More Stories

Informist, Thursday, Aug. 6, 2026

 

By Aaryan Khanna

 

MUMBAI – Government bond prices ended on a mixed note. Most bonds ended slightly higher as traders were optimistic about a potential deal between the US and Iran to end the war in West Asia, which is seen pulling down crude oil prices and spurring gilt prices upward, dealers said. The five-year benchmark 6.36%, 2031 gilt underperformed longer-tenure gilts through the day after the sharp rise in its price Wednesday and before its auction Friday.

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 101.21, up from INR 101.17 Wednesday. Its yield ended at 6.7666%, down from 6.7722% the previous day. The 6.36%, 2031 ended 2 paise lower at INR 100.16 as traders geared up for its INR-210-billion supply at the weekly gilt auction, dealers said.

 

Reports that the US and Iran were moving close to a peace deal to re-open the Strait of Hormuz put Brent crude futures for October delivery below $79 per barrel intraday, which led gilt prices rising in the first half. However, crude oil was less supportive by the end of gilt market hours as it rose to $80.30 per barrel, similar to its level at 1700 IST Wednesday. Traders placed bets the peace deal could be signed overnight after US Treasury Secretary Scott Bessent had said Tuesday he expects it within the next 24-48 hours, dealers said.

 

Traders also had increased risk appetite after the Reserve Bank of India's Monetary Policy Committee rate decision Wednesday was seen signalling no rate hikes in the coming months. Dealers ruled out a rate hike at the next meeting in October and some said they no longer expect repo rate increases from the current 5.25% in 2026-27 (Apr-Mar). However, hefty profit sales from state-owned banks above INR 100.20 on the 6.94%, 2036 gilt prevented a further fall in prices, as did the intraday rise in crude oil. Still, some traders covered short positions in the 10-year benchmark while trimming their holdings of the five-year gilt, dealers said.

 

"Everyone knows that this is a level for PSU (state-owned) banks to sell, especially those that bought the 10-year near 6.83% (yield)," a dealer at a private-sector bank said. "The easiest way that this 6.75% level breaking is if crude moves towards $70 (per barrel), which can only happen if the peace deal happens. Otherwise, there is a lot of supply every time the market moves to these levels." 

 

 

 

 

The profit taking by state-owned banks is expected to continue, limiting the rise in bond prices despite the outlook on no rate hikes. Dealers said the government's actions to limit the impact of the West Asia war on the domestic economy have been fiscally expansionary, while inflation is forecast to remain above the RBI's 4% aim for the next 12 readings. Traders expect the 10-year gilt yield to trade in a 6.65-6.85% range until the end of September despite domestic price pressures rising as banks pick up gilts to park foreign currency non-resident (bank) deposit inflows, dealers said.

 

Foreign banks continued to buy short-term bonds to deploy these inflows on Thursday, which are rising by around $8 billion-$10 billion every week on a systemic level, dealers said. Domestic banks' purchases have not increased as much as they are using the inflows to retire high-cost liabilities and fund credit growth, they said. Asset-liability managers preferred to pick up off-the-run and illiquid bonds to capture higher yields, especially as the five-year benchmark yield slumped to its lowest closing level since Mar. 12 on Wednesday.

 

Primary dealers likely sold the 6.36%, 2031 bond ahead of its auction after the nine-basis-point fall in its yield Wednesday, dealers said. Some of the investors who had piled into the benchmark gilt on Wednesday avoided it on Thursday. Most traders do not expect the five-year yield to fall below 6.25% as that would be lower than the interest rate banks are offering on FCNR(B) deposits. Some mutual funds picked up short-term gilts while selling long-term bonds over the past two days, dealers said. Even those bets stagnated on Thursday after the RBI conducted an INR-1.50-trillion variable rate reverse repo auction, which consequently pushed the weighted average call rate to near the policy repo rate of 5.25%, they said. Over the past three days, the weighted average call rate was at or lower than 5.10%.

 

"People expect liquidity to be on the comfortable side and I don't think that view has changed after the VRRR," a dealer at a state-owned bank said. "But the bigger takeaway is that there is a floor for overnight funding rates that is still close to repo rate, so your deployment in everything from short-term T-bills to up to two year bonds will be a negative reaction."

 

Trade volume on the RBI's Negotiated Dealing System–Order Matching platform fell to INR 584.20 billion from INR 793.40 billion Wednesday, higher than usual due to the rate decision being announced. Thursday, there were no trades using the RBI's wholesale e-rupee pilot, which has been the case now for several months.  

 

OUTLOOK

On Friday, 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. The impact may be limited before the INR-320-billion gilt auction at 1030-1130 IST, they said.

Demand for the INR-210-billion supply of the 6.36%, 2031 bond is seen robust as asset-liability managers add the bonds to their portfolios to deploy FCNR(B) deposits. The 40-year benchmark 7.71%, 2066 gilt is also seen in demand by life insurers and pension funds as its yield is higher than its previous auction, which should allow the INR-110-billion supply to sail through, dealers said.

 

Government bond prices are likely to open higher if Brent crude oil prices are below $80 with no escalation in the West Asia war, dealers said. However, the rise in bond prices will likely remain limited due to profit sales by state-owned banks near 6.75% yield on the 10-year benchmark gilt. On the other hand, adverse headlines may lead to sales from traders and purchases from large banks, dealers said.

 

The 6.94%, 2036 bond's yield is seen between 6.73-6.82% Friday. Any significant movement in the rupee and swap rates will also lend cues, dealers said.  

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.2100	6.7666%	101.1700	6.7722%
6.48%, 2035	98.0750	6.7635%	98.0500	6.7672%
6.36%, 2031	100.1575	6.3188%	100.1800	6.3130%
6.68%, 2040	97.3400	6.9810%	97.3825	6.9760%
7.24%, 2055	97.6100	7.4418%	97.5200	7.4495%

---

India Gilts: Most tad up; bets of fall in 10-year yield below 6.75% aid

 

	1530 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.21	101.28	101.16	101.18	101.17
YTM (%)	6.7666	6.7567	6.7736	6.7708	6.7722

 

MUMBAI—-1530 IST—-Prices of most government bonds were up slightly on bets of crude oil prices falling further and pulling down the yield on the 10-year benchmark 6.94%, 2036 bond to 6.72%, dealers said. However, the yield did not fall below the key 6.75% level Thursday as traders, especially from state-owned banks, took profits at and above the INR-101.20 price on the bond, they said.

 

Short-term bonds underperformed other tenures after a sharp fall in their yields Wednesday and ahead of INR 210 billion fresh supply of the benchmark five-year 6.36%, 2031 bond Friday, they said. Albeit, foreign and private-sector banks' asset and liability managers purchased bonds maturing in under 10 years -- largely between five and seven years -- as they deployed funds received through foreign currency non-resident (banks) deposits, they said. Some traders built positions on bets of yields falling in the near term, especially scope for a fall in the 10-year yield and longer-term paper after a sharp rise in prices of short-term bonds.

 

"We're just playing intraday now, tracking crude minute by minute. We think 6.75% will break but since it hasn't so far, around 6.76% is where PSUs (state-owned banks) are taking profits," a dealer at a state-owned bank said.

 

At the auction Friday, demand for the five-year bond is seen robust from both state-owned banks and banks aiming to deploy their FCNR(B) deposits into gilts, dealers said. "Right now, it looks like PSU banks will take 7,000 crores (INR 70 billion) of the five-year tomorrow (Friday)," a dealer at another state-owned bank said. However, traders do not expect the yield on the bond to fall below 6.25% in the near-term. Demand for INR 110 billion of the 7.71%, 2066 bond is seen to be moderate, dealers said. Some banks may purchase small quantities of the bond for investment books, while some demand from long-term investors is seen, they said.

 

The total trade volume in the government securities market at 1530 IST was INR 486.10 billion, down from INR 663.75 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 6.72–6.78% during the day.  (Cassandra Carvalho)

---

India Gilts: Tad up on intraday fall in crude oil prices; likely FPI buys

 

	1315 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.21	101.28	101.17	101.18	101.17
YTM (%)	6.7666	6.7567	6.7722	6.7708	6.7722

 

MUMBAI--1315 IST--Prices of government bonds were up as Brent crude oil prices fell intraday, dealers said. Foreign participants and public sector banks likely bought bonds, which also lifted the bond prices, dealers said. Traders remain hopeful of a potential peace deal between the US and Iran which buoyed market sentiment, dealers said. Later in the day, traders are likely to make space in their portfolios for a fresh supply of gilts at the weekly gilt auction Friday, dealers said.

 

"... Seems like foreign guys are buying," a dealer at a primary dealership said. "... Market sentiment is positive because of the peace deal expectation between the US and Iran."  

 

Bond prices were supported by the hopes of a potential peace deal between the US and Iran soon after the US Treasury Secretary Scott Bessent suggested a deal could come as early as Friday, dealers said. Bond prices rose tracking a fall in Brent crude oil prices, but gave up some gains as Brent crude oil prices rose to near $80 per barrel again, dealers said. 

 

Some traders said bond prices were supported as foreign portfolio investors likely bought bonds in the secondary market, dealers said. On other hand, some traders said foreign banks likely booked profits on their holdings, which limited the rise in bond prices. These banks net bought INR 91.20 billion worth of gilts on Wednesday. Public sector banks also likely purchased bonds at attractive levels after they net sold INR 95.30 billion of bonds Wednesday.    

 

At the bond buyback auction Thursday, traders expect the participation to be firm following the recent rise in bond prices, dealers said. However, most of the participation was likely from private sector banks as the public sector banks did not have the securities in their portfolios, dealers said. Traders will track the cut-off prices set on the 5.74%, 2026 bond and the 8.24%, 2027 bond as these two bonds are likely to receive the highest amount of offers, dealers said. Broadly, market participants expect the cut-off price to be similar to indicative prices released by Financial Benchmarks India Ltd. on Wednesday, whereas some expect it to be 2–3 paise higher, according to an Informist poll.

 

Traders are also likely to lighten their portfolios for the fresh supply of the 6.36%, 2031 bond and the 7.71%, 2066 bond at the weekly gilt auction Friday, dealers said. "Demand looks decent for the longer tenure but not sure about the shorter one," a dealer at a state owned bank said. "There could be some upside (higher cut-off yield at the gilt auction Friday) in the five-year (6.36%, 2031) bond because currently I feel its overpriced."

 

Short-term bonds underperformed Thursday after rising sharply Wednesday. Traders do not expect the yield on the 6.36%, 2031 bond to fall below 6.30%. Some traders expect the 5-year benchmark bond price to fall to INR 99.95, and it is likely to remain below INR 100.15.      

 

The total trade volume in the government securities market at 1315 IST was INR 348.50 billion, down from INR 561.30 billion at 1330 IST Wednesday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.75–6.78% during the day.  (Janwee Prajapati)

---

India Gilts: Steady due to lack of domestic cues; oil prices to lend cues

 

	0945 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.20	101.23	101.17	101.18	101.17
YTM (%)	6.7680	6.7641	6.7722	6.7708	6.7722

 

MUMBAI--0945 IST--Prices of government bonds were steady Thursday due to lack of domestic triggers as crude oil prices and US Treasury yields remained largely unchanged overnight, dealers said. A slight ease in Brent crude oil prices helped bond prices, dealers said. Bond prices are likely to track movement in crude oil prices for further cues, dealers said. Later in the day, traders will likely make space in their portfolio for the fresh supply of INR 302 billion of gilts, which is likely to weigh on bond prices, dealers said.  

 

"The market is steady because there is no movement in crude and the US Treasury is also flat," a dealer at a primary dealership said. "I think the 10-year yield will only move between 6.75–6.78% today (Thursday) unless there is any movement in crude oil prices."

 

Brent crude oil futures for October delivery were $79.37 per barrel, slightly lower than $80.43 per barrel at the end of Indian trading hours Wednesday. Iran said talks with Oman are moving forward "positively". US Secretary of State Marco Rubio also noted "progress", and Treasury Secretary Scott Bessent suggested a deal could come soon. Hopes of a potential peace deal between the US and Iran led to a fall in crude prices and kept market sentiments buoyed, dealers said. The yield on the 10-year benchmark US Treasury note was at 4.61% Thursday, slightly lower than 4.62% at 1700 IST Wednesday. 

 

The government will buy back four securities maturing in 2026–27 (Apr-Mar). The gilts to be bought back include the 7.33%, 2026 bond, the 5.74 26bond, the 8.15%, 2026 bond, and the 8.24%, 2027 bond. Traders expect the participation at the auction to be firm from banks as bond prices have risen to attractive levels, dealers said. However, traders do not expect any significant impact of the buyback auction on bond prices unless the result is significantly different from market expectations, dealers said. 

 

The total trade volume in the government securities market at 0945 IST was INR 85.85 billion, up from INR 66.65 billion at 0930 IST Wednesday, right before the Reserve Bank of India's Monetary Policy Committee meeting decision, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.75–6.78% during the day.  (Janwee Prajapati)

---

India Gilts: Seen steady on lack of escalation in war in West Asia

 

MUMBAI – Government bond prices are seen opening steady Thursday as Brent crude oil prices remained largely unchanged due to lack of any significant escalation in the West Asia war, dealers said. Later in the day, traders will look out for the result of the INR 200 billion buyback auction for further cues, dealers said. Some traders are also likely to make space in their portfolio for the fresh supply of INR 320 billion of gilts at the weekly gilt auction Friday, dealers said.

 

The 10-year benchmark 6.94 36bond is expected to open around 6.77% Thursday and move between 6.75% and 6.82% through the day, dealers said. Wednesday, the 6.94%, 2036 bond ended at INR 101.17, up sharply from INR 100.86 Tuesday. The yield on the bond was 6.7722% Wednesday, down from 6.8125% Tuesday. If Brent crude oil hovers near $80 per barrel, the yield on the 10-year benchmark bond is unlikely to fall below 6.77%, dealers said. Some traders expect the yield on the 6.94%, 2036 bond to be sticky around 6.80% on the higher side. Some other traders said the yields are unlikely to rise beyond the key 6.82% level as public sector banks are likely to purchase bonds at these levels. These banks net sold INR 95.30 billion worth of gilts Wednesday as they booked profits, dealers said.

 

The Brent crude oil futures for October delivery were at $80.02 per barrel, slightly up from $80.45 per barrel at the end of Indian trading hours Wednesday. Diplomatic pushes to reopen the Strait of Hormuz are seen picking up speed. Iran said talks with Oman are moving forward "positively." US Secretary of State Marco Rubio also noted "progress," and Treasury Secretary Scott Bessent suggested a deal could come soon. Under the draft proposal described by officials, vessels would enter the Persian Gulf via a route overseen by Iran and exit through a route overseen by Oman. The deal still hinges on the US lifting its blockade on Iranian ports. Washington has, however, previously opposed any arrangement that gives Iran control over the strait. The yield on the 10-year benchmark US Treasury note was at 4.61% Thursday, slightly lower than 4.62% at 1700 IST Wednesday. 

 

Back home, short-term bonds are likely to remain in favour Thursday due to likely foreign inflows under the Foreign Currency Non-Resident (Banks) deposit scheme. Comfortable liquidity in the banking system is also likely to support the prices of short-term bonds. However, the rise in bond prices will be limited after the RBI announced an INR 1.5 trillion of variable rate reverse repo auction Wednesday to suck out excess liquidity from the banking system, dealers said.   

 

Later in the day, traders will also track the result of the INR 200 billion gilt buyback auction. The government will buy back four securities maturing in 2026–27 (Apr-Mar). The gilts to be bought back include the 7.33%, 2026 bond, the 5.74 26bond, the 8.15%, 2026 bond, and the 8.24%, 2027 bond. These were the same papers the government had bought back in the previous auction. Participation at the auction is likely to be firm as bond prices have risen to attractive levels, dealers said. At the last auction, the largest buyback was of the 7.33 26 gilt and the smallest was of the 8.24 27 gilt. The cut-off prices in the auction were broadly in line with levels published by Financial Benchmarks India Ltd.  (Janwee Prajapati)  End

 

US$1 = INR 95.22

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

 

Edited by Deepshikha Bhardwaj

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000 /+91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.