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Informist, Monday, Aug. 3, 2026

 

By Aaryan Khanna

 

MUMBAI – Government bond prices ended slightly higher due to a sharp fall in crude oil prices and robust inflow into foreign currency non-resident bank deposits, dealers said. The 10-year benchmark gilt, however, ended flat as these positives offset the impact of Bloomberg Index Services' decision to defer India's inclusion in its flagship Global Aggregate Index, which most traders had expected this cycle.

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.73, or 6.8343% yield, the same as on Friday. The bond fell sharply at the open due to the knee-jerk reaction to Bloomberg's decision, with its yield rising to 6.8881% briefly, the highest since Jun. 12. However, it recovered all losses as the war in West Asia eased inflationary concerns, with banks also considering the 10-year yield attractive above 6.85%.

 

Brent crude for October delivery was at $83.58 per barrel at 1700 IST, down from $90.22 a barrel at the end of Indian market hours Friday. Over the weekend, US President Donald Trump called off planned strikes on Iran and said it was returning to the negotiating table after three weeks of fighting. The potential end to the war in West Asia is seen coming soon as neither side seems to be benefiting from a protracted conflict around the vital Strait of Hormuz, dealers said.

 

Even so, bond prices remained lower for most of the day as the index inclusion was deferred, with Bloomberg citing that recent positives towards inclusion had yet to materialise in day-to-day operational efficiency for all investors. Around $20 billion of foreign portfolio investment inflow was expected in 2027-28 (Apr-Mar) after the inclusion, dealers said. Now, FPIs are likely to sell bonds in the coming weeks, though there was no sign of concentrated sell-off in index-eligible gilts Monday, they said.

 

"The market positioning had lightened since early July, so there was not a lot to sell, and whatever had to happen has already been taken out," a dealer at a private-sector bank said. "I don't expect to see any follow-up selling in the coming days either. It is all done. Now the focus will turn to monetary policy (decision) on Wednesday."  

 

Clearing Corp. of India data at 1930 IST showed FPIs sold INR 5.37 billion of fully accessible route bonds Monday. Most traders expect India to be included in the next review, though some flagged that the next update could take another six months to arrive, during which a bulk of the bond supply in 2026-27 (Apr-Mar) would also have been pushed in to the market at potentially higher yields, dealers said.

 

Though some traders were cautious before the Monetary Policy Committee's rate decision Wednesday, others said it would be business as usual, especially with Reserve Bank of India Governor Sanjay Malhotra making public comments on the inflation focus in July. Economists in an Informist Poll unanimously expect the policy repo rate to be unchanged, a sentiment shared by bond traders

 

While the 10-year benchmark gilt faced heavy sales early in the day, the selling pressure faded quickly. Most traders had not been betting heavily on the inclusion, despite expecting it. Optimism on the inclusion had peaked in the first half of July, after which the flare-up in West Asia and consequent volatility led traders to trim their portfolios, dealers said. State-owned banks bought bonds in the secondary market as the yield on the 10-year 2036 bond moved between 6.84% and 6.86%, dealers said. Some dealers said private-sector banks were also stepping up purchases due to levels seen as attractive. 

 

Trade volumes on the RBI's Negotiated Dealing System – Order Matching platform reflected the lack of enthusiasm for large trades, with volumes inching up to INR 482.50 billion from INR 466.25 billion on Friday. There were no trades using the RBI's wholesale e-rupee pilot, which has been the case for several months. 

 

Meanwhile, the five- and 15-year benchmark gilts ended higher on Monday as latest data showed hefty inflows into FCNR(B) deposits. Banks garnered nearly $37 billion between Jun. 8 and Friday, according to Reserve Bank of India data. The special concessional swap window the RBI is running till Sept. 30 makes raising 3-5 year deposits cheaper for banks under the FCNR(B) scheme. Some traders were betting on the scheme to now attract over $100 billion of deposits, a potential windfall for gilts of these tenures. The government's bank-wise data until Jul. 30 showed HSBC's FCNR deposits grew over $6 billion since Jun. 5, with State Bank of India increasing such deposits by over $4 billion.

 

While the five-year bond was widely expected to outperform longer tenure gilts until the end of September, steepening the bond yield curve, the 6.68%, 2040 and 7.06%, 2041 bonds have been surprisingly in favour with domestic long-term investors, dealers said. At the same time, mutual funds were likely to trim their holdings of such securities in the coming weeks as purchases from foreign investors fade or turn into sales, they said. 

 

"We are also a bit surprised as to why the 15-year bonds are continuing to do so well," a dealer at a state-owned bank said. "Earlier, it was attracting FAR bond inflows from FPIs. Now there is consistent buying from institutions. I don't think banks have any use for the 15-year. The trading view there is not good either fundamentally."

 

OUTLOOK

Tuesday, gilt prices may take direction from the developments in the West Asia war and their impact on crude oil prices and US Treasury yields, dealers said. Some traders may avoid aggressive bets before the RBI's Monetary Policy Committee announces its rate decision Wednesday, they said.

 

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 result of the state bond auction may also lend cues during the day. The RBI said 17 states and Union territories will raise INR 268.50 billion through the sale of bonds Tuesday, the same as indicated in the Jul-Sept calendar. The heavy supply may put pressure on gilt prices Tuesday, though banks want to secure higher-yielding bonds for their held-to-maturity books, dealers said.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.7300	6.8343%	100.7300	6.8343%
6.48%, 2035	97.6900	6.8211%	97.6800	6.8225%
6.36%, 2031	99.7500	6.4236%	99.6400	6.4519%
6.68%, 2040	97.0175	7.0183%	96.9650	7.0243%
7.24%, 2055	97.3025	7.4682%	97.3000	7.4684%

 

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India Gilts: Off lows on PSU banks' buys; slight rise in oil weighs   

 

	1545 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.68	100.73	100.35	100.50	100.73
YTM (%)	6.8410	6.8343	6.8881	6.8668	6.8343

 

MUMBAI--1545 IST--Prices of government bonds were off the day's low as state-owned banks stepped up purchases as the yield on the 10-year benchmark 6.94%, 2036 bond remained near 6.85%, dealers said. However, a slight intraday rise in prices of Brent crude oil capped gains on bond prices, dealers said.

 

The 6.94%, 2036 bond remained the top-most traded bond as of 1543 IST with a volume of INR 255.45 billion, data from Clearing Corp. of India Ltd. showed Monday. The total trade volume in the government securities market was INR 403.80 billion at 1543 IST, slightly lower than INR 376.95 billion at 1530 IST Friday, as per the CCIL data. Purchases from banks at levels seen attractive led to a pickup in volume Monday, dealers said. Traders see the yield on the 10-year gilt in a range of 6.82-6.87% for the rest of the day, they said.

 

State-owned banks bought bonds in the secondary market as the yield on the 10-year 2036 bond moved between 6.84% and 6.86%, dealers said. Some dealers said private-sector banks were also stepping up purchases due to levels seen as attractive. 

 

"PSU buys are there, we've been hearing about them and that is what is protecting the levels," a dealer at a private-sector bank said. "As far as private banks are concerned, they too are maybe buying today (Monday)."

 

A slight intraday rise in Brent crude oil prices pulled down bond prices, dealers said. Brent crude oil futures for October delivery traded near $84 per barrel at 1530 IST, after falling to near $82 per barrel during the day. Market participants will closely track the movement of Brent crude oil prices, they said.  (Diksha Tripathy)

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India Gilts: Recover all losses on buys at attractive levels, fall in oil

 

	1200 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.70	100.73	100.35	100.50	100.73
YTM (%)	6.8385	6.8343	6.8881	6.8668	6.8343

 

MUMBAI--1200 IST--Government bond prices recovered all losses as traders likely picked up bonds at levels seen as attractive, dealers said. Fall in Brent crude oil prices on hopes of a potential peace deal between the US and Iran also lifted bond prices, dealers said. However, gains were limited as Bloomberg Index Services Ltd. deferred the inclusion of India's fully accessible route bonds on its flagship Global Aggregate Index, dealers said. Traders remain cautious ahead of the Reserve Bank of India's Monetary Policy Committee meeting outcome Wednesday, the dealer said.

 

"The market is currently looking at mixed news," a dealer at a private sector bank said. "The hopes of a potential ceasefire is positive for the market as Brent has fallen but the inclusion (Bloomberg deferred inclusion of Indian bonds in the Global Aggregate Index) is weighing." 

 

The fall in bond prices was also limited as traders remain hopeful of purchases from foreign participants under the foreign currency non-resident (bank) deposits, dealers said. Foreign capital inflow is likely to be confined to up to five-year tenure, which will ultimately lead to a steepening of the yield curve, dealers said. Traders expect the spread between the five-year and 30-year tenure to widen by 10-15 basis points, dealers said. Since the Reserve Bank of India launched measures to bring in foreign inflows about six weeks ago, it has brought in nearly $37 billion, according to the latest RBI data, more than what the market had expected.

 

However, some traders do not expect the yield on the five-year 6.36%, 2036 bond to fall below 6.40%, which is a crucial level. At 1200 IST, the 6.36%, 2036 bond was trading at INR 99.75, or 6.42% yield. The yield on the five-year benchmark bond has fallen nearly 20 basis points since Jun. 5, when the central bank came up with measures to bring in foreign inflows.  

 

Traders expect the Reserve Bank of India's Monetary Policy Committee 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 Nino conditions on economic growth and inflation. Traders will closely track comments from the RBI Governor Sanjay Malhotra, who is expected to be hawkish, given the geopolitical conditions, 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.

 

Most of the activity was confined to the most liquid 10-year benchmark 6.94%, 2036 bond on caution ahead of the RBI's Monetary Policy Committee meeting Wednesday, dealers said. The total trade volume in the government securities market at 1200 IST was INR 233.10 billion, higher than INR 160.95 billion at 1230 IST Friday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.78-6.87% during the day. "Had it not been for the crude (fall in crude oil prices), we could have easily risen over the 6.88-89%," a dealer at a primary dealership said. "We saw 6.89% today but could not sustain at that level...6.87% is an attractive level for the banks to buy, which, if continued, we can fall to 6.78%."  

 

At the auction of the state government bonds Tuesday, traders expect the cut-off yields at the state bond auction to be higher, tracking a rise in central government bond yields, dealers said. However, the rise in yield is likely to remain contained on firm demand from market participants to add the higher-yielding bonds to their investment books, dealers said.  (Janwee Prajapati) 

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India Gilts: Off lows as oil slumps; dn as Bloomberg defers index inclusion

 

	0955 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.67	100.73	100.35	100.50	100.73
YTM (%)	6.8428	6.8343	6.8881	6.8668	6.8343

 

NEW DELHI--0955 IST--Government bond prices fell sharply at the open but were off lows as crude oil prices slumped, following comments by the US that it was holding off on strikes on Iran and returning to negotiations, dealers said. The five-year benchmark bond was higher than the previous close with traders expecting robust bank demand. Gilt prices had opened sharply lower after Bloomberg Index Services Ltd. deferred the inclusion on India's bonds on its flagship Global Aggregate Index, dealers said.

 

"It looks like the Bloomberg news has been offset by the global situation getting better," a dealer at a state-owned bank said. "Even if crude does go a little bit higher intraday, I think there is a lot of appetite in this 6.86-6.90% zone from PSU banks that will make a further sell-off difficult."

 

The yield on the 10-year benchmark 6.94%, 2036 gilt briefly hit 6.8881% intraday, its highest level since Jun. 12, reacting to the index decision which came after Indian market hours Friday. Traders had widely expected an inclusion and had been waiting for the announcement with a positive outlook over the past few months, dealers said. Some of the potential hit, however, had been mitigated by bond sales by foreign banks Friday to lighten their portfolios ahead of the weekend. Foreign banks net sold INR 21.91 billion worth of gilts Friday.

 

Even as the decision is likely to lead to gilt sales by foreign portfolio investors both on Monday and over the next few days, the sharp fall in crude oil prices should help keep the 10-year gilt's yield in the 6.83-6.88?nd Monday, dealers said. Brent crude for October delivery fell to $83.45 per barrel, down more than 7% from the end of Indian trading hours Friday. US President Donald Trump over the weekend scaled back rhetoric on attacking Iran on social media, with hopes of a peace deal between the two sides reviving to end the long-running war in West Asia, dealers said. 

 

Meanwhile, the five-year benchmark 6.36%, 2031 gilt was higher due to firm demand from traders and asset-liability managers as banks garnered foreign currency non-resident deposits of nearly $37 billion between Jun. 8 and Friday, according to Reserve Bank of India data. The special concessional swap window the RBI is running till Sept. 30 makes raising 3-5 year deposits cheaper for banks under the FCNR(B) scheme. Some traders were betting on the scheme to now attract over $100 billion of deposits, a potential windfall for gilts of these tenures.

 

Some mutual funds also switched their holdings from longer-term bonds to shorter-tenure securities after the Bloomberg announcement, dealers said. Traders also universally expect the spread of the 15-year benchmark 7.06%, 2041 bond over the 10-year gilt to widen from the current 18 basis points.

 

The total trade volume in the government securities market at 0955 IST was INR 111.90 billion, higher than INR 92.20 billion at 1030 IST Friday, data from Clearing Corp. of India Ltd. showed. Traders were reacting to several cues and had divergent views on bond prices currently, which would likely lead to higher trade volumes through the day, dealers said.  (Aaryan Khanna)

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India Gilts: Seen dn as Bloomberg defers index inclusion; fall in oil to help

 

MUMBAI – Government bond prices are seen opening down Monday after Bloomberg Index Services Ltd. said after market hours Friday it has deferred the inclusion of India's fully accessible route bonds on its flagship Global Aggregate Index, dealers said. However, continued inflows from foreign currency non-resident (bank) deposits are likely to limit the fall in bond prices, dealers said. Fall in Brent crude oil prices is also likely to support bond prices, while a rise in US Treasury yields will likely weigh, dealers said.

 

The 10-year benchmark 6.94 36bond is expected to open around 6.84% Monday and oscillate between 6.80% and 6.88% through the day, dealers said. Friday, the 6.94%, 2036 bond ended at INR 100.73, down from INR 100.88 Thursday. The yield on the bond was 6.8343% Friday, up from 6.8132% Thursday. The yield on the 6.94%, 2036 bond is unlikely to rise above 6.88%. Even if it does, it is unlikely to sustain a rise above the psychologically significant level of 6.90%, dealers said. Some traders expect firm demand for bonds near a 6.85% yield on the 10-year benchmark bond, whereas others expect such purchases near 6.88%.

 

After Indian market hours on Friday, Bloomberg Index Services Ltd. said it has postponed the inclusion of India's Fully Accessible Route bonds in its flagship Global Aggregate Index. The index provider said recent policy changes by the government and regulators have cut operational complexity and improved settlement efficiency, addressing several issues flagged in the January update. But it added that those improvements have not yet fully shown up in day-to-day market practice, which is required for the benchmark used for global investment-grade fixed income. Bloomberg Index Services did not provide a timeline for the next review. Some traders, however, expect an announcement in the coming months, dealers said. 

 

Bond prices are likely to see only a limited decline, with expectations that India will keep drawing foreign capital through three to five-year FCNR(B) deposits. The Reserve Bank of India is covering the full hedging cost for currency risk on these deposits, which is supporting inflows. Since the scheme launched about six weeks ago, it has brought in nearly $37 billion, according to the latest RBI data, more than what the market had expected.

 

Brent crude oil prices for October delivery were at $83.52 per barrel, down more than 7% from the end of Indian trading hours Friday. Oil prices edged lower after US President Donald Trump said the US and Iran would start new talks, easing worries about potential supply disruptions in the West Asia. Trump said discussions with Iran would begin Monday afternoon. He also said he had been ready to order the largest US military strike since World War II but was persuaded against it by allies. There were early signs of diplomatic progress as well. Iranian Foreign Minister Abbas Araghchi said talks with Oman on a mechanism for ship transit through the Strait of Hormuz were "nearing completion and in their final stages". The 10-year benchmark US Treasury yield rose to 4.70%, up from 4.69% at 1700 IST Friday.

  

On the domestic front, the government will also buy back four securities maturing in the financial year 2026-27 (Apr-Mar). The gilts up for buyback are the 7.33%, 2026 bond, the 5.74%, 2026 bond, the 8.15%, 2026 bond, and the 8.24%, 2027 bond. These were the same papers bought back in the previous auction. In that last auction, the government took the largest amount of the 7.33 26 gilt and the smallest amount of the 8.24 27 gilt. Cut-off prices were broadly in line with levels published by Financial Benchmarks India Ltd.  (Janwee Prajapati)

 

End

 

US$1 = INR 95.34

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

 

Edited by Saji George Titus

 

 

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