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Informist, Friday, Jul. 31, 2026

 

By Aaryan Khanna

 

NEW DELHI – Government bond prices erased early gains to end lower after crude oil prices rose intraday on reports that Iran had closed the Strait of Hormuz to commercial traffic, dealers said. Bonds had traded higher for most of the day, supported by an overnight fall in crude oil prices and US Treasury yields, along with firm demand for the 10-year benchmark 6.94%, 2036 gilt at the weekly auction. 

 

The benchmark 6.94%, 2036 bond ended at INR 100.73, down from INR 100.88 Thursday. Its yield closed at 6.8343%, up from 6.8132% the previous day. The bond traded in a wide band of INR 100.70-100.99 and the 10-year benchmark yield had dipped below 6.80% in early trade. It ended sharply lower than the cut-off of INR 100.89 at the auction.

 

Tehran blocked ships from transiting the key waterway Friday and said prior permission from Iranian authorities would be required to use the Strait of Hormuz, only a day after tanker crossings rose, according to various media outlets. Brent crude futures for October delivery rose to $88.13 per barrel by the end of Indian market hours, up from an intraday low under $85 and higher than $87.34 a barrel at 1700 IST Thursday. Typically, a rise in crude oil prices leads to higher imported inflation for large consumers like India, thus giving the Reserve Bank of India less room to keep policy rates low for an extended period.

 

"The market may be bullish, but with the uncertainty on crude, it's better to stay away from the market than try to position overnight and then see your position get blown up by the next morning," a dealer at a primary dealership said. "At least here (in India) we are certain he (the RBI) is not hiking next week." An Informist Poll of 18 economists was unanimous in expecting a status quo from the Monetary Policy Committee on Wednesday. Traders expect the repo rate to remain unchanged at 5.25% and the policy stance to remain neutral.

 

Traders refrained from building aggressive positions before the weekend and confined most of their activity to the most liquid 10-year benchmark gilt ahead of the monetary policy, dealers said. The action was also concentrated in the 6.94%, 2036 gilt after its auction, with benchmark gilt yields across the curve rising less than the 10-year benchmark yield Friday.

 

The RBI set a cut-off price of INR 100.89 on the 2036 bond at the auction, slightly higher than an Informist poll median estimate of INR 100.87. The weighted average price on the bond was INR 100.91. State-owned banks purchased roughly INR 150 billion to INR 180 billion of the bond, while investors such as foreign banks, mutual funds and insurance companies purchased the rest at auction, dealers said.

 

"We are going to be cautious while adding to the portfolio, of course," a dealer at a state-owned bank said. "It is just that these levels have always attracted interest and demand was quite sound from both investors and traders. So there are good signs of underlying demand that should keep levels protected from here."

 

Some corporates also picked up the 6.94%, 2036 bond at the auction, dealers said. Traders who did not get to cover their short bets at auction purchased bonds in the secondary market. However, bond prices were little changed after the auction result. 

 

Traders considered the 10-year gilt attractive above 6.80% yield on the view that it would fall to around 6.70-6.72% if there is an extended pause in the fighting between the US and Iran, with Brent crude likely to fall below $80 per barrel in that scenario. The 10-year gilt's yield was not seen rising above 6.85?sily due to robust domestic demand for gilts amid sustained foreign currency non-resident bank deposit growth, making the risk-reward favourable to pick up auction stock, dealers said. Traders pegged the inflows at around $8 billion for the second straight week from the foreign currency non-resident (bank) account. Moreover, they widely expected India to be included in Bloomberg's Global Aggregate Index, which was seen as boosting trader appetite to pick up gilts ahead of sustained purchases from foreign portfolio investors.

 

The total turnover in the government securities market was INR 466.25 billion Friday, down from INR 562.90 billion Thursday, data from Clearing Corp. of India showed. The slowdown reflected caution ahead of the auction result, the weekend and India's monetary policy review, along with the lack of reaction to the cut-off, dealers said. There were no trades using the RBI's wholesale e-rupee pilot, which has been the case for several months. 

 

OUTLOOK

Gilts are not traded on Saturdays. On Monday, gilt prices may fall sharply after Bloomberg Index Services Ltd. said after market hours it has deferred the inclusion of India's fully accessible route bonds on its flagship Global Aggregate Index. The index provider said positive developments had taken place since its last update in January, but more time was warranted to make the decision as the impact of recent regulatory changes improves market access for foreign portfolio investors.

 

The index provider noted recent policy changes by the government and regulators have reduced operational complexity and improved settlement efficiency, responding to several hurdles raised at the previous update in January. Still, enhancements have not been completely reflected in day-to-day market practice, which was essential for the flagship benchmark for global investment-grade fixed income, Bloomberg Index Services said. It did not give a timeline for the next update.

 

The fall on Monday is likely to be worsened as it comes just after traders have picked up INR 340 billion of the 10-year benchmark 6.94%, 2036 gilt at auction Friday. However, continued inflows from FCNR(B) deposits are likely to limit the negative impact of the war in West Asia and the Bloomberg announcement, dealers said. The 10-year benchmark gilt's yield is seen in the range of 6.80-6.95% Monday. 

 

The movement in US Treasury yields and crude oil prices over the weekend may also impact gilt prices at the open. After the Indian bond market shut, the 10-year US yield hit an over six-month high of 4.74%.

 

On the domestic front, 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.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.7300	6.8343%	100.8800	6.8132%
6.48%, 2035	97.6800	6.8225%	97.8400	6.7982%
6.36%, 2031	99.6400	6.4519%	99.7000	6.4361%
6.68%, 2040	96.9650	7.0243%	97.1125	7.0072%
7.24%, 2055	97.3000	7.4684%	97.3400	7.4649%

 

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India Gilts: Erase all gains on rise in oil prices; caution ahead of weekend 

 

	1545 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.83	100.99	100.79	100.98	100.88
YTM (%)	6.8202	6.7977	6.8258	6.7991	6.8132

 

MUMBAI--1545 IST--Government bond prices erased their earlier gains to trade lower, tracking an intraday rise in Brent crude oil prices, dealers said. Traders also trimmed their positions ahead of the weekend amid fears of escalation in the conflict in West Asia, they said.

 

"Bond prices are down because of crude (rise in crude oil prices) and weekend pressure," a dealer at a primary dealership said. "The prices were holding because all those who had placed their bids (in the auction) at INR 100.84-100.85 did not get the paper at auction, so they covered in the secondary... Once that buying was done, we saw a fall (in bond prices)." In the auction, the RBI set a cut-off price of INR 100.89 on the 6.94%, 2036 bond, slightly higher than an Informist poll median estimate of INR 100.87. The weighted average price on the bond was INR 100.91. Some traders expect bond prices to fall further Friday, with the yield on the 10-year benchmark bond likely to hit 6.83% near the end of the trading session, dealers said. 

 

Brent crude oil futures for October delivery were at $87.14 per barrel, up from $85.76 per barrel at 0900 IST but similar to $87.34 per barrel at the end of Indian trading hours Thursday. Crude oil prices rose after Iran said its military launched a drone strike on Kuwait's Ahmad al-Jaber Air Base. Tehran claimed it also hit key sites across Kuwait — including military facilities, energy assets, and ports — though US and Kuwaiti officials have not confirmed the claims. Iran's Islamic Revolutionary Guard Corps said the attack on the US base in Kuwait was in retaliation for US strikes on Iran Thursday, which included a strike on a building on Qeshm Island.

 

Traders also refrained from building aggressive positions and confined most of their activity to the most liquid 10-year benchmark gilt ahead of the Reserve Bank of India's monetary policy on Wednesday, dealers said. Escalations in the war in West Asia and a rise in Brent crude oil prices also weighed on market sentiment, reigniting fears of a rate hike at the October policy meeting, dealers said.   

 

The total trade volume in the government securities market at 1545 IST was INR 391.70 billion, down from INR 446.00 billion at 1530 IST Thursday, data from Clearing Corp. of India Ltd. showed. Nearly 66% of the total trade was concentrated in the 6.94%, 2036 bond. The yield on the 10-year gilt is seen in a range of 6.78–6.84% during the day. (Janwee Prajapati)

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India Gilts: Unch on fear of war escalation despite higher-than-view cut-off

 

	1422 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.915	100.99	100.89	100.98	100.88
YTM (%)	6.8082	6.7977	6.8117	6.7991	6.8132

 

MUMBAI--1422 IST--Prices of government bonds were little changed after the result of the INR-340-billion gilt auction even though both the cut-off price and the weighted average price were higher than what most market participants had estimated, dealers said. A slight rise in Brent crude oil prices and the rupee coming off its day's high limited a rise in prices, while risk-trimming ahead of the weekend also weighed, dealers said. 

 

The RBI set a cut-off price of INR 100.89 on the 6.94%, 2036 bond, slightly higher than an Informist poll median estimate of INR 100.87. The weighted average price on the bond was INR 100.91. State-owned banks purchased roughly INR 150 billion to INR 180 billion of the bond, while investors such as foreign banks, mutual funds and insurance companies purchased the rest at auction, dealers said. Some corporates also picked up the bond, they said. Some banks which did not get to cover their short bets at auction purchased bonds in the secondary market. However, bond prices were little changed after the auction result was published. 

 

"Positioning is very light here, it's showing that no one has the appetite to go long," a dealer at a private sector bank said. Brent crude oil futures for delivery in October inched higher to $86 per barrel from about $85 per barrel earlier in the session. The rupee, which had appreciated to a day's high of 95.2675 per dollar, pared some gains to trade at about 95.45 per dollar. More than expected delay in Bloomberg Index Services publishing its review of the possible inclusion of Indian sovereign bonds in its flagship Global Aggregate Index also weighed on bond prices, dealers said. While traders trimmed exposure to risk in case the West Asia war escalated over the weekend, some traders expect bond prices to rise towards the end of the session, with appetite for excess short bets to be covered after robust demand at the auction, they said.

 

The total trade volume in the government securities market at 1430 IST was INR 313.10 billion, down from INR 398.70 billion at 1430 IST Thursday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.78-6.84% during the day. (Cassandra Carvalho)

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India Gilts: Remain up; demand for 6.94%, 2036 gilt widespread at auction

 

	1220 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.93	100.99	100.90	100.98	100.88
YTM (%)	6.8061	6.7977	6.8100	6.7991	6.8132

 

India Gilts: Remain up; demand for 6.94%, 2036 gilt widespread at auction

 

NEW DELHI--1220 IST--Government bond prices remained higher as crude oil prices fell further during the day, with Brent futures for October nearing $85 per barrel. Demand for the 10-year benchmark 6.94%, 2036 gilt was seen widespread at the weekly gilt auction, though bids were below current market prices, they said.

 

The government sold INR 340 billion of the 2036 bond at auction. Dealers estimated around INR 80 billion to INR 100 billion will go to short sellers covering their positions, with bidding from this section of the market aggressive. State-owned banks are likely to pick up INR 120 billion to INR 150 billion of the benchmark bond's supply, with foreign banks also keen to deploy the cash accrued throgh foreign currency non-resident deposits. However, these bids were largely in the INR 100.85-INR 100.90 band, suggesting the cut-off is likely to be close to INR 100.87, the median of an Informist poll before bidding ended. 

 

"The auction should clear around INR 100.87, basically what was expected," a dealer at a primary dealership said. "I don't think anyone has gone above and beyond in bidding for the papers. Though there is some trader demand as well, further gains seem unlikely because not a lot of people will miss out on the stock, everyone's needs will be met. "

 

Some traders considered the 10-year gilt attractive above 6.80% yield on the view that it would fall to around 6.70-6.72% if there is an extended pause in the fighting between the US and Iran, with Brent crude likely to fall below $80 per barrel in that scenario. Meanwhile, the 10-year gilt's yield is not seen rising above 6.85?sily due to robust domestic demand for gilts amid sustained deposit growth, making the risk reward favourable to pick up auction stock, dealers said.

 

Dealers said they would unwind long positions, or purchases, of other bonds and cover the corresponding short sale in the 6.94%, 2036 gilt either at the auction or in the secondary market. This was largely to concentrate their holdings in the liquid 10-year benchmark gilt before the Reserve Bank of India's Monetary Policy Committee makes its rate decision on Wednesday, before which trading activity is likely to slow, dealers said. Traders would prefer to remain nimble and keep portfolio risk minimal before the rate decision, even though the domestic rate-setting panel is widely expected to stand pat on rates and stance.

 

The total trade volume in the government securities market at 1220 IST was INR 158.70 billion, down from INR 251.95 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 6.77-6.85% during the day.  (Aaryan Khanna)

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India Gilts:Up on fall in crude, US ylds; caution before auction limits gain

 

	1000 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.95	100.99	100.90	100.98	100.88
YTM (%)	6.8033	6.7977	6.8100	6.7991	6.8132

 

NEW DELHI--1000 IST--Government bond prices rose as US Treasury yields and crude oil prices fell overnight, dealers said. Gains were limited ahead of the weekly gilt auction at 1030-1130 IST, where the government will sell INR-340-billion of the 10-year benchmark 6.94%, 2036 gilt, they said. Some traders also placed fresh short sales near the psychologically crucial 6.80% yield on the bond.

 

"This is standard, we see traders bring down the prices before the auction so they can bid at better levels," a dealer at a state-owned bank said. "Since crude and US yields are also down, I don't see (gilt) prices sustaining here (sees them going up)."

 

Brent crude oil futures for October delivery were at $85.51 per barrel, down from $87.30 per barrel at the end of Indian trading hours Thursday as tanker traffic in the Strait of Hormuz picked up. The US Federal Reserve's preferred inflation gauge rose by less than expected in June, helping pull down the yield on the 10-year US Treasury note to 4.65%, down from 4.69% at 1700 IST Thursday.

 

Investors have been upbeat on bonds and were keen to pick up fresh supply at the auction. Prices are more likely to rise than fall due to demand exceeding supply in the domestic market, which should keep gilt prices more sensitive to a fall in US yields and crude rather than a rise, dealers said. Banks are looking to deploy inflows from foreign currency non-resident deposits to buy the 10-year benchmark gilt at auction. The overall pace of flows has picked up and may have reached $8 billion-$10 billion this week, dealers 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 Thursday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.78-6.85% during the day.(Aaryan Khanna)

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India Gilts: Seen tad up as crude oil, US yield falls; auction ahead

 

MUMBAI – Government bond prices are likely to open slightly higher Friday tracking an overnight fall in Brent crude oil prices and US Treasury yields, dealers said. Some traders are likely to make some space in their portfolio for the fresh supply of the 10-year benchmark 6.94%, 2036 bond which will be auctioned at 1030 IST, which will likely limit the rise in bond prices, dealers said. Trade volume is likely to remain subdued ahead of the result of the INR-340-billion weekly gilt auction, dealers said.   

 

The 10-year benchmark 6.94 36bond is expected to open around 6.80% Friday and oscillate between 6.78% and 6.83% through the day, dealers said. Thursday, the 6.94%, 2036 bond had ended at INR 100.88, down from INR 101.00 Wednesday. The yield on the bond was 6.8132% Thursday, up from 6.7964% Wednesday. The yield on the 6.94%, 2036 bond is likely to face strong resistance at 6.80%, dealers said. Traders do not expect the yield on the 10-year benchmark bond to rise above 6.82–6.83% as this is an attractive level for public sector banks to buy bonds. Any significant fall in crude oil prices will likely pull down bond yields to 6.78%, dealers said. However, a fall beyond that is unlikely as market players will be cautious ahead of the weekend, dealers said.

 

Brent crude oil futures for October delivery were at $86.20 per barrel, down from $87.30 per barrel at the end of Indian trading hours Thursday. Crude oil prices fell on renewed hopes of a potential ceasefire between the US and Iran. Pakistan's Foreign Ministry spokesperson Tahir Andrabi confirmed that negotiations between the US and Iran are currently ongoing to restore peace and reopen the critical Strait of Hormuz. The yield on the 10-year US Treasury benchmark note fell to 4.65%, down from 4.69% at 1700 IST Thursday.

 

Back home, demand for the 6.94%, 2036 gilt is seen firm at the auction from both investors and traders covering short sales, dealers said. However, some traders expect the cut-off yields to be higher due to the large supply. Some foreign investors are also likely to pick up the bond at the auction after having offloaded it in the secondary market this week, dealers said. Some traders expect bond prices to rise after the auction result if the cut-off prices are as expected. Friday, the government will sell INR 340 billion of the 6.94%, 2036 bond. 

 

Traders are likely to remain cautious and refrain from building aggressive positions ahead of the weekend as the fear of an escalation in the war in West Asia hovers, dealers said. Traders will closely track the Reserve Bank of India's Monetary Policy Committee meeting in August, dealers said. 

 

Earlier this month, traders had pared bets of a rate hike in the current calendar year after the war between the US and Iran was seen approaching a complete ceasefire. However, recent escalations in the war in West Asia have reignited the fear of a rate hike at the October policy meeting, dealers said. Most traders now expect at least two rate hikes of 25 basis points each in the current financial year. Traders will also track inflation data for further clarity, dealers said. At the monetary policy meeting in August, the RBI's rate setting panel is expected to keep interest rates on hold and maintain a neutral policy stance, owing to uncertainty over the impact of the war in West Asia and of the El Nio conditions on economic growth and inflation.  (Janwee Prajapati)

 

End

 

US$1 = INR 95.38

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

 

Edited by Saji George Titus

 

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