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Informist, Wednesday, Jul. 29, 2026

 

By Diksha Tripathy 

 

MUMBAI – Government bond prices ended lower Wednesday as Brent crude oil for October delivery rose above $85 per barrel, dealers said. Some traders placed short bets in the 10-year benchmark 6.94 36bond ahead of its auction on Friday, which weighed on bond prices, they said. Some foreign banks likely also trimmed positions, dealers said. Most traders refrained from placing aggressive bets as they await the US Federal Open Market Committee's decision on policy rates, scheduled for 2330 IST Wednesday.

 

The 10-year 2036 bond ended at INR 101.00 Wednesday, down from INR 101.14 Tuesday. The 10-year benchmark gilt yield rose to 6.7964% Wednesday from 6.7774% the previous day. The total turnover in the government securities market was INR 372 billion Wednesday, significantly down from INR 461.80 billion Tuesday, data from Clearing Corp. of India showed. The volume of the 10-year benchmark bond was the lowest since Jun. 4. Traders remained cautious ahead of the US FOMC, which kept market volumes low, dealers said. 

 

"Markets will assess the Fed's decision and then take a call," a dealer at a private-sector bank said. "The Fed decision is also significant as we have MPC (Monetary Policy Committee) coming up, so the tone (of the US Fed Chair) there may have an impact (on MPC's tone) here as well." 

 

The yield on the 10-year benchmark US Treasury note continued to trade above 4.63% in the run-up to the US Federal Committee decision. Most market participants expect a hawkish pause by the Kevin Warsh-led rate-setting panel. While traders will watch out for commentary on inflation amid the resumption of the war in West Asia, dealers said Warsh is unlikely to provide forward guidance as he did at the previous meeting.

 

Markets were mostly driven by movement of Brent crude oil prices, dealers said. Brent crude oil futures for October delivery were at $85.56 per barrel at 1700 IST, up from $84.25 per barrel at the end of gilt market hours Tuesday. Traders will continue to track developments in West Asia as further escalation could push oil prices even higher.

 

Some traders placed short bets in the secondary market as they look to cover these positions at the 10-year bond auction Friday. The government will sell INR 340 billion of the 10-year 6.94%, 2036 bond Friday. Most traders expect firm demand and believe the auction will sail through smoothly, with the 10-year being the most liquid paper. Data on the special repo segment of the Clearcorp Repo Order Matching System – a proxy for tracking short sales on a particular bond – showed trades worth INR 82.68 billion in the 6.94%, 2036 gilt at 1700 IST. Short sales in this paper rose to over INR 80 billion from nearly INR 66 billion in the previous week, data showed. Wednesday, foreign portfolio investors likely sold bonds, which also weighed on gilt prices, dealers said.

 

The fall in bond prices was capped as banks deployed funds from foreign-currency non-resident deposits into gilts, dealers said. Traders expect foreign inflows to remain robust in August, after they have been higher than market expectations so far, dealers said. The Reserve Bank of India's measures to attract foreign capital launched in early June had drawn inflows of $32 billion by Sunday, RBI Governor Sanjay Malhotra said.   

 

The auction of Treasury bills had little impact on bond prices, as it was largely in line with market expectations. At the INR-240-billion T-bill auction Wednesday, the cut-off yields were similar to the Informist Poll estimates. The RBI set a cut-off yield of 5.34% on the 91-day T-bill, 5.60% on the 182-day T-bill, and 5.74% on the 364-day T-bill. "There was no surprise in the auction results, and hence the prices didn't really move," the dealer from the private-sector bank said.  

 

OUTLOOK

On Thursday, gilt prices will take cues from the overnight movements in Brent crude oil prices and US Treasury yields, dealers said. Most market participants expect a hawkish pause by the US FOMC, dealers said.          

 

The pressure on the RBI to tighten monetary policy is expected to mount later in the year, as the US Federal Reserve is expected to increase policy rates in 2026, with a tightening interest rate differential pressuring the rupee. However, the US rate-setting panel is expected to stand pat on rates Wednesday, dealers said. The CME FedWatch tool showed a 64% probability that the Fed funds target rate would remain unchanged at 3.50-3.75% on Wednesday.

 

Continued inflows from FCNR(B) deposits are likely to limit the negative impact of the war in West Asia, dealers said. They also expect further flows on the view that Bloomberg will soon announce the inclusion of Indian sovereign bonds in its flagship Global Aggregate Index. The yield on the 10-year benchmark 6.94%, 2036 gilt is seen in a range of 6.75-6.82% Thursday.  

 

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 imported inflation from rising crude oil prices. Traders are now gauging whether the RBI's MPC will raise the repo rate in October to curb inflation, they said.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.0000	6.7964%	101.1350	6.7774%
6.48%, 2035	97.8775	6.7926%	98.0200	6.7711%
6.36%, 2031	99.7300	6.4284%	99.7825	6.4148%
6.68%, 2040	97.1300	7.0052%	97.2300	6.9936%
6.90%, 2065	91.6500	7.5685%	92.0000	7.5383%

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India Gilts: Dn on caution before FOMC move; 10-yr volume lowest since Jun 4

 

	1516 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.00	101.13	100.98	101.09	101.14
YTM (%)	6.7964	6.7788	6.7988	6.7837	6.7774

 

MUMBAI--1516 IST--Government bond prices were down more as traders likely trimmed their positions due to caution ahead of the Federal Open Market Committee's decision on policy rates Wednesday, dealers said. Some traders also made space in their portfolios to absorb the fresh supply of 10-year benchmark bonds at the weekly gilt auction Friday, dealers said. Some traders also placed short bets, which weighed on bond prices, dealers said. The fall in bond prices was limited as foreign inflows are expected to continue, dealers said. Trade volume was lowest since Jun. 4 on caution ahead of the FOMC decision and weekly gilt auction Friday, dealers said.

 

"It is just range-bound; 6.75% to 6.85% (yield on the 10-year benchmark 6.94%, 2036 bond) is the range," a dealer at a small finance bank said. "We had broken a line on the charts yesterday, but now the 10-year (6.94%, 2036 bond) is consolidating again at around current levels. We're seeing some de-risking before FOMC and before MPC next week."

 

Traders placed short bets on the 6.94%, 2036 bond as they expect to cover these positions at the auction, dealers said. Short bets on the 6.94%, 2036 bond picked up after the bond's prices rose on the back of a fall in Brent crude oil prices below the key $90 per barrel, dealers said. 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 1139 IST showed trades worth INR 81.77 billion in the 6.48%, 2036 gilt. The short sales in this paper shot up to over $80 billion from nearly INR 66 billion in the previous week, data showed.

 

The fall in bond prices was contained as traders expected the foreign currency non-resident deposit to flow into government securities, dealers said. Traders expect foreign inflows to rise in August after it remained higher than market expectations, dealers said. The Reserve Bank of India's measures to attract foreign capital launched in early June had drawn inflows of $32 billion by Sunday since the concessional swap window for banks was rolled out on Jun. 8, RBI Governor Sanjay Malhotra said.

 

Some traders, likely foreign banks, trimmed positions ahead of the FOMC decision on policy rates scheduled at 2330 IST, which weighed on bond prices. Traders largely expect the US rate-setting panel to keep policy rates unchanged at its meeting. However, traders will closely watch US Federal Reserve Chair Kevin Warsh's commentary on the West Asia war and its impacts, dealers said. Any indication of a rate hike in the US will put pressure on the Reserve Bank of India's Monetary Policy Committee to raise the repo rate as well from the current 5.25%. 

 

Trade volume in the secondary market remained subdued as volume of the 10-year benchmark bond fell to its lowest since Jun. 4, just a day prior to the June MPC meeting. Traders refrained from building aggressive positions as they maintained caution ahead of the FOMC meeting decision, given the escalation in the West Asia war, dealers said. The total trade volume in the government securities market at 1516 IST was INR 250.75 billion, down from INR 351.65 billion at 1530 IST Tuesday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.75–6.80% during the day.  (Janwee Prajapati and Cassandra Carvalho) 

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India Gilts: Dn on short sales before auction Fri; intraday fall in oil aids

 

	1243 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.06	101.13	101.00	101.09	101.14
YTM (%)	6.7879	6.7788	6.7964	6.7837	6.7774

 

MUMBAI--1243 IST--Government bond prices were down as traders made space in their portfolios for the fresh supply of 6.94%, 2036 bond at an auction Friday, dealers said. Traders also remain cautious of building aggressive positions ahead of the Federal Open Market Committee's decision on policy rates, scheduled at 2330 IST Wednesday, dealers said. Intraday ease in Brent crude oil prices limited the fall in bond prices, dealers said.

 

"We have 10-year (10-year benchmark 6.94%, 2036 bond) auction on Friday, so people are placing shorts (short bets)," a dealer at a primary dealership said. "Currently the market is tracking FOMC (meeting decision) today (Wednesday), (gilt) auction Friday, (Reserve bank of India's Monetary Policy Committe) MPC next week and Brent crude oil prices...and to some extent BBG inclusion (inclusion of Indian sovereign bonds in Bloomberg's Global Aggregate Index)." 

 

Traders placed short bets on the 10-year benchmark paper ahead of the weekly gilt auction where the government will sell INR 340 billion of the 6.94%, 2036 paper. Traders are likely to continue placing short bets on the 10-year benchmark bond till early Friday if the Brent crude oil prices remain steady, dealers said. Traders also made space in their portfolios to absorb the fresh supply of the 10-year benchmark bond, which also weighed on bond prices, dealers said.  

 

Traders will closely watch the US Federal Reserve Chair Kevin Warsh's commentary, with rate hikes in the US seen putting pressure on the Reserve Bank of India's Monetary Policy Committee to raise the repo rate as well from the current 5.25%. As of 1243 IST, Fed fund futures were pricing in a 70.6% chance of the Fed keeping the rate unchanged Wednesday, up from 63.7% Tuesday, according to the CME FedWatch tool.  

 

Brent crude oil futures for October delivery fell below the crucial $85 per barrel level which limited the fall in bond prices, dealers said. However, uncertainty continued to hover around the potential US-Iran peace deal amid an escalation in the West Asia war which weighed on market sentiment, dealers said. 

 

At the INR-240-billion T-bill auction, traders expect the cut-off yield to be similar to the T-bill auction last week, dealers said. Some traders expect the cut-off yields to be slightly lower than the cut-offs last week as liquidity in the banking system has increased, dealers said. Traders also expect the liquidity to increase in August due to foreign currency non-resident deposit inflows, which will further ease the cut-off yields on T-bills, dealers said.

 

Demand at the auction was firm as banks picked up the 1-year T-bill and mutual funds likely picked up the 182-day T-bills, dealers said. The Reserve Bank of India is likely to set a cut-off of 5.34% yield on the 91-day Treasury bill at the auction Wednesday, according to 14 bond dealers polled by Informist. The cut-off on the 182-day T-bill is seen at 5.59% yield, and that on the 364-day T-bill is seen at 5.73% yield. Traders expect the T-bill result to lend cues to the market if the cut-off yield is significantly different from expectations.   

 

The total trade volume in the government securities market at 1243 IST was INR 141.25 billion, only about half of INR 253.55 billion at 1230 IST Tuesday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.75–6.80% during the day.  (Janwee Prajapati) 

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India Gilts: Down on rise in crude prices, caution before US FOMC decision

 

	1000 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.07	101.13	101.06	101.09	101.14
YTM (%)	6.7869	6.7788	6.7886	6.7837	6.7774

 

NEW DELHI--1000 IST--Government bond prices fell in early trade as crude oil prices rose overnight due to a flare-up in fighting between the US and Iran after a lull since the weekend, dealers said. Traders short sold the 6.94%, 2036 bond and also trimmed their holdings of the 10-year benchmark ahead of its auction on Friday. Caution before the US Federal Open Market Committee's rate decision kept trading activity muted.

 

Brent crude for October delivery was at $85.22 per barrel, up from $84.27 per barrel at the end of Indian trading hours Tuesday. Brent crude oil prices rose overnight after the US military said it had intercepted multiple missiles launched by Iran, while Tehran's military stopped vessels from transiting the Strait of Hormuz. Dealers said the move did not have a significant impact but traders trimmed some positions as fighting resumes. 

 

Even as prices fell, traders were on the sidelines ahead of the US FOMC's rate decision at 2330 IST Wednesday, avoiding adding to their portfolios with the event coming up. The total trade volume in the government securities market at 1000 IST was INR 46.60 billion, less than half of INR 124.65 billion at 1030 IST Tuesday, data from Clearing Corp. of India Ltd. showed.

 

The US rate-setting panel is widely expected to stand pat on rates, though the CME FedWatch tool reflects a 30% possibility of a rate hike. Activity from foreign portfolio investors is likely to be subdued Wednesday after they sold INR 9 billion of the 6.94%, 2036 bond and some short-term securities on Tuesday, dealers said. US Federal Reserve Chair Kevin Warsh's commentary will be closely watched, with rate hikes in the US seen putting pressure on the Reserve Bank of India's Monetary Policy Committee to raise the repo rate as well from the current 5.25%.

 

"I don't think there is much positioning to be done from our side, we will be more reactive," a dealer at a private sector bank said. "FPIs also seem to have adjusted their portfolios over the last two days, so the effect is more of a slowing down on activity rather than big sales or anything like that."

 

The 2036 gilt is seen underperforming during the day with INR 340 billion of its fresh supply coming up at auction on Friday. Overnight short sales may be limited due to uncertainty over global triggers but traders will look to capture an intraday fall in prices, dealers said. At the same time, firm appetite from banks for bonds to deploy foreign currency non-resident deposit inflows is likely to prevent the 10-year gilt yield from rising above 6.80% Wednesday, they said. The yield on the 10-year gilt is seen in a range of 6.75-6.82% during the day.  (Aaryan Khanna)

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India Gilts: Seen steady ahead of US Fed decision; rise in oil to weigh

 

MUMBAI – Government bond prices are expected to open flat Wednesday amid caution ahead of the Federal Open Market Committee's rate decision and uncertainty over a possible US-Iran peace deal, dealers said. An overnight rise in Brent crude oil prices is likely to pull down bond prices. However, the fall in bond prices is likely to be limited as foreign inflows are expected to continue, dealers said. 

 

US Treasury yields remained steady ahead of the policy rate decision scheduled at 2330 IST Wednesday. As of 0730 IST, Fed fund futures were pricing in a 69.5% chance of the Fed keeping the rate unchanged Wednesday, up from 63.7% Tuesday, according to the CME FedWatch tool. At 0730 IST, the 10-year benchmark US Treasury yield was 4.62%, slightly down from 4.63% at 1700 IST Tuesday.

 

The 10-year benchmark 6.94 36bond is expected to open around 6.78% Wednesday and trade between 6.75% and 6.82% through the day, dealers said. Tuesday, the 6.94%, 2036 bond had ended at INR 101.14, down from INR 101.16 Monday. The yield on the bond was 6.7774% Tuesday, up from 6.7739% Monday. The yield on the 6.94%, 2036 bond is unlikely to fall below the key 6.75% level Wednesday due to profit booking from public sector banks. Most market participants do not expect the benchmark gilt's yield to fall below the psychologically crucial 6.75% mark this week without a fresh positive trigger, dealers said.

 

Continued inflows from foreign currency non-resident (bank) deposits are likely to prevent a fall in bond prices, dealers said. The Reserve Bank of India's measures to attract foreign capital launched in early June had drawn inflows of $32 billion by Sunday since the concessional swap window for banks was rolled out on Jun. 8, RBI Governor Sanjay Malhotra said. Short-term bonds are expected to be in favour due to expectations of an increase in foreign inflows, dealers said. 

The pressure on the RBI's Monetary Policy Committee to tighten monetary policy is seen rising later in the year as the US Federal Open Market Committee is expected to raise policy rates starting September, and a tighter interest rate differential will weigh on the rupee which is already weak due to higher crude oil prices. The US rate-setting panel is expected to keep rates unchanged Wednesday, dealers said.

 

Brent crude oil futures for October delivery were at $85.29 per barrel, slightly up from $84.27 per barrel at the end of Indian trading hours Tuesday. Brent crude oil prices rose overnight after the US military said it had intercepted multiple missiles launched by Iran. Iran's Islamic Revolutionary Guard Corps said it "struck and stopped" three oil tankers in the Strait of Hormuz after they allegedly ignored warnings and continued along what it described as an "unsafe and illegal route," according to media reports. The Iranian military also warned that any vessel following "illegal interference or orders" from the US in the strategic waterway "will not go unanswered."

 

Wednesday, the Reserve Bank of India will auction INR 90 billion of the 91-day Treasury bills, INR 80 billion of 182-day T-bills, and INR 70 billion of the 364-day T-bills. The cut-off yields set on these papers are likely to be similar to the cut-off yields set at the auction previous week as liquidity in the banking system remains comfortable, dealers said. The RBI had set a cut-off yield of 5.35% on the 91-day T-bill, 5.61% on the 182-day T-bill, and 5.775 on the 364-day T-bill at the previpus T-bill auction.  (Janwee Prajapati)  End

 

US$1 = INR 95.65

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

 

Edited by Saji George Titus

 

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