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Informist, Monday, Aug. 24, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended down across tenures Monday as traders pared bets taken before the weekend of the US and Iran agreeing to a deal, after threats between the two countries continued Monday. Increased bets of rate hikes in India by December were also reflected in the positioning, dealers said. A few state-owned banks bought gilts during the day, limiting the fall. However, the banks are unlikely to continue purchasing at the current yield levels, dealers said, with aggressive purchases seen only if the yield on the 10-year benchmark gilt rises to 6.90%.

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 100.47, against INR 100.62 Friday. Its yield rose to 6.8708% from 6.8495% at the end of the previous session. Friday, bond prices had risen sharply a few minutes before the end of trade on a report that Iran's president favoured a quick end to the war in West Asia.

 

"Not all PSUs (state-owned banks) are buying right now, it's just two or three. How much will they buy here?" a dealer at a state-owned bank said. "At 6.90-6.92% (yield on the 10-year benchmark) again we'll see PSUs stepping up buys, but until then I'm not sure how long this will hold here (at current levels)."

 

State-owned banks made hefty bond purchases last week and some Monday to build their held-to-maturity books and deploy some inflows received through foreign currency non-resident (banks) deposits, dealers said. Traders speculated that some other investors were also purchasing bonds on-screen Monday, with some state-owned banks looking to purchase bonds only if yields rise. Some private-sector banks deployed inflows received through FCNR(B) deposits into short-term bonds, dealers said. Several market participants chose to stay on the sidelines and refrain from purchases unless bond prices fell further, making for thin trade. The total turnover in the government securities market was INR 333.20 billion, much lower than INR 521.85 billion Friday, data from Clearing Corp. of India Ltd. showed.

 

A worsening outlook for global bond yields amid sticky oil prices raised expectations of a fall in gilt prices, especially once the FCNR(B) swap window closes, dealers said. Traders expect the bond yield curve to flatten going ahead, with the yield spread of the 15-year benchmark over the 10-year benchmark unlikely to widen further, dealers said. Some traders placed short bets on the five-year benchmark bond to purchase longer-term paper. However, the fall in the bond's price was cushioned most of the day by banks deploying FCNR(B) flows into short-term bonds, dealers said.

 

Some traders also placed short bets on the 10-year benchmark ahead of INR 340 billion of its supply Friday, with these bets likely to be covered at a yield of around 6.90%, they said. Sales to make room for auction stock could be earlier than usual due to a holiday-shortened week, dealers said. "Auction will go through, but because it is (INR) 34,000 (crore) we can see the selling pressure build up on Thursday," a dealer at a private-sector bank said. Financial markets administered by the Reserve Bank of India are shut Wednesday for Id-e-Milad.

 

OUTLOOK

Tuesday, gilts will track developments in the war in West Asia and near-month Brent crude oil futures, with expectations of a "sell-off" in bond prices increasing amid lack of a resolution to the war. The 10-year benchmark bond yield is seen hitting 6.90% this week, especially due to INR 340 billion of its supply. A rise could be tempered by banks deploying foreign inflows into gilts, dealers said, especially in short-term bonds this week, with expectations of some purchases from foreign banks. Once the RBI's swap window for FCNR(B) deposits closes, however, the bond yield curve is seen flattening as the focus shifts to the likelihood of rate hikes. Gilts will also track the movement of US Treasury yields, which are pricing in heavy supply along with inflation fears, dealers said.

 

Aug. 31, traders will also track India's GDP estimates for the June quarter. According to the median of a Informist Poll of 14 economists, Indian economic growth is expected to moderate to a one-year low of 7.2% in the June quarter. Expectations of rate hikes in 2026 are seen increasing after the RBI's rate-setting panel focused on the potential for the same at its meeting earlier in the month. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.85% and 6.92%, dealers said. Any significant movement in the rupee and swap rates will also lend cues, they said.

 

	MONDAY		FRIDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	100.4700	6.8708%	100.6200	6.8495%
6.48%, 2035	97.6000	6.8367%	97.7450	6.8147%
6.36%, 2031	99.4750	6.4965%	99.5500	6.4768%
7.06%, 2041	100.0000	7.0591%	100.0900	7.0493%
7.24%, 2055	97.0650	7.4892%	97.3200	7.4671%

 

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India Gilts: Most dn on fear of US-Iran war escalation; trade volume subdued

 

	1500 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.48	100.62	100.45	100.60	100.62
YTM (%)	6.8708	6.8495	6.8737	6.8523	6.8495

 

MUMBAI--1500 IST--Prices of most government bonds were down in thin trade as traders remained cautious over the escalation in the US-Iran war after the US Treasury Secretary threatened economic sanctions against Iran, dealers said. A slight intraday rise in Brent crude oil prices also pulled down bond prices, dealers said. The premature closure of Reserve Bank of India's foreign currency non-resident (banks) deposit window, which will likely lead to a fall in foreign inflows, also weighed on market sentiments, dealers said. However, purchases from public sector banks at attractive levels limited the fall in bond prices, dealers said. 

 

"Trade volume is quite low today (Monday). Traders are waiting for news regarding the US sanctions on Iran," a dealer at a primary dealership said. "The market is tracking crude oil currently, and I think traders will also wait for the US policy meeting before taking aggressive positions." 

 

Brent crude oil futures for October delivery were at $93.40 per barrel, slightly higher than $93.33 per barrel at the end of Indian trading hours Friday. Traders refrained from building aggressive positions due to caution of a likely escalation in the US-Iran war, dealers said. The US has warned that it will announce economic sanctions on Iran, which are likely to impact Tehran's economy majorly and force its surrender in the West Asia war, as per media reports. The total trading volume in the government securities market at 1500 IST was INR 261.50 billion, significantly lower than INR 376.70 billion at 1530 IST Friday, according to data from the Clearing Corp. of India Ltd. 

 

Traders continued to favour short-term bonds as they expect the foreign inflows to continue till the closure of the FCNR (B) window on Aug. 31 from Sept. 30, dealers said. However, the premature closure of the swap window weighed on market sentiments, dealers said. The fall in bond prices was contained as public sector banks step up purchases at levels seen as attractive, dealers said. Most traders expect the bond yield to rise going ahead on fears of a rate hike by the central bank's rate-setting committee, dealers said. The yield on the 10-year gilt is seen in a range of 6.85–6.88% during the day, dealers said.  (Janwee Prajapati)

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India Gilts: Fall further as traders trim positions amid low risk appetite

 

	1230 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.51	100.62	100.46	100.60	100.62
YTM (%)	6.8651	6.8495	6.8723	6.8523	6.8495

 

MUMBAI--1230 IST--Prices of government bonds fell more and hit the day's low Monday as traders trimmed positions due to low risk appetite on chances of further escalation in the US-Iran war, dealers said. Some state-owned banks likely made purchases near 6.86% yield on the 10-year 6.94%, 2036 gilt, which limited the fall in bond prices, dealers said. Bond prices were also supported as Brent crude oil prices fell below the $93-per-barrel figure, dealers added.

 

Near-month Brent crude oil futures were at $92.73 per barrel at 1220 IST, slightly lower than $93.19 per barrel at 0900 IST, and $93.38 per barrel at the end of Indian gilt market hours Friday. Traders continue to closely monitor developments in the West Asia war amid uncertainty around the end of the conflict, they said. A major escalation is likely as the US has warned that it will announce economic sanctions on Iran, which are likely to impact Tehran's economy majorly and force its surrender in the West Asia war, as per media reports.

 

The uncertainty around the end of the war also dampened the risk appetite of market participants and, thus, they trimmed their positions, which weighed on bond prices, dealers said. Some traders also placed short bets on the 10-year benchmark bond ahead of its likely auction Friday, they said. However, state-owned banks likely bought bonds when the yield on the 10-year benchmark 2036 bond remained near 6.86%, which prevented a further fall in bond prices, they said.    

 

"There are no big positive cues for the market for now," a dealer at a state-owned bank said. "There are inflation concerns due to the US-Iran war, (bond) yields are also expected to rise further, crude is up, so there is a very weak risk appetite at the moment."   

 

The total trading volume in the government securities market at 1230 IST was INR 138.35 billion, significantly lower than INR 208.30 billion at 1230 IST Friday, according to data from the Clearing Corp. of India Ltd. Any developments in the West Asia war and its impact on Brent crude oil prices will lend direction to the market, dealers said. The yield on the 10-year gilt is seen in a range of 6.83–6.88% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Dn as oil back at $93/bbl amid uncertainty over US-Iran war end

 

	0930 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	100.59	100.62	100.55	100.60	100.62
YTM (%)	6.8538	6.8495	6.8595	6.8523	6.8495

 

MUMBAI--0930 IST--Prices of government bonds were slightly down as Brent crude oil prices rose above $93 per barrel, after falling over the weekend on the Iranian president's comments hinting at ending the US-Iran war, dealers said. The rise in US Treasury yields also weighed on bond prices Monday, dealers said. However, the expectations of robust flows from foreign currency non-resident deposits till Aug. 31 deadline likely supported the market, dealers said.

 

Traders expect banks to deploy the major chunk of the FCNR(B) flows into government securities, which is likely to keep bond prices supported, especially the short-term gilts, they said. The RBI measures to boost foreign capital inflows have attracted $72.85 billion till Friday from Jun. 8, the central bank had said Saturday. Market participants expect at least $85 billion of FCNR(B) flows by Aug. 31, they said.     

 

A rise in Brent crude oil prices and US Treasury yields weighed on bond prices Monday amid uncertainty around the end of the West Asia conflict, dealers said. The US has warned that it will announce economic sanctions on Iran, which is likely to impact Tehran's economy majorly and force its surrender in the West Asia war, as per media reports. Near-month Brent crude oil futures traded at $93.11 per barrel at 0930 IST, similar to $93.38 per barrel at the end of Indian gilt market hours Friday. However, Brent prices had fallen to $92.05 per barrel over the weekend. The yield on the 10-year benchmark US Treasury note was also up at 4.72% at 0930 IST, from 4.69% at 1700 IST Friday.

 

The total trading volume in the government securities market at 0930 IST was INR 27.85 billion, lower than INR 33.80 billion at 0930 IST Friday, according to data from the Clearing Corp. of India Ltd. Traders expect state-owned banks to buy bonds near 6.86% yield on the 10-year 6.94%, 2036 bond, which is likely to defend the level, they said. 

 

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 6.83–6.88% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen up as oil prices fall; hopes of robust FCNR flows to help

 

MUMBAI – Prices of government bonds are seen opening higher tracking a fall in prices of Brent crude oil over the weekend, dealers said. The hope of robust foreign currency non-resident deposit-related flows from the Reserve Bank of India's special measure may also help short-term gilts, dealers said.     

 

The 10-year benchmark 6.94%, 2036 bond is expected to open around 6.83% Monday and move between 6.80% and 6.85% through the day, dealers said. Friday, the bond ended at INR 100.62, or 6.8495% yield. Traders are likely to make heavy purchases near the 6.85% yield on the 10-year 2036 bond, which is likely to defend the level, they said. 

  

Monday, bond prices are likely to take cues from Brent crude oil prices, which came down from highs after the Iranian president late Friday expressed interest in ending the conflict, dealers said. At 0732 IST, the near-month Brent crude oil futures fell to $92.63, from $93.38 per barrel at the end of Indian gilt market hours Friday. A further fall in prices of crude oil to below the psychologically crucial level of $90 per barrel may take the yield on the 10-year 2036 bond to near 6.80% Monday, dealers said. However, 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, dealers added.  

 

Monday, bond prices will also track the movement in the US Treasury yields, which are pricing in heavy supply along with inflation fears, dealers said. The yield on the 10-year benchmark US Treasury note was 4.72% at 0732 IST, up from 4.69% at 1700 IST Friday. 

 

Bond prices, especially the short-term gilts, may also find support from the robust FCNR(B) flows, some part of which is likely to be deployed into government securities by banks, dealers said. The RBI measures to boost foreign capital inflows have attracted $72.85 billion till Friday from Jun. 8, the central bank had said Saturday. Nearly 90% of these inflows came from FCNR(B) deposits at $65.40 billion. 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, with the RBI revising the deadline for the swap window to Aug. 31 from Sept. 30, earlier, they said.  

 

Bond prices will also take cues from any significant movement in the rupee and overnight indexed swap rates, dealers said. Market participants will also track the release of the RBI Bulletin for August, which is likely to be released Monday, they said. The challenges and risks flagged in the RBI report and outlook on inflation will be closely watched amid the West Asia war, dealers said.  (Diksha Tripathy)

 

End

 

US$1 = INR 95.7450

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

 

Edited by Rajeev Pai

 

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