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Informist, Friday, Aug. 21, 2026

 

By Aaryan Khanna and Cassandra Carvalho

 

NEW DELHI/MUMBAI – Government bond prices rose sharply at the end of choppy day after Iran President Masoud Pezeshkian reportedly said he favoured a quick end to the war in West Asia, dealers said. Through the day, bond prices traded on a mixed note, with most bonds steady while short-term gilts outperformed as banks deployed foreign currency non-resident (banks) deposits, they said.

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.62, against INR 100.47 Thursday. Its yield fell to 6.8495% from 6.8709% at the end of the previous session. The entire upswing came in the last few minutes of the session – at 1651 IST, the 10-year bond traded at INR 100.42. 

 

At an event, Pezeshkian was quoted as saying that it was better to end the war now as Iran was in a position of power and dignity and that the whole world acknowledged its victory while painting the US as the aggressor. Brent crude for October delivery fell by nearly $1 after the statement to $93.33 per barrel at the end of Indian market hours.

 

"There was some news that Iran's president is looking to end the war early, he said Iran was in a position of strength," a dealer at a private sector bank said. "The market just reacted to that. If it comes true, at least one big headache (for bond traders) will end." 

 

For most of the session, the price of the 10-year benchmark bond traded in a thin band, briefly falling due to an intraday rise in Brent crude oil prices to $94 per barrel, before recovering. The bond yield has risen 9 basis points this week due to accelerated bets of rate hikes in India after the release of minutes of the Monetary Policy Committee's last meeting, along with early closure of the swap window for foreign currency non-resident (banks) deposits. However, intraday, trade in the bond has been focussed on the movement of crude oil prices and US Treasury yields, dealers said. "Its just crude, crude and crude what traders are tracking," a dealer at a private sector bank said. "While for investors and banks, we're seeing some buying from their side."

 

Unless crude oil prices sustain a further rise, the yield on the bond is seen as unlikely to hold if it rises to 6.90-6.92%, dealers said. State-owned banks have made hefty bond purchases this week, even as the 10-year bond yield traded in a range of 11 basis points. These banks have net purchased gilts worth nearly INR 200 billion this week till Thursday, according to data from Clearing Corp. of India. While traders also bought bonds on bets of hefty foreign inflows to the tune of at least $15 billion by the end of Aug. 31, state-owned banks have received large inflows this week through FCNR(B) deposits, dealers said. Some of that cash has been parked into gilts, especially in short-term gilts. The five-year benchmark 6.36%, 2031 bond is all the more attractive to buy after the bond's yield rose around 12 bps this week, dealers said. Banks have also purchased illiquid short-term bonds, they said. Some foreign banks also deployed inflows into bonds, they said.

 

At the weekly gilt auction, demand for the long-term 7.43%, 2076 bond was robust from pension funds and life insurance companies. However, demand for the 2041 bond was lukewarm, with state-owned banks taking about half its INR-170-billion stock, albeit at prices lower than secondary market levels. The bond's yield spread over the 10-year benchmark yield rose by 3 bps Friday, the most since its issuance. Some traders placed short bets on the liquid 6.68%, 2040 bond to cover them in the 2041 bond at auction, dealers said. "PSUs have taken the 15-year (2041) bond, but nothing massive," a dealer at a state-owned bank said. 

 

The total turnover in the government securities market was INR 521.85 billion, lower than INR 622.75 billion Thursday, data from CCIL showed. The activity of foreign investors has not impacted bond prices significantly this week, dealers said. 

 

OUTLOOK

The bond market is shut on Saturdays. On Monday, gilts will track developments in the West Asia war after the Iranian president expressed interest in ending the conflict. If near-month Brent crude oil futures rise above $95 per barrel, they could hit $100, according to technical charts, dealers said. The 10-year benchmark bond yield would hit 6.90% in such an instance, but a rise could be tempered by banks deploying foreign inflows into gilts, dealers said, especially in short-term bonds. Gilts will also track the movement of US Treasury yields, which are pricing in heavy supply along with inflation fears, dealers said. 

 

Expectations of rate hikes in 2026 are seen increasing, after the Reserve Bank of India's rate-setting panel focused on the potential for the same at its latest meeting. Traders will watch foreign inflows and their impact on systemic liquidity, and whether these flows are deployed into gilts, with expectations of at least $15 billion in flows over the last fortnight of August. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.82% and 6.92%, dealers said. Any significant movement in the rupee and swap rates will also lend cues, they said.

 

	FRIDAY		THURSDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.6200	6.8495%	100.4700	6.8709%
6.48%, 2035	97.7450	6.8147%	97.5600	6.8424%
6.36%, 2031	99.5500	6.4768%	99.3825	6.5206%
7.06%, 2041	100.0900	7.0493%	100.1600	7.0417%
7.24%, 2055	97.3200	7.4671%	97.3400	7.4654%

 

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India Gilts: Mixed; intraday rise in oil price weighs, short-term outperform

 

	1547 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.435	100.55	100.39	100.44	100.47
YTM (%)	6.8758	6.8598	6.8822	6.8751	6.8709

 

	1547 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.36%, 2031
PRICE (INR)	99.44	99.54	99.39	99.42	99.38
YTM (%)	6.5056	6.4794	6.5200	6.5108	6.5206

 

MUMBAI--1547 IST--Prices of government bonds were mixed, with an intraday rise in Brent crude oil prices briefly pulling down prices before they recovered to trade in a thin band. Prices of most bonds were a tad up for most of the session due to purchases by state-owned banks, dealers said. Long-term bonds were down briefly after cut-off prices at the INR-280-billion gilt auction were slightly lower than expected, dealers said. Mutual funds sold bonds across the yield curve, especially long-term bonds, dealers said, with redemption pressure adding to accelerated rate hike bets, dealers said. Brent crude oil for delivery in October rose to the day's high of $94.34 briefly, before inching lower again. 

 

The Reserve Bank of India set a cut-off price of INR 99.93 on the 7.06%, 2041 bond, a tad lower than an Informist poll estimate of INR 99.95. The cut-off price on the 7.43%, 2076 gilt was INR 98.22, also lower than a consensus estimate of INR 98.29. The 2041 bond hit the day's low of INR 99.96 after the result of the auction, and remained sharply down. State-owned banks took the 2041 bond, but not aggressively, dealers said. "I don't think we've (state-owned banks) even taken half (the size of the 2041 bond)," a dealer at a state-owned bank said. The yield spread between the 2041 bond and the 10-year benchmark bond widened slightly to 19 basis points post the auction result from 17 bps Thursday. Investors, including large insurance companies and pension funds, took the 2076 gilt, dealers said. There was negligible demand for bond forward-rate agreements in the 2076 bond, especially due to its illiquid nature, dealers said. 

 

In the secondary market, short-term bonds outperformed other tenures after a sharp rise in their yields this week. Banks, especially state-owned ones, deployed inflows received through foreign currency non-resident (bank) deposits into these bonds, dealers said. The five-year benchmark 6.36%, 2031 bond yield was down 2 basis points Friday after rising 16 bps this week till Thursday. "PSUs are buying, they've gotten flows Friday, whoever's (scheduled day for swap window) was Tuesday Wednesday," a dealer at a private sector bank said. With state-owned banks' purchases, a rise in the 10-year benchmark yield past the 6.90% level looks unlikely unless Brent crude oil prices surge, dealers said. 

 

The total trading volume in the government securities market at 1530 IST was INR 376.70 billion, lower than INR 513.30 billion at the same time Thursday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.84–6.90% during the day, dealers said.  (Cassandra Carvalho)

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India Gilts: Remain in thin band; demand for 2041 bond seen mixed at auction

 

	1240 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.50	100.55	100.39	100.44	100.47
YTM (%)	6.8666	6.8598	6.8822	6.8751	6.8709

 

MUMBAI--1240 IST--Prices of government bonds remained in a thin band Friday as traders refrained from placing aggressive bets ahead of the result of the weekly gilt auction, dealers said. A mixed demand was seen for the 15-year 7.06%, 2041 bond at the auction, which is likely to result in a higher-than-expected cut-off yield at the auction, dealers said.

 

The government invited bids to sell INR 170 billion of the 7.06%, 2041 bond and INR 110 billion of the 7.43%, 2076 bond Friday between 1030 IST and 1130 IST. The higher yields in the secondary market and high crude oil prices likely dampened the demand at the weekly gilt auction, dealers said. A big insurance company likely bid aggressively at the auction for the 50-year paper, dealers said. Demand from pension funds was also there at the auction for the 2076 paper, dealers said.

 

Traders had mixed views on the demand for the 15-year paper, they said. While state-owned banks bid aggressively for the paper, private-sector and foreign banks were not that aggressive in placing bids, dealers said. Major state-owned banks likely bid at the auction and bought stock worth nearly INR 70 billion-INR 80 billion, of the total INR 170 billion, dealers said. The cut-off on the 7.06%, 2041 gilt is seen at INR 99.95 or 7.0647% yield, and that on 7.43% 2076 is seen at INR 98.29 or 7.5619% yield, as per an Informist Poll.

 

"We can see some tail in the 15-year cut-off (yield) as demand was not that aggressive," a dealer at a private-sector bank said. "It (auction) will sail through, that will not be a problem."

 

Traders await the result of the gilt auction as it can lend further cues to the market, dealers said. Most traders refrained from placing aggressive bets ahead of the auction results, dealers said. The total trading volume in the government securities market at 1240 IST was INR 229.20 billion, slightly lower than INR 264.30 billion at 1230 IST Thursday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.80–6.90% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: In thin band; traders trim positions before weekly gilt auction

 

	0946 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.44	100.55	100.39	100.44	100.47
YTM (%)	6.8751	6.8598	6.8822	6.8751	6.8709

 

MUMBAI-–0946 IST--Prices of government bonds moved in a narrow range Friday as most traders maintained caution before the weekly gilt auction, dealers said. However, primary dealerships likely trimmed positions ahead of the INR-280-billion, which weighed on bond prices, dealers said.

 

The total trading volume in the government securities market at 0945 IST was INR 68.95 billion, lower than INR 95.90 billion at 0930 IST Thursday, according to data from the Clearing Corp. of India Ltd. Most traders refrained from placing aggressive bets ahead of the auction, the results of which are expected to lend cues to the market, dealers said.  

 

"Nobody wants to position at the moment, at least not before the auction," a dealer at a state-owned bank said. "Some PDs might be selling, because that is what they usually do before the auction, and I think only that is the reason why prices are slightly lower for now."  

 

The government will sell INR 170 billion of the 7.06%, 2041 bond and INR 110 billion of the 7.43%, 2076 bond Friday between 1030 IST and 1130 IST. The higher yields in the secondary market and high crude oil prices are likely to dampen the demand at the weekly gilt auction, dealers said. Insurers and pension funds are likely to bid aggressively for the long-term 2076 bond. However, for the new-15 year bond, traders might not be that active, dealers said. 

 

High Brent crude oil prices remain a concern for traders amid uncertainty around the West Asia war, dealers said. In early trade Friday, Brent crude oil futures for October delivery surged to $94 per barrel and were traded at $93.53 per barrel at 0945 IST, down from $94.19 per barrel at the end of Indian gilt market hours Thursday. However, crude oil prices have remained above the psychologically crucial level of $90 per barrel for almost the entire week, weighing on bond prices. 

 

Traders will closely monitor any development in the West Asia war and its impact on Brent crude oil prices as it can lend direction to the market, dealers said. The yield on the 10-year gilt is seen in a range of 6.80–6.90% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen steady on caution before auction; result to lend cues

 

MUMBAI – Prices of government bonds are likely to open steady Friday as traders are likely to maintain caution before the weekly gilt auction, the result of which is expected to lend cues to the market, dealers said. Overnight, a slight fall in Brent crude oil prices is seen as a positive for the market, dealers said. However, crude oil prices still remain above the crucial level of $90 per barrel, which may weigh on bond prices, dealers said.

 

The 10-year benchmark 6.94%, 2036 bond is expected to open around 6.88% Friday and move between 6.80% and 6.90% through the day, dealers said. Tuesday, the bond ended at INR 100.47, or 6.8709% yield. Traders are likely to make heavy purchases near the 6.89-6.90% yield on the 10-year 2036 bond, which is likely to defend the level, they said. Trading activity in the first half may be lower on caution ahead of the result of the weekly gilt auction. However, in the second half, traders may trim positions ahead of the weekend amid uncertainty around the war in West Asia, which may weigh on bond prices, dealers said.

 

Brent crude oil prices remain a concern for traders as it has stayed above the psychologically crucial level of $90 per barrel for almost the entire week, dealers said. In early trade Friday, Brent crude oil futures for October delivery surged to $94 per barrel and were trading at $93.73 per barrel at 0750 IST, down from $94.19 per barrel at the end of Indian gilt market hours Thursday.

 

On the global front, traders will also track US Treasury yields, a rise in which is likely to weigh on Indian bond prices, dealers said. The yield on the 10-year benchmark US Treasury note was 4.71% at 0750 IST, largely similar to that at 1700 IST Thursday.

 

Bond prices will take cues from the result of the weekly gilt auction, dealers said. Demand at the INR-280-billion gilt auction Friday is expected to be tepid, dealers said. The government will sell INR 170 billion of the 7.06%, 2041 bond and INR 110 billion of the 7.43%, 2076 bond. The yield spread of the 7.06%, 2041 bond over the 10-year benchmark has compressed to 17 basis points, which is too aggressive, dealers said.

 

Expectations of interest rate hikes are seen increasing, after the minutes of the Reserve Bank of India's Monetary Policy Committee had revealed its focus on the potential of higher rates. Traders will watch foreign inflows and their impact on systemic liquidity, and whether these flows are deployed into gilts, with expectations of at least $15 billion in flows over the fortnight. Any significant movement in the rupee and swap rates will also lend cues, they said.  (Diksha Tripathy)

 

End

 

US$1 = INR 95.6950

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

 

Edited by Avishek Dutta

 

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