iran and with caution ahead of the weekend. A proxy for tracking short sales on a particular bond is the number of trades on the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 0730 IST showed trades worth INR 54.35 billion in the 6.94%, 2036 gilt, down from INR 67.49 billion Thursday.

 

Brent crude oil futures for September delivery rose past $100 per barrel for the first time in nearly three months and traded at $100.18 per barrel at 0730 IST, up from $98.64 per barrel at the end of Indian trading hours Thursday. Brent crude oil prices rose almost 17% this week due to renewed escalations in the West Asia conflict. At 0730 IST, the yield on the 10-year benchmark US Treasury note was at 4.71%, up from 4.69% at 1700 IST Thursday.      

 

The latest spike in US yields was driven by attacks on oil tankers in the Red Sea by Houthis in Yemen, and rising concerns over shipping through the Strait of Hormuz — one of the world's key energy transits. US President Donald Trump said Washington would hold Iran accountable for any future Houthi strikes on vessels in the Red Sea, and warned of severe military retaliation against both Tehran and the Houthis in Yemen. The US launched another round of strikes on Iranian military targets, marking the 13th straight night of attacks. Washington said the campaign aims to curb threats from Iran's Islamic Revolutionary Guard Corps to commercial shipping and to restore safe passage through the Strait of Hormuz.

 

Back home, traders will closely track the result of the weekly gilt auction where the government will sell INR 170 billion of the new 15-year, 2041 bond and INR 110 billion of the 7.43%, 2076 bond. 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 at the auction, 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.

 

Traders will refrain from building aggressive positions ahead of the result of the auction, which will likely keep trade volumes subdued in the first half of the trading session. Later in the day, traders will likely trim their positions on caution ahead of the weekend.  (Janwee Prajapati)

 

End

 

US$1 = INR 96.51

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

 

Edited by Saji George Titus

 

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