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Informist, Thursday, Jul. 30, 2026

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices ended off lows due to firm investor demand, offsetting negative global cues, especially with crude prices paring intraday gains, dealers said. An overnight rise in both oil and US Treasury yields did pull down bond prices, compounded by traders trimming their portfolios ahead of the INR-340-billion supply of the 10-year benchmark gilt at auction Friday, they said.

 

The benchmark 6.94%, 2036 gilt ended at INR 100.88, down from INR 101.00 Wednesday but well above the intraday low of INR 100.73. Its yield closed at 6.8132%, up from 6.7964% the previous day, after rising to as much as 6.8344% Thursday.

 

State-owned banks picked up the 10-year gilt at the day's low, with some foreign and private-sector banks also picking up bonds across tenures, dealers said. Bank demand for bonds is likely to remain high until September, with a weekly average of $5 billion-$6 billion coming in through foreign currency non-resident bank deposits, of which around 40% is being invested into gilts or used to receive overnight indexed swap rates, dealers said. Some traders also covered intraday short sales as Brent crude for October delivery eased to $87.34 per barrel from a high of $89.50 intraday, though it was up over 2% from $85.57 per barrel at the end of Indian market hours Thursday.

 

"We hit 6.86% (yield on the 10-year gilt) last week. This 6.82-6.86% zone is a heavy buying zone for PSU (public-sector banks)," a dealer at one such bank said. "Other segments of the market are already generally participating, likely through balance sheets, as traders would only have done some intraday short covering. With crude and US yields at this level, fresh buying doesn't make sense."

 

Bond prices opened lower as the US and Iran traded strikes overnight, pushing up Brent crude prices, with traders fearing further escalation of the war in West Asia. A continuation of the war, with crude oil prices nearing $100 a barrel, is seen as the only clear scenario that could push the 10-year gilt yield towards 7.00%. Otherwise, robust domestic appetite for gilts is likely to keep the benchmark yield below 6.85% until September, dealers said. 

 

Comments from US Federal Reserve Chair Kevin Warsh seemed to welcome a rise in US Treasury yields, pushing up the 10-year gilt yield to as high as 4.71% Thursday from 4.63% at the end of Indian market hours Wednesday. Since the Federal Open Market Committee held policy rates despite three dissents, short-term US yields inched lower while traders feared US monetary policy would fall behind the curve on inflation and would have to hike more later.

 

The differential movement was reflected in foreign portfolio investors' demand for Indian bonds as well. While FPIs picked up bonds maturing in 2027 and 2028, Clearing Corp. of India data showed they were net sellers of INR 32 billion worth of Fully Accessible Route gilts Thursday, the most since Apr. 2. These sales were largely concentrated in the 6.94%, 2036 gilt. FPIs sold nearly INR 28 billion of the 10-year benchmark Thursday, nearly a quarter of their total holdings as of Wednesday, with smaller sales in bonds maturing in 2030 and 2031.

 

The sizeable sales contributed heavily to bond prices slumping during the day, especially as traders ramped up short sales before the gilt auction Friday. Demand at the auction is seen firm but at lower prices than current market levels, dealers said. With the large quantum of supply at auction, traders are confident they can cover short sales with the fresh supply, they said.

 

Domestic banks continued to pick up gilts in their available-for-sale portfolios as they considered the 10-year gilt attractive above 6.80% yield. Going by Reserve Bank of India Governor Sanjay Malhotra's recent comments, most traders do not expect the Monetary Policy Committee to hike the policy repo rate of 5.25% at its meeting next week, dealers said. Should the FOMC hike rates at its next meeting in September, the likelihood of a domestic rate hike in October or December will increase rapidly, they said. 

 

"For India, the implications could be significant: a firmer US dollar, reduced room for RBI easing, and potentially even pressure to tighten policy if the Fed resumes rate hikes," Sneha Pandey, fund manager - Fixed Income at Quantum Asset Management Co., said. "This backdrop could weigh on the rupee, constrain liquidity conditions, and create a more challenging environment for foreign capital inflows. Until there is greater clarity on the Fed's reaction function and the global rate trajectory, the risk-reward appears skewed toward caution on both duration and rupee-denominated assets."

 

The total turnover in the government securities market was INR 562.90 billion Thursday, sharply up from INR 372.00 billion Wednesday as traders reacted to a variety of triggers, data from Clearing Corp. of India showed. There were no trades using the RBI's wholesale e-rupee pilot, which has been the case for several months. 

 

OUTLOOK

Friday, gilt prices may take cues from overnight movements in Brent crude oil prices and US Treasury yields at open, dealers said. Focus will then shift to the INR-340-billion weekly gilt auction at 1030-1130 IST, they said.

 

Continued inflows from FCNR(B) deposits are likely to limit the negative impact of the war in West Asia, dealers said. Traders also expect further flows on the view that Bloomberg will soon announce the inclusion of Indian sovereign bonds in its flagship Global Aggregate Index.

 

Demand for the 6.94%, 2036 gilt at auction is seen firm both from investors and traders covering short sales, dealers said. Some FPIs may pick up the bond at auction after offloading it in the secondary market this week, they said. The 10-year benchmark gilt's yield is seen in the range of 6.75-6.88% Friday. 

 

The 10-year gilt may outperform other benchmarks as traders turn cautious ahead of the Monetary Policy Committee's rate decision on Wednesday. Traders and economists almost universally expect the rate-setting panel to retain the policy repo rate at 5.25%, with June data showing retail inflation remained well within the RBI's 2-6% target band. The policy stance is also seen being retained at 'neutral'.

 

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. The CME FedWatch tool showed an 83% probability that the Fed funds target rate would be hiked by December, with around 60% expecting the increases to come as early as the next meeting in September.

 

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.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.8800	6.8132%	101.0000	6.7964%
6.48%, 2035	97.8400	6.7982%	97.8775	6.7926%
6.36%, 2031	99.7000	6.4361%	99.7300	6.4284%
6.68%, 2040	97.1125	7.0072%	97.1300	7.0052%
7.24%, 2055	97.3400	7.4649%	97.4500	7.4553%

 

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India Gilts: Off lows on banks' demand near 6.82% yield on 10-yr benchmark

 

	1447 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.92	101.01	100.73	100.92	101.00
YTM (%)	6.8076	6.7949	6.8344	6.8076	6.7964

 

MUMBAI--1447 IST--Prices of government bonds were off lows as banks purchased bonds at levels seen lucrative near the 6.82% yield on the 10-year benchmark bond, dealers said. An intraday drop in Brent crude oil prices also aided the recovery, dealers said. Banks deployed inflows received through foreign currency non-resident bank deposits into bonds, they said. However, foreign portfolio investors likely continued to sell gilts for the third consecutive session, while traders sold gilts to make room for INR 340 billion of fresh supply of the 10-year benchmark bond Friday.

 

"Shorts (short sales) in the system (in the 10-year benchmark) are still low, only around eight thousand crore," a dealer at a state-owned bank said. "PSUs (state-owned banks) are buying, foreign (banks) are buying. (Foreign) flows are coming in and people are deploying it." A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 1447 IST showed trades worth INR 87.65 billion in the 6.94%, 2036 gilt, rising slightly from INR 82.68 billion Wednesday. Some traders preferred placing short bets intraday, but refrained from carrying these bets overnight, dealers said. 

 

Brent crude oil futures for delivery in October were $87.82 per barrel at 1447 IST, inching lower than the day's high of $89.50 per barrel, helping a recovery in bond prices, dealers said. This week, foreign banks have received healthy inflows through FCNR(B) deposits, dealers said, and likely deployed these by purchasing bonds such as the five-year benchmark 6.36%, 2031 bond, which was the second-most traded paper on the Reserve Bank of India's Negotiated Dealing System-Order Matching Platform. State-owned banks bought bonds for their investment books, dealers said.

 

Sentiment took a hit, however, with traders refraining from aggressive positions due to a rise in US Treasury yields and escalation in the war in West Asia. Traders are increasingly uncertain about the cut-off price at the 10-year benchmark gilt auction Friday, after the overnight change in offshore triggers. The cut-off price on the 10-year bond could be around 15 paise lower than its price in the secondary market during the time of auction, dealers said. The total trading volume in the government securities market at 1447 IST was INR 426.10 billion, higher than INR 205.70 billion at 1430 IST Wednesday, data from Clearing Corp. of India Ltd. showed. (Cassandra Carvalho)

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India Gilts: Sharply down on rise in crude oil, US ylds; short sales weigh

 

	1230 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.80	101.01	100.73	100.92	101.00
YTM (%)	6.8249	6.7949	6.8344	6.8076	6.7964

 

India Gilts: Sharply down on rise in crude oil, US ylds; short sales weigh 

 

MUMBAI--1230 IST--Government bond prices were sharply down, tracking an intraday rise in Brent crude oil prices and US Treasury yields, dealers said. A rise in overnight indexed swap rates also weighed on bond prices, dealers said. Traders also placed short bets ahead of the weekly gilts auction Friday, dealers said. Traders made space in their portfolios to absorb the large supply of INR 340 billion of the 6.94%, 2036 gilt at the auction, dealers said.   

 

"Market (bond prices) is down because US yields are up...Fed (Federal Open Market Committee meeting decision) was slightly more hawkish than expected," a dealer at a small finance bank said. "Crude is also higher... the market was holding after opening then people started going short."  

 

Traders placed short bets ahead of the weekly gilt auction where the government will sell INR 340 billion of the 10-year benchmark 6.94%, 2036 bond, dealers said. Demand at the auction is likely to be firm from all market participants. However, the large supply is likely to pull up cut-off yields, dealers said. Demand for the bond at the auction is likely to be driven by short covering, dealers said. A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 1230 IST showed trades worth INR 87.65 billion in the 6.94%, 2036 gilt, slightly up from INR 82.68 billion Wednesday. 

 

While foreign banks are seen picking up gilts to deploy foreign currency non-resident (banks) deposits under the Reserve Bank of India's special measure, traders fear that the escalation in the war in West Asia is likely to drive foreign investors towards safe haven assets, dealers said. Foreign banks were top net buyers Wednesday as they purchased INR 21.21 billion worth of gilts, taking their net purchase this week to over INR 85 billion.

 

Brent crude oil futures for October delivery were at $93 per barrel, up from $89.46 per barrel at 0900 IST Thursday. Traders trimmed positions given the escalation in the war and no clarity over the US-Iran peace deal, dealers said. However, some traders covered short bets in early trade as they expected bond prices to rise if crude oil prices fell, dealers said.   

 

The total trading volume in the government securities market at 1230 IST was INR 216.95 billion, higher than INR 131.30 billion at the same time Wednesday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.78–6.85% during the day. Most traders do not expect the yield on the 10-year benchmark bond to rise above the crucial 6.83% level as they expect public sector banks to buy bonds near these levels. While some traders expect bond prices to face strong resistance at 6.83%, others expect the yield on the 6.94%, 2036 bond to oscillate between 6.80–6.85%. 

 

US Treasury yields hit 4.71?ter the US FOMC held its policy rate range at 3.50-3.75% with three members dissenting and voting on a 25-basis-point rate hike. Traders now expect the Reserve Bank of India's Monetary Policy Committee to hike rates in the October meeting if the US Fed Reserve hikes policy rate at its September meeting, dealers said. Some traders expect the rate setting panel to hike the repo rate by at least 50 basis points in the current financial year.  (Janwee Prajapati)

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India Gilts: Fall as crude, US ylds rise; short covering limits early losses

 

	1000 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.91	101.01	100.88	100.92	101.00
YTM (%)	6.8097	6.7949	6.8132	6.8076	6.7964

 

NEW DELHI--1000 IST--Government bond prices fell as crude oil prices and US Treasury yields rose overnight, dealers said. Losses were limited as the 10-year benchmark 6.94%, 2036 gilt's yield topped the psychologically crucial 6.80% mark, with a brief recovery seen in early trade as traders rushed to cover short sales.

 

Brent crude for October delivery rose to $87.34 per barrel from $85.57 per barrel after Iran launched strikes on US bases in West Asia and the US responded with attacks of its own. Meanwhile, the US Federal Open Market Committee held its policy rate range at 3.50-3.75% with three members dissenting and voting on a 25-basis-point rate hike. Though this was expected, US Federal Reserve Chair Kevin Warsh seemed to welcome a rise in US yields in his comments post the policy, pushing up the 10-year benchmark US Treasury note to 4.70%, from 4.63% at 1700 IST Wednesday.

 

Even with the adverse global cues, traders covered their overnight short sales immediately as prices fell after the market opened, dealers said. This led to the 6.94%, 2036 gilt recovering all losses briefly, before trending lower again. Prices are also expected to fall towards the close as traders make room for the INR-340-billion auction of the 10-year benchmark gilt on Friday, they said.

 

"This was expected, wasn't it? People have been out of the market for the last two days, nobody has been buying, so it is a good entry point as levels (yields) are higher," a dealer at a primary dealership said. "The hawkish hold by the FOMC was what (the) market was prepared for and there seems to be some fatigue in trading headlines on crude."

 

Traders are unlikely to initiate fresh purchases as long as US yields and crude prices make the case for rate hikes in India, dealers said, with the bulk of the buying during the day likely to come from state-owned banks. However, their positioning had lightened over the last two days ahead of the US policy decision and they may pick up bonds intraday, dealers said. Foreign banks are seen picking up gilts maturing in up to 10 years to deploy inflows into 3-5 year foreign currency non-resident deposits under the Reserve Bank of India's special scheme, which may also limit losses, they said. 

 

The total trade volume in the government securities market at 1000 IST was INR 68.30 billion, higher than INR 58.00 billion at 1030 IST Wednesday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.78-6.85% during the day.  (Aaryan Khanna)

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India Gilts:Seen down on rise in crude oil, US yield; FOMC decision to weigh

 

MUMBAI – Government bond prices are seen opening lower Thursday tracking a rise in Brent crude oil prices and US Treasury yields, dealers said. Three policy makers dissenting at the US Federal Open Market Committee meeting and voting for a 25 basis points increase in the federal funds target rate

is also likely to affect sentiment and pull down bond prices, dealers said. The US FOMC left the federal funds rate target at 3.50-3.75%.

 

Traders are also likely to make space in their portfolios for the fresh supply of the 10-year benchmark bond at the auction Friday, dealers said.

However, hopes of consistent foreign inflows under the foreign currency non-resident (banks) deposits are likely to limit the fall in bond prices, dealers said.  

 

The 10-year benchmark 6.94 36bond is expected to open around 6.82% Thursday and trade between 6.78% and 6.85% through the day, dealers said. Wednesday, the 6.94%, 2036 bond had ended at INR 101.00, down from INR 101.14 Tuesday. The yield on the bond was 6.7964% Wednesday, up from 6.7774% Tuesday. The yield on the 6.94%, 2036 bond is unlikely to rise above the crucial 6.80% level due to purchases from public sector banks, dealers said. The fall in bond prices is also likely to remain limited as traders expect foreign participants to continue buying bonds. Foreign banks were top net buyers Wednesday as they purchased INR 21.21 billion worth of gilts, taking their net purchase to over INR 85 billion this week.   

 

At 0730 IST, the yield on the 10-year benchmark US Treasury note was 4.68%, up from 4.63% at 1700 IST Wednesday. US yields rose as the FOMC's decision to hold policy rates steady was not unanimous. Policymakers said the decision reflects a balancing act between strong economic growth and persistently high inflation. At 0730 IST, Fed fund futures were pricing in a 63% chance of the Fed hiking the policy rate at its September meeting, according to the CME FedWatch tool. Any rate hike by the US Fed will put pressure on the Reserve Bank of India's Monetary Policy Committee to raise rates to maintain the interest rate differential. 

 

Brent crude oil futures for October delivery were at $87.26 per barrel, up from $85.57 per barrel at the end of Indian trading hours Wednesday. The US carried out new strikes on Iran early Thursday after Tehran attacked a US base in Jordan, ending almost a week-long halt in military action. The US Central Command called the operation "a powerful response" to Iran's attempted strike on American troops. 

 

Continued inflows from FCNR(B) deposits are likely to help offset the negative impact of the war in West Asia on India's current account balance, 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.

 

Traders are likely to free up some space in their portfolio to absorb the fresh supply of the 6.94%, 2036 bond Friday, dealers said. Some traders expect the cut-off yield on the 10-year benchmark bond to be higher given escalations in the war in West Asia. Some traders expect the demand for the bond to be firm as traders will buy bonds at the auction to cover their short positions. A proxy for tracking short sales on a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. Latest data showed trades worth INR 82.68 billion in the 6.94%, 2036 gilt. The short sales of this paper shot up to over $80 billion from nearly INR 66 billion in the previous week, data showed. The government will sell INR 340 billion of the paper Friday.  (Janwee Prajapati)

 

End

 

US$1 = INR 95.6800

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

 

Edited by Saji George Titus

 

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