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Informist, Monday, Aug. 31, 2026

 

By Janwee Prajapati

 

MUMBAI – Government bond prices ended sharply down Monday as Brent crude oil prices rose above the psychologically crucial level of $90 per barrel, dealers said. The rise in US Treasury yields also weighed on sentiment, dealers said. Bond prices were largely unchanged after GDP data for the June quarter came in line with market expectations, dealers said. The fall in bond prices was contained as banks likely bought gilts at levels they considered attractive, dealers said.  

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 99.95, against INR 100.19 Friday. The yield on the bond rose to 6.9452% from 6.9108% at the end of the previous session. This was the highest closing level for the 10-year benchmark yield since Jun. 8. Yield on the bond oscillated between 6.94% and 6.96% during the session Monday. The yield on the 6.94%, 2036 bond failed to break and rise above 6.96% as public sector banks likely stepped in to buy bonds at levels seen as attractive, dealers said. However, some traders said the purchases likely came from foreign and private sector banks, as state-owned banks were net buyers on Friday and already bought INR 52.75 billion of bonds. These banks net purchased a similar quantum of gilts on Thursday as well.   

 

"Bond prices have been down since morning because crude (Brent crude oil price) was up," a dealer at a primary dealership said. "I think foreign banks also bought today because from here it is slightly tricky as to where the yield (on the 10-year benchmark 6.94% ,2036 bond) can go. If we see a significant fall in Brent (crude oil prices), we can still go to 6.80%-6.85%, but there are equal chances of it going to 7.10%-7.20% due to rate hike expectations."

 

The Brent crude oil futures contract for November delivery was at $91.21 per barrel at 1700 IST, down slightly from the day's high of $91.45 per barrel but up from $89.61 per barrel at the end of Indian trading hours Friday. Crude oil prices rose as the US military struck Iranian rocket launchers that were reportedly being prepared to lay mines in the Strait of Hormuz, according to media reports. This was Washington's first military action against Tehran in over a month. Following the escalation, Brent crude prices rose above the key $90-per-barrel mark.

 

After Brent crude prices rose and expectations of a policy rate hike grew following Fed Chair Kevin Warsh's comments at the Jackson Hole symposium, US Treasury yields rose. The 10-year benchmark US Treasury note was at 4.72%, up from 4.68% at the end of Indian trading hours Friday. US traders see a 62% probability of a rate hike by the Fed at its September meeting, up from just 40% a week ago, according to the CME FedWatch tool.

 

The rise in US Treasury yields also weighed on Indian bond prices. Traders expect a hike in US policy rates will nudge the Reserve Bank of India's Monetary Policy Committee to raise rates as well. Some dealers expect one rate hike in the current calendar year, in December, and a total increase of 50 basis points in the financial year ending Mar. 31. Others, however, expect more than 125 basis points of rate hikes in a span of two years and a 100 basis point rise in one-year, along with a hike expected in the October meeting.   

 

Expectations of a rate hike, combined with the central bank's early closure of its foreign currency non-resident (banks) deposits window, pulled down short-term bond prices, dealers said. The spread between the 10-year benchmark 6.94%, 2036 bond and the five-year benchmark 6.36%, 2031 bond was at 37 basis points Monday. Some traders expect spreads to widen further by 10 basis points next month, dealers said. However, total volume in the bond remained subdued. The bond also remains under pressure ahead of its auction Friday. Some banks likely preferred to pick up long-term bonds for their held-to-maturity books, dealers said.

 

"I think the spread between the 10-year benchmark and the 5-year benchmark could go to 40 basis points by next month," a dealer at a private sector bank said. "We also have an auction this week which is also putting pressure... demand at the auction seems doubtful."

 

On the GDP front, bond prices were little changed as GDP growth data for the June quarter was broadly in line with market expectations at 7.8%, dealers said. Bond prices had retreated briefly after the data release, as GDP growth was expected to moderate to a one-year low of 7.2% in the June quarter, according to an Informist Poll. However, dealers said traders bought bonds at attractive levels, which limited the fall in bond prices.  

 

Total turnover on the RBI's Negotiated Dealing System–Order Matching system was INR 499.50 billion Monday, up from INR 487.70 billion Friday. There were no trades using the central bank's e-rupee pilot Monday, as has been the case in recent months.

 

OUTLOOK

Tuesday gilt prices are likely to track developments in the war in West Asia and Brent crude oil prices at the open, dealers said. They will also track movements in US Treasury yields, which are pricing in heavy supply along with inflation fears, dealers said. Later in the day, traders will track the result of the state bond auction worth INR 270 billion. The supply is higher than the INR 242.16 billion indicated in the calendar for the week.    

 

On a longer-term view, expectations of rate hikes in 2026 are seen increasing after the RBI's rate-setting panel focused on the possibility of such hikes at its meeting earlier this month. Some traders expect the yield on the 10-year benchmark bond to rise above 7% in the next few months if the RBI raises repo rates, dealers said. In such a scenario, some traders expect the yield on the 10-year benchmark to halt at 7.20% in the current calendar year.

 

Given the expectation of a rate hike, some traders expect the central bank to announce measures to absorb excess liquidity from the banking system to set the stage for a smooth transmission of rate hikes, dealers said. Traders have pared bets on a steepening of the yield curve after the RBI advanced the closure of foreign currency non-resident (bank) deposits. Traders now expect the curve to flatten. The supply of government securities for the second half of the current financial year will also play a key role in the movement of the yield curve, dealers said. Some traders expect the state government borrowing calendar for the December quarter to be similar in size to the same period last year. 

 

The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.85% and 6.98%, 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	99.9500	6.9452%	100.1900	6.9108%
6.48%, 2035	97.1000	6.9135%	97.3000	6.8829%
6.36%, 2031	99.1500	6.5821%	99.3300	6.5346%
7.06%, 2041	99.6000	7.1029%	99.7800	7.0831%
7.24%, 2055	96.3000	7.5561%	96.6300	7.5271%

 

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India Gilts: Remain unchanged after Apr-Jun GDP growth in line with view

 

	1613 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.89	100.01	99.84	100.00	100.19
YTM (%)	6.9538	6.9365	6.9609	6.9380	6.9108

 

MUMBAI--1613 IST--Prices of government bonds remained broadly unchanged after India's GDP growth of 7.8% in the June quarter was broadly in line with most traders' expectations. Bond prices remained sharply down as the rise in Brent crude oil prices continued to weigh on market sentiment, dealers said. The Brent crude oil futures contract for November delivery was at $91.14 per barrel, down slightly from the day's high of $91.45 per barrel but up from $89.61 per barrel at the end of Indian trading hours Friday. 

 

Traders do not expect any major changes in bond yields now, considering the GDP data for the June quarter was in line with market expectations. Most traders expect the 10-year benchmark 6.94%, 2036 bond yield to close below 6.96%, dealers said. Bond prices had retreated briefly after the data release, as some participants had earlier expected India's GDP growth to moderate to a one-year low of 7.2% in the June quarter, according to the median of an Informist Poll. However, traders purchased bonds at attractive levels, which pulled up bond prices, dealers said.

 

"GDP is in line with market expectations, therefore no reaction in the market," a dealer at a primary dealership said. "I do not think the yield will rise above 6.96% for today at least, unless there is anything major."

 

The total volume in the government securities market at 1613 IST was INR 444.05 billion, similar to INR 455.95 billion at 1630 IST Friday, according to data from the RBI's Negotiated Dealing System. The yield on the 10-year benchmark 6.94%, 2036 bond is seen in the 6.90–6.96% range for the rest of the day.  (Janwee Prajapati)

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India Gilts: Remain sharply down; short term G-sec seen likely out of favour

 

	1508 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.92	100.01	99.86	100.00	100.19
YTM (%)	6.9502	6.9365	6.9581	6.9380	6.9108

 

MUMBAI-–1508 IST--Government bond prices continued to be sharply down Monday as Brent crude oil futures rose to the day's high of $91.45 per barrel during intraday trade, dealers said. The probability of a peace deal between the US and Iran appeared bleak, which weighed on sentiment, dealers said. With the advance closure of the Reserve Bank of India's foreign currency non-resident (banks) deposits window Monday, short-term yields are expected to rise, they said. The fall in bond yields was cushioned by likely purchases by public-sector banks, they added.    

 

The Brent crude oil futures contract for November delivery was at $91.10 per barrel, down slightly from the day's high but up from $89.61 per barrel at the end of Indian trading hours Friday. The rise in US Treasury yields to 4.72% from 4.69% Friday also weighed on market sentiment as traders now expect a policy rate hike at the upcoming US Federal Open Market Committee meeting, following US Federal Reserve Chair Kevin Warsh's comments at the Jackson Hole Symposium Friday. US traders see a 62% probability of a rate hike by the Fed at its September meeting, up from just 40% a week ago, according to the CME FedWatch tool.

 

The expectation of a rate hike in the US is likely to nudge the Indian central bank's own rate-setting panel to raise repo rates as well, dealers said. Some dealers expect one rate hike in the current calendar year, in December, and a total increase of 50 basis points in the financial year ending Mar. 31. This has led to traders trimming their positions in short-term bonds, which in turn weighed on the price of the five-year benchmark bond, dealers said. The spread between the 10-year and five-year is seen widening in the next month, they said. The 6.36%, 2031 bond was at INR 99.10, or 6.59% yield, at 1508 IST, down 22 paise from Friday.

 

"There are expectations of a rate hike, not in October but in December, likely by 25 basis points," a dealer at a private-sector bank said. "Traders are slowy shifting their positions away from the short-term paper and moving to a slightly higher duration now."

 

The total trading volume in the government securities market at 1508 IST was INR 388.45 billion, slightly higher than INR 373.25 billion at 1530 IST Friday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in the range of 6.90–6.96% during the day, dealers said. Traders also await the Apr-Jun GDP data due 1600 IST.  (Janwee Prajapati)

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India Gilts: Remain sharply down; PSU banks' buys help limit losses

 

	1240 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.93	100.01	99.88	100.00	100.19
YTM (%)	6.9487	6.9365	6.9556	6.9380	6.9108

 

MUMBAI-–1240 IST--Government bond prices remained sharply down Monday as Brent crude oil prices continued to trade above the crucial $90-per-barrel level, dealers said. Increased bets of a September rate hike by the US Federal Reserve, following Fed Chair Kevin Warsh's hawkish comments at the Jackson Hole Economic Policy Symposium, pushed US Treasury yields higher and continued to weigh on Indian gilt prices, dealers said. Traders now await the release of GDP growth data for the June quarter at 1600 IST, which is likely to provide further cues to the market.

 

The yield on the 10-year benchmark 6.94%, 2036 gilt breached the crucial 6.95% level to hit its highest since Jun. 8. The spread between the 10-year benchmark gilt yield and the five-year 6.36%, 2031 gilt yield compressed to 35 basis points Monday, from 38 bps Friday.

 

Brent crude oil prices continued to weigh on bond prices, dealers said. Amid escalations in the war in West Asia, Brent crude oil futures for November delivery were at $90.60 per barrel, up from $89.61 per barrel at the end of Indian gilt market hours Friday. The yield on the 10-year benchmark US Treasury note was at 4.72%, up from 4.69% at 1700 IST Friday. Following Warsh's comments, the two-year Treasury yield, seen as a key indicator of near-term rates, has risen significantly. The rise in US yields also weighed on Indian gilt prices, dealers said.

 

"Bets of a rate hike by US Fed in September have gone up now and his (Kevin Warsh's) remarks are also seen as hawkish by the market," a dealer at a state-owned bank said. "Plus, crude is also not softening so that's adding to it."

 

Monday, bond prices found some support from purchases by state-owned banks near the 6.94-6.95% yield level on the 6.94%, 2036 bond. Some traders also covered short positions, lending further support to bond prices. "PSUs are on-screen but not aggressively; there is no FOMO (fear of missing out) at this point," the dealer said.

 

The total trading volume in the government securities market at 1240 IST was INR 239.55 billion, higher than INR 149.45 billion at 1230 IST Friday, according to data from the Clearing Corp. of India Ltd. Traders will closely monitor developments in the 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 6.90–6.96% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Sharply down on rise in oil prices as US-Iran war escalates

 

--Dealers: Gilts tumble on oil rise above $90/bbl as US-Iran war escalates 

 

	0955 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.91	100.01	99.89	100.00	100.19
YTM (%)	6.9509	6.9365	6.9538	6.9380	6.9108

 

MUMBAI--0955 IST--Government bond prices were sharply down Monday tracking a rise in prices of Brent crude oil, which rose above the crucial level of $90 per barrel, dealers said. A rise in US Treasury yields also weighed on Indian gilt prices, dealers said. However, purchases by state-owned banks near 6.94% yield on the 10-year benchmark 6.94%, 2036 bond supported prices, they said.     

 

Monday, the yield on the 10-year benchmark 2036 bond hit its highest level since Jun. 11 as escalations in the war in West Asia dampened risk appetite. Sunday, the US military struck Iranian rocket launchers, which were reportedly being prepared to lay mines in the Strait of Hormuz, Reuters reported. The development marked Washington's first military action against Tehran in more than a month. Following the escalation, Brent crude oil prices rose above the crucial level of $90 per barrel. At 0950 IST, Brent crude oil futures for November delivery were at $90.14 per barrel, up from $89.61 per barrel at the end of Indian gilt market hours Friday.    

 

"Crude is the most important factor, not just for Indian gilts but for global markets as well," a dealer at a state-owned bank said. "If (US-Iran) war escalates further, crude will inch higher, and we might see a 7% yield (on the 10-year 6.94%, 2036 bond) as well."

  

The rise in US Treasury yields also weighed on bond prices, dealers said. At 0950 IST, the yield on the 10-year US Treasury note was 4.71%, up from 4.69% at 1700 IST Friday. Market participants raised bets on a September rate hike after US Federal Reserve Chair Kevin Warsh said financial conditions were not currently restrictive and described interest rates as the Fed's "predominant tool" for fulfilling its mandate. Traders will closely track the movement in US yields during the day, they said.     

 

Monday, bond prices were supported on purchases by state-owned banks near 6.94% yield on the 6.94%, 2036 bond. Some traders also covered short positions, which supported bond prices. The total trading volume in the government securities market at 0955 IST was INR 83.15 billion, higher than INR 55 billion at 0950 IST Friday, according to data from the Clearing Corp. of India Ltd. Traders will closely monitor developments in the 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 6.90–6.96% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen down as oil rises above $90/bbl; GDP data to lend cues

 

MUMBAI – Government bond prices are seen opening lower Monday due to a rise in prices of Brent crude oil amid escalation in the US-Iran war, dealers said. The escalation is likely to dampen the risk appetite, which is expected to result in lower trade volume in the market, dealers said. Traders will also await the GDP growth data for the June quarter, scheduled for 1600 IST Monday, which is expected to lend further cues to the market.

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 6.92% Monday and move between 6.85% and 6.95% during the day, dealers said. Friday, the bond ended at INR 100.19, or a yield of 6.9108%. Trading volumes are expected to remain low in the first half of the session as traders are unlikely to take fresh positions ahead of the release of the GDP data, they said. However, state-owned banks are likely to buy bonds at 6.92% yield on the 10-year 2036 bond, which is likely to provide a strong resistance, dealers said. Traders are likely to remain cautious amid escalation in the war in West Asia.

 

Sunday, the US military struck Iranian rocket launchers, which were reportedly being prepared to lay mines in the Strait of Hormuz, Reuters reported. The development marked Washington's first military action against Tehran in more than a month. Following the escalation, Brent crude oil prices rose above the crucial level of $90 per barrel. Traders expect the escalations to dampen the risk appetite, which is likely to weigh on the market. Traders are likely to trim positions if the war between the US and Iran escalates further, they said. 

 

The rise in oil prices also pushed up the US Treasury yields, which are likely to weigh on Indian bond prices, dealers said. At 0800 IST, the yield on the 10-year US Treasury note was 4.72%, up from 4.69% at the end of Indian gilt market hours Friday. Market participants also raised bets on a September rate increase to 57?ter US Federal Reserve Chair Kevin Warsh said financial conditions were not currently restrictive and described interest rates as the Fed's "predominant tool" for fulfilling its mandate. Warsh's comments pushed the short-term Treasury yields sharply higher. Traders will closely track the movement in US yields, they said.     

 

Traders will refrain from placing aggressive bets ahead of the release of India's June quarter GDP data. India's economic growth is expected to moderate to a one-year low of 7.2% in the June quarter, according to the median of an Informist Poll of 14 economists. Thursday, S&P Global Ratings projected India's GDP growth for 2026-27 (Apr-Mar) at 6.6% on account of the continuing energy shock and challenging agricultural conditions. The ratings agency had also said it expected India's GDP growth averaging 7.0% on year over the next three years. Traders are likely to assess the comment and see its impact on the market. Expectations of rate hikes in 2026 are seen increasing after the minutes of the meeting of the Reserve Bank of India's Monetary Policy Committee were seen as more hawkish than the policy statement itself. 

 

On a longer-term view, expectations of rate hikes in 2026 are seen increasing, dealers said. Some traders expect the yield on the 10-year benchmark bond to rise above 7% in the next few months if the MPC hikes the repo rate, dealers said. In such a scenario, some traders expect the yield on the 10-year benchmark at 7.20% in the current calendar year.

 

Given the expectation of a rate hike, some traders expect the central bank to announce measures to absorb excess liquidity from the banking system to set the stage for a smooth transmission of rate hikes, dealers said. Such measures may include incremental cash reserve ratio or bond sales through open-market operations. Traders, however, are divided on the usefulness of such measures. Some traders expect such an announcement within the next month. 

 

Traders have pared bets on a steepening of the yield curve after the RBI advanced the closure of foreign currency non-resident (bank) deposits. Traders now expect the curve to flatten. The supply of government securities for the second half of the financial year 2026-27 (Apr-Mar) will also play a key role in the movement of the yield curve, dealers said. Some traders expect the state government borrowing calendar for the December quarter to be similar in size to the same period last year. (Diksha Tripathy)  End

 

US$1 = INR 95.16

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

 

Edited by Saji George Titus

 

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