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Informist, Monday, Aug. 10, 2026

 

By Diksha Tripathy 

 

MUMBAI – Prices of government bonds ended steady Monday amid lack of significant cues, dealers said. Bond prices were supported by likely purchases by foreign banks and foreign portfolio investors, dealers said. However, an intraday rise in Brent crude oil prices and US Treasury yields capped gains, they said. 

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 101.23, similar to the closing level of Friday. Its yield settled at 6.7643%, largely unchanged from Friday. During the day, the 10-year benchmark bond moved between 6.76% and 6.77%. Amid no fresh cues on both global and domestic fronts, the total turnover in the government securities market was INR 389.30 billion at 1700 IST, significantly lower than INR 540.50 billion at the end of Indian gilt trading hours Friday, data from Clearing Corp. of India Ltd. showed. 

 

The likely purchases by foreign banks, which are deploying funds from foreign currency non-resident (banks) deposits into gilts, pushed up trading activity during the day, dealers said. A large foreign bank likely bought short-term papers in the secondary market, dealers said. Most traders dismissed the Financial Express news report that the Reserve Bank of India may prematurely close its special window to encourage FCNR deposits before Sept. 30 and bond prices did not react much to the news, dealers said. RBI Governor Sanjay Malhotra had refuted such speculations last week as well.

 

"I don't think any such thing will happen, because why would they (the RBI) end the scheme when they are getting good flows," a dealer at a state-owned bank said. "The market has largely dismissed this news." 

 

 

On Monday, an intraday rise in prices of Brent crude oil capped the rise in bond prices, dealers said. No clarity over a peace deal between the US and Iran over the weekend pushed oil prices higher, dealers said. Brent crude oil futures for October delivery touched the day's high level of $85.14 per barrel during the trading session Monday. It was at $84.46 per barrel at the end of Indian gilt trading hours Monday, up over 3% from $81.83 per barrel at 1700 IST Friday.

  

A rise in US Treasury yields also weighed on bond prices, dealers said. The yield on the 10-year US Treasury note was 4.67% at 1700 IST, up from 4.66% Friday. Traders now await the US inflation print for July, which is expected to lend cues to global markets, dealers said. 

 

Traders also await India's CPI inflation data for July, which is expected to be released at 1600 IST Wednesday, they said. India's headline inflation for July is likely to remain unchanged from June at 4.4?spite higher food prices caused by deficient rainfall across the country, according to an Informist poll. A higher-than-expected inflation data may pull down bond prices, dealers said. 

 

"See, 4.4-4.6% (India's headline inflation print for July) is something that the market is expecting," a dealer at a private sector bank said. "But anything higher than that or maybe a print higher than 5% would actually put pressure on bond prices." 

 

Traders see 6.76% yield on the 10-year 2036 bond as an important technical level, they said. "Once 6.76% is broken, the market will be targeting 6.70-72% as the next technical level," a dealer at another private sector bank said. 

 

Monday, long-term bonds outperformed other tenures for the second session after the RBI accepted only 20 competitive bids for INR 110 billion of the 7.71%, 2066 bond at the weekly gilt auction Friday, dealers said. The investor demand drove prices of long-term government securities higher Monday, dealers said. The 6.90%, 2065 bond ended at INR 92.40, up 24 paise over Friday, while its yield settled at 7.5042%, down over 2 bps from Friday.     

 

OUTLOOK

Tuesday, gilt prices may take direction from developments in the war in West Asia and their impact on crude oil prices and US Treasury yields, dealers said. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.72% and 6.80% Tuesday, dealers said. Any significant movement in the rupee and swap rates will also lend cues, dealers said. 

 

Traders also await commentary from the RBI governor at the Financial Institution Benchmarking and Calibration conference on Tuesday. However, most traders expect his remarks to align with his policy statement last week. The governor may offer clarity on the timeline of the FCNR(B) deposit facility following the report of a premature closure of the deposit window, some traders said. 

 

Traders will also track the result of the auction of state government securities Tuesday, they said. A total of six states will raise INR 153 billion through the sale of bonds Tuesday with Punjab having the option to retain additional subscription of up to INR 5 billion in its 17-year bond through a greenshoe option, the RBI had said Friday. The auction will take place between 1030 IST and 1130 IST. A higher-than-expected cut-off yield at the auction may put pressure on government bond prices, dealers said.  

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	101.2250	6.7643%	101.2200	6.7651%
6.48%, 2035	98.0900	6.7616%	98.0800	6.7630%
6.36%, 2031	100.0100	6.3571%	100.0300	6.3518%
7.06%, 2041	100.7600	6.9769%	100.7300	6.9802%
7.24%, 2055	98.1500	7.3955%	97.9775	7.4103%

 

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India Gilts: Little changed; long-term bonds outperform other tenures

	1601 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.23	101.28	101.16	101.16	101.22
YTM (%)	6.7636	6.7573	6.7735	6.7735	6.7651

 

MUMBAI—1601 IST—Prices of government bonds were little changed, with the 10-year benchmark remaining in a thin band in lacklustre trade. Traders awaited fresh developments on the West Asia war and its impact on crude oil prices. They dismissed an intraday rise in crude oil prices, with some foreign portfolio investors likely purchasing gilts, they said. Long-term bonds outperformed other tenures for the second session after the Reserve Bank of India accepted only 20 competitive bids for INR 110 billion of the 7.71%, 2066 bond at the weekly gilt auction Friday. There was investor interest also in the 6.68%, 2040 bond, with the 'Reported Deals T+1' segment of the RBI's Negotiated Dealing System showing nine trades totalling INR 13.55 billion in the bond Monday. As of 1601 IST, foreign portfolio investors net purchased gilts worth INR 2.43 billion through the Fully Accessible Route Monday, according to data from Clearing Corp. of India. This data updates with a lag. 

 

"Market is very dull today (Monday), its trading in a narrow band," a dealer at a state-owned bank said. "Possibly insurers' demand in the longer-end after (aggressive bids at) the auction."

 

Traders await the inflation prints for July both in India and the US, due Wednesday. The yield on the 10-year US Treasury note remained above 4.65% even after jobs data in the US released Friday was softer than expected. Elevated US Treasury yields deterred a fall in government bond yields, even as surplus liquidity in the Indian banking system aided purchases by domestic participants, dealers said. A large foreign bank purchased gilts earlier in the session, dealers said.  

 

Traders also await commentary from RBI Governor Sanjay Malhotra at the Financial Institution Benchmarking and Calibration conference Tuesday, though most expect his remarks to align with his policy statement last week. The governor could perhaps offer clarity on the timeline of the FCNR(B) deposit facility, after traders largely dismissed a report Monday that stated the facility could be closed earlier than the Sept. 30 deadline, dealers said. 

 

The total trade volume in the government securities market at 1601 IST was INR 332.35 billion, similar to INR 339.85 billion at 1530 IST Friday, according to data from Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.75–6.80% for the rest of the day. (Cassandra Carvalho)

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India Gilts: In thin band; traders await fresh cues from India CPI Wed

 

	1410 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.24	101.28	101.16	101.16	101.22
YTM (%)	6.7626	6.7573	6.7735	6.7735	6.7651

 

NEW DELHI--1410 IST--Government bond prices moved in a thin band after recovering early losses. Traders awaited fresh triggers such as India's CPI inflation data for July, due later this week, amid uncertainty about global developments, with no major breakthrough in the war between the US and Iran, dealers said. 

 

Some traders downplayed the movement in crude oil prices as this is seen similar to the Reserve Bank of India's assumption when unveiling GDP and CPI projections, dealers said. Others said that the benign view on US interest rate hikes after weak jobs data on Friday continued to offset the impact of the rise in Brent crude prices since Friday. An intraday fall in crude did not elicit much of a response as traders were not keen to buy gilts at current levels on the view that the yield on the 10-year benchmark 6.94%, 2036 gilt would find it difficult to fall below the psychologically crucial 6.75% yield, dealers said. Brent crude for October delivery eased to as low as $83.33 per barrel from $84.33 a barrel at 0900 IST.

 

"Between $80 and $85 (per barrel), it (Brent crude) should make no difference to the inflation trajectory," a dealer at a private sector bank said. "Right now, the biggest narrative is FCNR(B) and we know the market is dominated by it. That led to some buying in the morning and since then everything has been quiet."

 

The trader was referring to inflows into foreign currency non-resident (banks) deposits, which have spurred demand for gilts. While some banks were picking up bonds due to these inflows, most traders were on the sidelines before taking a call on rate hike expectations domestically after the release of India's July retail inflation print on Wednesday. An Informist poll pegged July's CPI inflation at 4.4%, similar to the previous month. A reading in line with this may lead to gilt prices rising as inflation remains near the Reserve Bank of India's 4% target. A higher-than-expected print could raise concern about the central bank's benign monetary policy approach, dealers said.

 

Meanwhile, traders preferred gilts maturing in 10 years and above over the five-year benchmark 6.36%, 2031 gilt after the yield curve "bull steepened" following the Monetary Policy Committee's rate decision last week. The longer-term bonds offered attractive returns over the three- and five-year benchmarks, while potentially leading to higher capital gains if a peace deal is struck and Brent crude prices fall, dealers said. However, yields on the short-term bonds are unlikely to rise sharply, with banks favouring these assets to match the increased liabilities coming through from FCNR(B) deposits, they said.

 

"We also don't think this is the right level to enter the five-year, especially since some of the stock from the auction is still left," a dealer at another private sector bank said, referring to the INR-210-billion supply of the 6.36%, 2031 gilt Friday. "We are also preferring bonds in 10 years or more."

 

The total trade volume in the government securities market at 1410 IST was INR 275.30 billion, up from INR 237.60 billion at 1430 IST Friday, according to data from Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.75–6.81% during the day. (Aaryan Khanna)

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India Gilts:Recover losses; softer US rate view offsets hit from rise in oil

 

	1030 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.23	101.28	101.16	101.16	101.22
YTM (%)	6.7636	6.7573	6.7735	6.7735	6.7651

 

NEW DELHI--1030 IST--Government bond prices opened lower but recovered all losses as traders covered short sales after US jobs data weakened the case for a rate hike in the world's largest economy, dealers said. Gilts fell at the open as a sharp rise in crude oil prices over the weekend overshadowed the data, which did not lead to a fall in US Treasury yields.

 

Non-farm payrolls data in the US unexpectedly fell by 23,000 in July, against a Wall Street Journal poll estimate of an 83,000 rise, according to data released Friday. The CME FedWatch tool showed expectations of a rate pause by the Federal Open Market Committee at its next meeting in September had risen to 54.0% Monday from 33.0% a week ago. The US rate expectation is seen helping the Reserve Bank of India's Monetary Policy Committee to also maintain status quo for a longer period, dealers said.

 

The 10-year US Treasury yield traded around 4.66%, similar to Friday's level, but the weak jobs data led offshore traders to receive fixed rates in the five-year overnight indexed swap rate, helping gilt prices, dealers said. Traders said US yields may fall sharply if the two sides moved towards a peace deal to end the war in West Asia. However, Brent crude for October delivery was at $84.22 per barrel at 1010 IST, up nearly 3% since the close of trade Friday, with the Strait of Hormuz still effectively shut as Iran and Oman work out a deal for its administration.

 

"We've had a weak opening due to crude rising sharply, otherwise we should have been better since (US) jobs data came so weak," a dealer at a primary dealership said. "The 10-year US yield had gone to 4.61% on Friday and should fall from here as US rate expectations have now normalised to a 50-50 chance of a hike in September."

 

Trade volumes were low due to a lack of significant cues domestically before the likely purchases from foreign and private-sector banks, which increased activity. Traders largely ignored a report that said the RBI may prematurely close its special window to encourage foreign currency non-resident (banks) deposits before Sept. 30, dealers said, as RBI Governor Sanjay Malhotra had refuted such speculation last week. A large foreign bank was also speculated to be buying short-term gilts and receiving the five-year OIS rate as it got a sizeable inflow in its three-to-five year FCNR(B) deposits, they said.

 

The total trade volume in the government securities market at 1030 IST was INR 164.25 billion, nearly doubling from INR 87.40 billion at the same time Friday, according to data from Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.75–6.81% during the day. (Aaryan Khanna)

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India Gilts: Seen down on oil price rise, report FCNR(B) window may end early

 

NEW DELHI – Government bond prices are seen opening lower as crude oil prices rose over the weekend with talks between the US and Iran failing to crystallise into a peace deal, dealers said. A report that the Reserve Bank of India's special measures to boost foreign currency non-resident (banks) deposits would end prematurely may also weigh on bond prices, they said. 

 

The 10-year benchmark 6.94 36bond is expected to open around 6.78% Monday and move between 6.76% and 6.83% through the day, dealers said. Friday, the bond had ended at INR 101.22 or 6.7651% yield. After an early fall, gilts recovered all losses Friday as Brent crude oil futures fell 2% intraday and the INR-320-billion auction of government bonds sailed through. 

 

Brent crude oil for October delivery rose to $84.40 per barrel at 0830 IST from $81.83 per barrel at 1700 IST Friday, the close of Indian market hours. Iran and the US are not directly engaged in talks and Tehran will not begin these as long as the US is in breach of an interim deal signed in June, Iran's Foreign Minister Abbas Aragchi said. The 10-year US Treasury yield was little changed after jobs data for July was released Friday. 

 

Meanwhile, the Financial Express Monday reported, quoting official sources, that the government and the RBI may discuss shutting the central bank's concessional swap window on three to five-year FCNR(B) once the inflows reach $50 billion. That figure may be hit this week, well ahead of the scheduled end of the scheme on Sept. 30, the report said. The officials quoted said concern was that the RBI may find foreign exchange management  problematic when these flows reverse at the time these deposits mature.

 

Traders said they widely disagreed with the report and three dealers said they would disregard it and would potentially buy bonds if there is an adverse reaction. Market participants had bet on a sustained pace of robust collections under the FCNR(B) deposits until the scheme ended in September, and the inflows have sharply pushed up demand for bonds, especially those maturing in three to five years. The report may lead to some traders trimming their holdings of the five-year benchmark 6.36%, 2031 gilt, especially after its fresh supply hit the market at the auction Friday, dealers said. 

 

Traders will also focus on the release of the domestic retail inflation data this week. India's headline inflation for July is likely to remain unchanged from June at 4.4?spite higher food prices caused by deficient rainfall across the country, according to the median of an Informist Poll of 12 economists.  (Aaryan Khanna)

 

End

 

US$1 = INR 95.30

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

 

Edited by Avishek Dutta

 

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