More Stories

Informist, Monday, Aug. 17, 2026

 

--India's 5-year benchmark gilt yld up 8 bps Mon, most in a day since Jul 14

 

By Cassandra Carvalho

 

MUMBAI – Government bond yields climbed Monday, reversing the largely downward trend seen last week, after the Reserve Bank of India cut short its concessional dollar-rupee swap facility on foreign currency non-resident (banks) deposits of three- to five-year tenors to Aug. 31 from Sept. 30 earlier. Traders shed positions, especially in short-term bonds, as they pared bets of inflows through these deposits being deployed into gilts. Prior to the RBI's announcement of the closure, several traders had expected the five-year benchmark 6.36%, 2031 gilt yield to fall to 6.25% or even 6.20% by the end of September on the back of robust inflows. However, after the bond yield hit a low of 6.30% this month, it rebounded. Monday, the yield rose nearly 8 basis points, the most in a day since Jul. 14. 

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.92, down from INR 101.27 Friday. Its yield rose to 6.8071%, up nearly 5 bps from 6.7578% Friday. During the day, the 10-year benchmark bond moved between 6.77% and 6.82%. The 6.36%, 2031 bond ended at INR 99.71, or 6.4352% yield, off the day's high of 6.4495%. Some traders expect the bond yield to hit 6.50% in the near term. However, until Aug. 31, banks are likely to deploy FCNR(B) flows into the bond, leading to some traders building positions in the bond on hopes of its price being supported for this fortnight, they said. 

 

"I think market will trade in an orderly manner now," a dealer at a small finance bank said. "All this time because of the flows we were moving in a range of 20-30 paise with PSUs (state-owned banks) not letting it (bond yields) go below. I'm expecting $25 billion-$30 billion flows by Aug. 31 (through FCNR(B) deposits) so we could still see a healthy number in terms of total flows."

 

Latest data from the RBI showed foreign inflows through its various schemes were nearly $56.85 billion till Aug. 13 from Jun. 8, of which FCNR(B) deposits comprised over $52 billion. By the end of these concessional windows, flows could easily top $85 billion, dealers said, which is still a healthy size even if it is lower than prior expectations of $100 billion. Several traders expect the yield on the 10-year benchmark bond to ease to 6.77-6.78% in a few sessions, with current levels seen as attractive to pick up bonds, they said. Several traders said the central bank's measure was welcome, although it dimmed the outlook for bond yields falling, since there were concerns on the reversal of the flows upon maturity, and the impact the swap would have on the central bank's balance sheet. Some traders also said more-than-expected foreign inflows could distort the government's borrowing programme due to lack of replacement demand coming in after bonds bought by foreign banks to deploy FCNR(B) flows mature.

 

While the focus was on short-term gilts, traders exited positions across the yield curve, with bond yields rising across. However, some stayed put on their long-term bond positions, with these bonds likely to react only to changes in the inflation trajectory or supply of these bonds in Oct-Mar, dealers said. Foreign portfolio investors may have been selling gilts, dealers said. As of 1810 IST, foreign portfolio investors net sold gilts worth INR 10.10 billion through the Fully Accessible Route Monday, according to data from Clearing Corp. of India. This data is updated with a lag. If the number holds, this would be the largest single-day sale since Jul. 30. FPIs were net buyers last week. A rise in crude oil prices and US Treasury yields over the weekend also weighed on bonds, offsetting some optimism on foreign inflows for the next fortnight. "Those were not getting any flows, some banks or PDs (primary dealerships) who were piggybacking on flows hoping for something have washed out those positions," a dealer at a private-sector bank said. 

 

The total turnover in the government securities market was INR 450.65 billion, similar to INR 458.90 billion Friday, data from CCIL showed. The INR 300-billion switch auction was fully subscribed Monday, the first for such an auction since at least 2023, though traders had expected the full subscription. They took advantage of the sharp fall in short-term bond prices to tender gilts, dealers said. 

 

OUTLOOK

Tuesday, gilts are seen tracking the overnight movement in US Treasury yields and crude oil prices. After market hours, US President Donald Trump threatened to bomb Oman if it interfered in negotiations between the US and Iran. Brent crude oil prices were little changed. Some traders fear oil prices hitting $90 per barrel but traders have largely priced in crude oil moving in the range of $80-$90 per barrel.

 

After a knee-jerk rise in bond yields following the RBI's announcement, traders will be on watch for foreign inflows and their impact on systemic liquidity and whether these flows are deployed into gilts. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.72% and 6.85%, dealers said. Any significant movement in the rupee and swap rates will also lend cues, they said. Traders will also track the result of the INR 202-billion state bond auction.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.9200	6.8071%	101.2700	6.7578%
6.48%, 2035	97.9000	6.7907%	98.2875	6.7324%
6.36%, 2031	99.7100	6.4352%	100.0150	6.3560%
7.06%, 2041	100.6625	6.9872%	101.1200	6.9378%
7.24%, 2055	98.1500	7.3958%	98.6800	7.3506%

 

---

India Gilts: Near day's low; switch auction fully subscribed, first in FY27

 

	1633 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.92	101.17	100.86	101.17	101.27
YTM (%)	6.8071	6.7718	6.8156	6.7718	6.7578

 

MUMBAI--1633 IST--Prices of government bonds hovered near the day's low Monday as traders continued to trim positions after the Reserve Bank of India Friday announced the early closure of its concessional swap window for foreign currency non-resident (banks) deposits, dealers said. Bond prices did not react to the result of the INR 300-billion switch auction Monday, dealers said. The result was largely in line with the view of market participants, they said.

 

The government had offered to switch eight gilts worth INR 300 billion maturing between 2027 and 2030 with seven longer-term gilts through the auction. This is the first auction out of five held so far in the financial year 2026-27 (Apr-Mar) to see 100% subscription. State-owned banks were likely major participants at the auction, dealers said. So far in FY27, the government has switched gilts totalling INR 909.90 billion.

 

"There was maximum buying by PSU banks only at the auction, not sure of the amount," a dealer at a state-owned bank said. "People who were looking to exit short-term positions now also actively participated." 

 

Foreign banks likely sold gilts Monday after the RBI announced that it would close its FCNR(B) swap facility early, dealers said. Foreign banks were net buyers in the previous week with purchases worth INR 151.64 billion, data from the Clearing Corp. of India Ltd. showed.  

 

An intraday rise in Brent crude oil prices also weighed on bond prices, dealers said. Near-month Brent crude was at $89.29 per barrel at 1630 IST, near the day's high of $89.68 per barrel. Traders continue to track the movement of crude oil prices amid some signs of escalation in the war in West Asia, they said.

 

The total trade volume in the government securities market at 1630 IST was INR 422.75 billion, similar to INR 405.80 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 6.76–6.84% during the day.  (Diksha Tripathy)

---

India Gilts: Fall more; yld curve flattens as 6.36%, 2031 bond yield surges

 

	1335 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.9525	101.17	100.92	101.17	101.27
YTM (%)	6.8025	6.7718	6.8075	6.7718	6.7578

 

	1335 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.36%, 2031
PRICE (INR)	99.72	99.85	99.66	99.85	100.02
YTM (%)	6.4326	6.3988	6.4495	6.3988	6.3560

 

MUMBAI--1335 IST--Prices of government bonds fell further and the yield on the 10-year benchmark bond topped the key 6.80% level—the highest in nearly two weeks--after the Reserve Bank of India cut short its dollar-rupee swap facility on foreign currency non-resident (banks) deposits of three to five-year tenures to the end of this month from Sept. 30. Traders exited positions, with some bouts of 'panic selling' across the yield curve, with short-term bond yields jumping the most. The yield on the benchmark five-year 6.36%, 2031 bond hit 6.45%, the highest since Aug. 3, with its yield spread between the 10-year benchmark bond compressing to 36 basis points from 40 bps Friday. Rising over 7 bps in a day, the rise in the five-year bond yield also inverted the spread with the five-year overnight indexed swap rate. 

 

"I think five-year (2031 bond) should stabilise around these levels, I was not expecting such a sell-off in 10-year so I think that (10-year yield) should come back to 6.78%; 6.80% (yield) is a good level to buy," a dealer at a private sector bank said. 

 

Some traders see the benefit in buying short-term bonds for the next fortnight. Traders expect hefty inflows of $15 billion-$20 billion through the FCNR(B) deposits in the two weeks to Aug. 31, as banks are likely to advance their deposit mobilisation, dealers said. "It's not like there will be no demand for G-sec. People will not go for longer maturity. They will buy shorter-term papers which give good returns, like corp. (corporate) bonds also. So now longer-term demand will be over, we will see some spread-widening again," a dealer at a state-owned bank said. Long-term bonds had outperformed other tenures last week, with demand exceeding supply and traders also taking positions in those bonds. The yield spread between the 10-year benchmark 6.94%, 2036 bond and the most-traded 15-year 6.68%, 2040 paper was little changed from Friday at about 19 basis points. That of the 7.71%, 2066 over the 10-year bond compressed by about a basis point, even as long-term bonds were sharply down. Some traders were more attentive to oil prices, the inflation trajectory and supply of long-term bonds in Oct-Mar before taking fresh bets in these bonds, they said. 

 

At the INR-300-billion switch auction, banks are seen 'undercutting' or selling the source securities at a sharp discount to prices indicated by Financial Benchmarks India Pvt. Ltd. Friday. Prices have fallen in the secondary market since Friday, especially those of short-term bonds, leading to tendering at lower prices than indicated levels, they said. Some banks will also look to book profits from their held-to-maturity books by selling the bonds at a deep discount, they said.

 

Traders are closely tracking the movement of crude oil prices, with fears of near-month Brent crude hitting $90 per barrel again. The total trade volume in the government securities market at 1330 IST was INR 265.75 billion, similar to INR 252.85 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 6.76–6.84% during the day.  (Cassandra Carvalho)

---

India Gilts:Sharply dn on premature closure of FCNR(B) window; PSUs' buys aid

 

	0959 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	101.01	101.17	100.99	101.17	101.27
YTM (%)	6.7944	6.7718	6.7972	6.7718	6.7578

 

	0959 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.36%, 2031
PRICE (INR)	99.67	99.85	99.67	99.85	100.02
YTM (%)	6.4456	6.3988	6.4456	6.3988	6.3560

 

MUMBAI-–0959 IST--Prices of government bonds were sharply down Monday after the Reserve Bank of India announced a premature closure of its concessional swap window for foreign currency non-resident (banks) deposits post market hours Friday, dealers said. The five-year 6.36 31 gilt was down more as traders trimmed bets of further FCNR(B) being deployed into the bond, they said. Purchases from state-owned banks near 6.79% yield on the 10-year benchmark 6.94%, 2036 bond limited the fall, they said. 

 

"FCNR(B) announcement is a negative factor for the market and which is why there is a big fall today (Monday)," a dealer at a private-sector bank said. "This fall was expected after the news of early closure came out." 

 

Bond prices were also down due to a rise in prices of Brent crude oil over the weekend, dealers said. Brent crude oil futures for October delivery were near $89 per barrel at 0959 IST, up from $87.20 per barrel at the end of Indian gilt market hours Friday.

 

Monday, some state-owned banks stepped up purchases when the yield on the 10-year benchmark 6.94%, 2036 bond remained near 6.79%, dealers said. The purchases from state-owned banks helped ease some pressure on bond prices, dealers added. 

 

"Some PSUs (public sector banks) are buying near 6.79% (yield on the 10-year 2036 bond)," a dealer at a state-owned bank said. "The yield (on the 10-year bond) may go higher today but most probably buying by PSUs will limit it to 6.83-84% levels."         

 

The total trade volume in the government securities market at 0959 IST was INR 100.15 billion, higher than INR 81.50 billion at 1000 IST Friday, according to data from Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.78–6.84% during the day.  (Diksha Tripathy)

---

India Gilts: Seen down after RBI announces early closure of FCNR(B) window

 

MUMBAI – Prices of government bonds are seen opening lower Monday after the Reserve Bank of India unexpectedly announced the premature closure of its special measure to boost foreign currency non-resident (banks) deposits after market hours Friday, dealers said. A rise in prices of Brent crude oil over the weekend may also put pressure on bond prices Monday, they said.

The 10-year benchmark 6.94 36bond is expected to open around 6.78% Monday and move between 6.75% and 6.85% through the day, dealers said. On Friday, the bond had ended at INR 101.27, or a 6.7578% yield.

 

"The closure of FCNR window will be the main concern for the market today (Monday)," a dealer at a primary dealership said. "Trading activity will be based on that only. Yields are going to remain high today, it seems."   

The RBI's swap facility for FCNR(B) deposits will now be available for deposits mobilised till Aug. 31, against the previous deadline of Sept. 30, the central bank said in a press release Friday. In June, the RBI had announced a few measures to attract foreign capital. Among these was a facility to cover the full hedging costs for banks raising fresh three- to five-year FCNR(B) deposits.

Traders had priced in hefty inflows from these deposits, which were expected to pull down the shorter end of the yield curve, while ample surplus liquidity from such inflows was expected to support buying appetite for bonds, dealers said. Market participants had also expected foreign inflows to top $100 billion, with FCNR(B) deposits leading these inflows, and had therefore expected ample durable liquidity in the banking system. Further, RBI Governor Sanjay Malhotra had last week said there were currently no plan to extend or advance the closure of the FCNR(B) window, which had given comfort to traders. These bets are likely to be pared, which will weigh on bond prices Monday, dealers said.

On the global front, Indian bond prices will take cues from the rise in Brent crude oil prices Monday, dealers said. Brent crude oil futures for October delivery were at $89 per barrel at 0730 IST, up over 2% from the end of Indian gilt market hours Friday. Near-month Brent crude oil prices rose on hints of an escalation in the West Asia war over the weekend, dealers said. On Saturday, US President Donald Trump said he had plans to declare the Strait of Hormuz a US territory, Al Jazeera reported. However, Iran rejected the claims and said Hormuz continues to remain under its control, as per media reports. Traders will closely monitor developments in the West Asia war and their impact on crude oil prices. A rise in crude prices could put further pressure on bond prices, dealers said.

 

Traders will also track the result of the switch auction Monday, dealers said. The government will switch eight government bonds worth INR 300 billion maturing between 2027 and 2030 with seven longer-term gilts through an auction Monday. Banks, pension funds, and insurers are likely to participate at the auction, dealers said.  (Diksha Tripathy)

 

End

 

US$1 = INR 95.6025

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

 

Edited by Rajeev Pai

 

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

Send comments to feedback@informistmedia.com

 

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