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Informist, Friday, Aug. 7, 2026

By Diksha Tripathy

MUMBAI – Prices of government bonds ended steady, recovering from a fall earlier in the session, as Brent crude oil price fell nearly 2% during the day, dealers said. Bond prices were also supported by likely purchases by foreign banks and state-owned banks at levels seen to be attractive, they said. However, some traders are likely to have trimmed positions ahead of the weekend amid lack of clarity over the US-Iran peace deal, which weighed on gilt prices, dealers said.                     

The 10-year benchmark 6.94%, 2036 bond ended at INR 101.22, similar to Thursday's closing level. Its yield ended at 6.7651%, largely unchanged from the previous day. During the day, the 10-year benchmark bond moved between 6.76% and 6.79%.

A significant fall in Brent crude oil price, after an overnight rise, supported bond prices, dealers said. The Brent crude futures contract for October delivery was at $81.83 per barrel at the end of Indian gilt market hours Friday, down from $83.47 per barrel at 0900 IST, but still higher than $80.30 per barrel at 1700 IST Thursday.

"G-sec (government securities) market is moving based on crude only," a dealer at a state-owned bank said. "Crude is falling and that is leading to a recovery today (Friday). These days, geopolitical factors impact crude, which impacts our market... that has been the trend for the past some time. If crude had not gone up in the last few days, it (the yield on the 10-year benchmark bond) would have been at 6.70%."

Bond prices were also supported by a fall in US Treasury yields during the day, dealers said. The yield on the 10-year benchmark US Treasury note was at 4.66% at 1700 IST, down from 4.68% at 0900 IST but higher than 4.63% at 1700 IST Thursday.

Friday, state-owned banks and foreign banks likely bought bonds, which further fuelled a recovery in the bond market, dealers said. Foreign banks largely bought short-term paper in the secondary market while state-owned banks accumulated the 10-year paper near 6.78% yield. 

"PSUs must be buying near 6.78% levels... it's a good level for them, because once it (the yield on the 10-year 6.94%, 2036 bond) breaks 6.75%, the next technical level is 6.70% or 6.71%," a dealer at another state-owned bank said.

At the INR 340-billion weekly gilts auction, the five-year 6.36%, 2031 bond saw firm demand from foreign banks, dealers said. The foreign banks likely used the opportunity to deploy flows from foreign currency non-resident (banks) deposits, dealers added. Public-sector banks and private-sector banks are also likely to have bought the 2031 paper at the auction, though they bid at relatively lower levels, dealers said. The Reserve Bank of India set a cut-off price of INR 99.98 on the 2031 bond, lower than the Informist Poll estimate of INR 100.00.

"All banks... foreign, public, private... were there at the auction today (Friday) and PDs (primary dealerships) as well," the second dealer quoted above said. "Foreign banks are pretty bullish at the moment, and they are putting FCNR funds into government securities. They were also on screen (buying in the secondary market) today."                   

The long-term 7.71%, 2066 gilt saw firm demand, likely from a big insurance company and some mutual funds, dealers said. The cut-off on the 2066 bond was INR 101.84, higher than the Informist Poll estimate of INR 101.73. Some state-owned banks which could not get their intended stock at the auction, likely bought bonds in the secondary market, dealers said. 

At 1700 IST, the total trade volume in the government securities market was INR 542.80 billion, slightly down from INR 579.40 billion at the end of gilt market hours Thursday, data from Clearing Corp. of India Ltd. showed.      

OUTLOOK

Gilts are not traded Saturdays. Monday, gilt prices may take direction from the developments in the war in West Asia and their impact on crude oil prices and US Treasury yields, dealers said. Government bond prices are likely to open higher if Brent crude oil prices fall over the weekend on hopes of a temporary US-Iran peace deal, dealers said. However, the rise in bond prices is likely to be limited by profit sales by state-owned banks near 6.75% yield on the 10-year benchmark gilt. 

The yield on the 6.94%, 2036 bond is seen between 6.72% and 6.82% Monday. Any significant movement in the rupee and swap rates will also lend cues, dealers said.

India Gilts: Mixed; 2031 bond falls, 2066 bond rises after auction result

MUMBAI--1424 IST--Prices of government bonds were mixed, with the five-year benchmark 2031 bond falling further after the cut-off price on it at the auction was lower than dealers' expectations. State-owned banks had bid poorly for the bond, below INR 100 estimated in an Informist Poll median of 26 respondents, dealers said. However, the cut-off price on the 7.71%, 2066 bond was much higher than expected, leading to a brief surge in the price of the bond in the secondary market, they said. Other than that, bond prices changed little after the auction result.

The Reserve Bank of India set a cut-off price of INR 99.98 on the 2031 bond, lower than the Informist Poll estimate of INR 100.00. Traders expect the weighted average price on the bond to be higher. The cut-off on the 2066 bond was INR 101.84, higher than the poll estimate of INR 101.73.

"In the five-year (bond), there is not much room to rally because your funding cost for FCNR -- at least for any domestic bank -- is higher than the yield in the central government bond," a dealer at a private-sector bank said. "So short-term spread instruments would be favoured, and because of the sell-off in the long end that will start looking more attractive to traders too."

Bond traders closely tracked the movement of crude oil prices during the day, with volumes dropping sharply amid a lack of aggressive positioning. At 1424 IST, the Brent crude futures contract for October delivery was at $83.24 per barrel, up from $80.30 per barrel. This weighed on bond prices, dealers said.

"If crude continues to move like this, we will hit 6.80% (yield on the 10-year benchmark 6.94%, 2036 bond) within two days," a dealer at a state-owned bank said. "There is no panic selling, but there is no buying that is happening either."  

The total trade volume in the government securities market at 1424 IST was INR 242.80 billion, down from INR 444.00 billion at 1430 IST Thursday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in the range of 6.76–6.83% during the day.  (Cassandra Carvalho)

India Gilts: Remain down; foreign bk demand for 5-yr bond robust at auction

MUMBAI--1245 IST--Government bond prices remained down due to the rise in crude oil prices and US Treasury yields, dealers said. Demand at the INR-320-billion auction was firm for both bonds and the supply would sail through without further downward pressure on gilt prices in the secondary market, they said.

A large foreign bank that was among the leading players in garnering foreign currency non-resident (banks) deposits was likely to bid for a large chunk of the five-year benchmark 6.36%, 2031 gilt at auction, to match its growing liabilities in the 3-5 year bucket, dealers said. Some other US-based foreign banks have also seen an increase in deposits this week under the Reserve Bank of India's special scheme, leading to higher demand for INR-210-billion supply at the auction. On other hand, state-owned banks were not keen to bid above INR 100.00 and may give the bond a miss if the cut-off price is aggressive. The total quantum of purchases from state-owned banks for the five-year gilt may be less than INR 100 billion, with foreign banks likely to pick up a similar amount, they said.

The unusual occurrence was largely driven by the sharp deposit accretion and because of the sharp fall in the five-year bond's yield since Monday, dealers said. The 6.36%, 2031 gilt's yield fell by over 10 basis points between Monday and Thursday. The bond's cut-off is seen at INR 100.00, according to the median of an Informist Poll of 26 dealers.

Traders were also not keen to bid aggressively on the bond as its price already reflected expectations of neutral monetary policy over the next few months and optimism on investor demand as FCNR(B) deposits continued to flow in, dealers said. Some private-sector banks bid for the 2031 gilt for asset-liability management, though they preferred receiving the five-year overnight indexed swap rate instead for a majority of their flows, they said. 

While the feedback on the five-year benchmark was divided, dealers universally said the 40-year benchmark 7.71%, 2066 bond was well bid at the auction. Life insurers preferred the bond as it yielded 10 basis points higher than 30-year benchmark gilt, which was among the only other liquid bonds in the segment, dealers said. Pension and provident funds were also actively bidding to pick-up the INR-110-billion supply of the 2066 gilt at the debt sale to match their liabilities. In the secondary market, the bond recovered to INR 101.90 from a low of INR 101.75 as traders got positive feedback from insurers on demand for the bond. The cut-off is that at INR 101.73 or 7.57% yield, according to the Informist Poll. 

"Bidding was quite good. Both the bonds should clear at around market levels," a dealer at a private-sector bank said. "Foreign banks are emerging as the major buyers for the five-year, while the long bond got good interest from investors. Some traders also see the chance of outperformance in the longer segment now that short-term bond yields have fallen."

The 10-year gilt was briefly off lows as Brent crude futures for October delivery slumped to near $83 a barrel from an intraday high near $84.50 per barrel. Even at the day's high on crude, traders said they were covering short sales and state-owned banks stepped up purchases as the yield on the 10-year 6.94%, 2036 gilt neared 6.80%, dealers said. Traders now expect gilt prices to trade in a thin band until the auction result. 

The total trade volume in the government securities market at 1245 IST was INR 160.55 billion, down from INR 320.80 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 6.76–6.83% during the day.  (Aaryan Khanna)

India Gilts: Down on rise in crude, US yields; caution before auction

MUMBAI--0950 IST--Government bond prices fell in early trade as crude oil prices and US Treasury yields rose overnight with no positive developments towards a US-Iran peace deal. Bond prices inched lower after the opening ahead of the weekly gilt auction, though traders covered some short sales on the 10-year benchmark 6.94%, 2036 bond near the psychologically crucial 6.80% yield, dealers said.

Brent crude for October delivery rose over 4% overnight to hover around $83.75 per barrel at 0950 IST Friday, while the 10-year US Treasury yield was also up over 4 basis points since 1700 IST Thursday to 4.69%. Iran's parliament is reportedly mulling over a legislation to ban US and Israeli ships from transitting the Strait of Hormuz. US yields rose on fears of the West Asia war extending further, heavy corporate supply as well as weekly unemployment claims making the case for monetary policy tightening, dealers said. 

"If Iran bans US ships from the Strait of Hormuz I don't know what kind of a peace deal they will be able to negotiate," a dealer at a primary dealership said. "Still, the market does not have the confidence to go short on bonds though because PSU banks will buy at these levels. So people would be covering any short positions around 6.80% (yield on the 10-year gilt)."

The government will sell INR 320 billion of two bonds at 1030-1130 IST. Demand for INR 210 billion of the five-year 6.36%, 2031 gilt is seen widespread, though the bond underperformed for the second straight day before the fresh supply. Foreign banks have received healthy inflows through foreign currency non-resident (banks) deposits and would pick up the gilt at auction, dealers said. However, some domestic banks are looking to demand higher yields to pick up the five-year gilt after its yield fell by over 10 basis points between Monday and Thursday, while foreign banks may opt to receive the five-year OIS rate rather than buy the bond due to the low spread between the two instruments, they said. The spread of the 6.36%, 2031 bond over the five-year OIS rate was around 5 bps. 

Meanwhile, life insurers and pension funds are seen picking up the 40-year benchmark 7.71%, 2066 gilt at the auction. The INR-110-billion supply will be easily absorbed by long-term investors as the returns are attractive to match with liabilities maturities in long-term products, dealers said.

"We already know where the demand is coming from from the shorter end," a dealer at a foreign bank said, referring to foreign currency non-resident (banks) deposits. "At these levels, the 40-year bond is the best priced asset on the curve and will be unaffected even if the RBI (Reserve Bank of India) raises the repo rate to 6.00%." The RBI's Monetary Policy Committee held the repo rate at 5.25% Wednesday and seemed to set a high bar for rate hikes in the coming months.

The total trade volume in the government securities market at 0950 IST was INR 60.25 billion, down from INR 85.85 billion at the same time Thursday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year gilt is seen in a range of 6.77–6.83% during the day.  (Aaryan Khanna)

India Gilts: Seen down as crude, US ylds rise; demand at auction seen strong

MUMBAI – Government bond prices are seen opening lower Friday after an overnight rise in US Treasury yields and crude oil prices, dealers said. Demand for bonds at the INR-320-billion government bond auction at 1030-1130 IST is likely to hold up as it will be driven by end-investors looking to hold the bonds to maturity rather than traders, they said.

The 10-year benchmark 6.94% 2036 bond is expected to open around 6.79% Friday and move between 6.77% and 6.83% through the day, dealers said. Thursday, the bond ended at INR 101.21 or 6.7666% yield. Its price rose slightly Thursday as traders bet the US and Iran would move closer to an understanding to end the West Asia war, though overnight developments seem to have thrown a spanner in the hopes for a quick peace deal, dealers said. 

The Iranian parliament is considering a bill to ban US and Israeli vessels through the Strait of Hormuz, according to media reports. This is seen aggravating tensions and prevent a diplomatic end to the war. Over the past two days, comments from top US and Iranian leadership have seemed to suggest a peace deal was imminent after the two sides paused military strikes on each other last week. Attacks on Saudi shipping in the Red Sea also raised supply concerns. Consequently, Brent crude oil futures for October delivery were at $83.50 per barrel, rising from $80.30 per barrel at the end of Indian trading hours Thursday.

The 10-year US Treasury yield rose to 4.68% at 0810 IST from 4.64% at 1700 IST as the expectations of a peace deal by Friday faded. US investors were also cautious ahead of non-farm payrolls data for July, due later Friday. Moreover, the increasing supply of debt from investment grade corporate issuers put pressure on US Treasury yields as investors flocked to the higher-yielding instruments. A rise in US Treasury yields narrows the interest rate differential between the safe haven asset and emerging market debt, making the latter less appealing to foreign investors.

Traders may trim their holdings as global cues turn adverse, though the losses are seen limited near the 6.80% yield on the 10-year benchmark gilt, dealers said. At that level, state-owned banks are likely to consider the yield attractive enough to start adding the bond to their portfolios, they said. Traders were puzzled that public-sector banks were on the buying side Thursday ahead of the auction, though they speculated most of these buys were for the trading books and would be cut in early trade Friday, potentially adding to volatility. State-owned banks were top net buyers Thursday, having net bought INR 23.55 billion of gilts in the secondary market, according to Clearing Corp. of India data.

Bond prices are seen under pressure early but may recover after the auction result, with investor demand seen widespread, dealers said. Demand for the INR-210-billion supply of the 6.36%, 2031 bond is expected to be robust as asset-liability managers add these bonds to their portfolios to deploy foreign currency non resident (banks) deposits. The INR-110-billion auction of the 40-year benchmark 7.71%, 2066 gilt is also expected to see demand from life insurers and pension funds, as its yield is higher than at the previous auction and would be attractive for the long-term investors, dealers said.

Any significant movement of the rupee and overnight indexed swap rates will also lend cues during the day, dealers said. Traders may turn cautious and trim their bond holdings towards the end of the day ahead of the weekend and the key US jobs data, they said.  (Aaryan Khanna)

End

US$1 = INR 95.21

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

Edited by Rajeev Pai

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