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Informist, Tuesday, Sept. 8, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended higher Tuesday, reversing a slight fall earlier in the session amid ample liquidity in the system, with the yield on the 10-year benchmark 6.94%, 2036 bond seen unlikely to top 7.00% in the near term, dealers said. A sudden fall in swap rates nearing the end of trade helped bond prices rise, they said. Several traders said they refrained from fresh short bets, even as Brent crude oil prices rose intraday to near the crucial $100 per-barrel mark. The asset and liability managers of some banks purchased gilts while receiving fixed-rate contracts in swaps, with some corporations likely hedging their issuances, dealers said. Bond prices were supported for most of the day but rose further nearing the end of trade.  

 

Traders were on watch for any announcement by the Reserve Bank of India to drain durable liquidity from the banking system. Speculation was that the central bank could announce such measures this week itself, including options such as incremental hikes in the cash reserve ratio, dealers said. Some dealers expect the central bank to continue with overnight variable rate reverse repo operations until the Monetary Policy Committee's meeting next month, instead of durable measures. Traders also assessed the outcomes of several meetings market participants have held with the central bank in recent sessions over gilt supply and systemic liquidity, they said. 

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 99.97 from INR 99.84 Monday. The yield on the bond fell to 6.9431% from 6.9607% at the end of the previous session. The five-year OIS fell 4 basis points nearing the end of trade, to 6.43% from 6.46% Monday. "7% (yield on the 10-year benchmark) is a support for now," a dealer at a private-sector bank said. "Market rumours are there about iCRR (incremental hikes in CRR) but I think he (the RBI) will continue with VRRRs for this month."

 

The Brent crude oil price for delivery in November was $98.53 per barrel at 1700 IST, from $97.44 at 0900 IST, hitting $99.46 during the session, the highest since Jul. 24. In spite of this, traders covered short bets in gilts, dealers said. The weighted average rate for the 6.94%, 2036 gilt in the special repo segment of the Clearcorp Repo Order Matching System was 2.91%, while the rate on the five-year benchmark bond was 2.73%. Rates nearing zero suggest a lack of bonds available to cover short sales. The total traded amount on the 2036 bond in the special repo segment -- a proxy to track short sales -- was INR 103.74 billion.

 

Other than liquidity measures, focus was also on the Centre's borrowing plan for Oct-Mar and states' borrowing for the December quarter. Traders have mixed views on what tenure bucket should change in Oct-Mar compared to Apr-Sept, with some preferring more supply of seven-year and 15-year bonds, dealers said. "Long-term bond yields are already high, there is more scope for short-term yields to rise if they increase supply there (in short-term) than in long-term," a dealer at a state-owned bank said. 

 

Cut-off yields at the state bond auction were largely within expectations, with mutual funds and banks deploying excess cash into short-term state bonds, dealers said. Total turnover on the RBI's Negotiated Dealing System–Order Matching system was INR 424.85 billion Tuesday, similar to INR 426.15 billion Monday.

 

OUTLOOK

Wednesday, gilts may take cues from movements in crude oil prices and US Treasury yields, dealers said. The impact of the RBI's liquidity measures to prop up overnight money market rates amid a record surplus banking system liquidity is also being closely watched.

 

With current overnight rates far below the RBI's repo rate, some traders expect the central bank to announce additional measures to absorb excess liquidity from the banking system amid such a large surplus, dealers said. The surplus liquidity in the banking system is seen warranting measures to drain durable liquidity beyond the variable rate reverse repo operations the RBI is currently conducting, they said.

 

Focus will also be on the US Federal Open Market Committee's mid-month rate decision, dealers said. The FOMC decision will be a key trigger for the RBI Monetary Policy Committee's repo rate decision in October, dealers said. Traders expect the yield on the 10-year benchmark bond to hit 7.10% in about a month, though this is seen unlikely in the near term amid flush liquidity.

 

Traders also await the release of the borrowing calendar for state and central government bond issuances for the next quarter and for the second half of the current financial year, respectively. They will also focus on the proportion of different bond tenures in the calendar, dealers said. The RBI has begun holding meetings with market participants to discuss the Centre's borrowing calendar, they said. 

 

Any significant movement in the rupee and swap rates will also lend cues, they said. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.90% and 7.05%, dealers said.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	99.9650	6.9431%	99.8425	6.9607%
6.48%, 2035	97.1500	6.9069%	97.0775	6.9178%
6.36%, 2031	99.5000	6.4900%	99.4850	6.4940%
7.06%, 2041	99.6100	7.1017%	99.4950	7.1144%
7.24%, 2055	96.1600	7.5684%	96.1000	7.5737%

 

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India Gilts: Tad up as crude oil prices, US Treasury yields fall intraday

 

	1409 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.90	99.92	99.79	99.86	99.84
YTM (%)	6.9532	6.9496	6.9690	6.9582	6.9607

 

MUMBAI--1409 IST--Government bond prices reversed all earlier losses to trade slightly higher, tracking an intraday fall in Brent crude oil prices and US Treasury yields, dealers said. The state bond auction results were in line with market estimates, which supported market sentiment, dealers said. Trade volume remained subdued on caution ahead of US CPI data and the Federal Open Market Committee meeting, dealers said.               

 

"Market is tracking only Brent crude for now," a dealer at a state-owned bank said. "Trade volume is also low because all the events are lined up in the mid (middle) of September. The market will track inflation data... people (traders) are also cautious of any liquidity measures (measures to absorb liquidity from the banking system) from the RBI (Reserve Bank of India)."

 

Brent crude oil futures for mid-month delivery were at $98.99 per barrel, up from $97.55 per barrel at 0900 IST and $97.45 per barrel at the end of Indian trading hours Monday. The yield on 10-year benchmark US Treasury notes was at 4.80%, down from the day's high of 4.82%.

 

Traders refrained from building aggressive positions ahead of the release of US CPI data scheduled to be released this week, which is likely to impact the Federal Open Market Committee's decision on the policy rate, dealers said. Traders will also closely track the FOMC's decision on policy rates. If the rate-setting panel refrains from raising the policy rate and delivers a dovish tone, Indian bond yields are likely to ease, dealers said. The yield on the 10-year benchmark bond will likely fall to 6.85% following such commentary from the FOMC, dealers said.

    

Trade volume in the market remained low amid the likelihood of further escalation in tension between the US and Iran, dealers said. The total traded volume in the government securities market at 1609 IST was INR 359.40 billion, lower than INR 363.60 billion at 1530 IST Monday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.92–7.00% during the day, dealers said. Traders expect the yield on the 10-year benchmark bond to remain below the crucial 7% mark if Brent crude oil prices remain between ? and 100 per barrel, dealers said. 

 

At the state bond auction, the central bank set a cut-off yield of 7.63% on Goa's 10-year bond, which was in line with the median of an Informist Poll. The cut-off yields on the states' 10-year bonds ranged from 7.59% to 7.63%. Some traders said the cut-off yields set on bonds above 10 years were better than expected, as banks and insurance companies likely picked up these bonds.  (Janwee Prajapati) 

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India Gilts: Remain in thin band; demand at state bond auction seen firm

 

	1140 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.84	99.90	99.83	99.86	99.84
YTM (%)	6.9611	6.9532	6.9622	6.9582	6.9607

 

MUMBAI--1140 IST--Goverment bond prices moved in a thin band Tuesday amid low volume as traders refrained from placing aggressive bets due to the likelihood of further escalations in the US-Iran war, dealers said. An intraday rise in Brent crude oil prices and US Treasury yields weighed on bond prices, dealers said. Traders now await the result of auction of state government securities which is likely to give further direction to the market. 

 

A total of eight states invited bids to raise INR 169 billion through the sale of bonds Tuesday. The quantum is lower than INR 260 billion mentioned in the states' indicative borrowing calendar for Jul-Sept for the week. Traders expect demand at the auction to be firm due to lower supply. 

 

"Demand was there at the auction because the quantum was small," a dealer at a state-owned bank said. "Banks participated and even other investors also, because people wanted to add these securities at the current levels." 

 

The cut-off yield on states' 10-year bonds at auction is seen at 7.63%, according to an Informist Poll. A significantly higher-than-expected cut-off yield on bonds at the auction may weigh on bond prices in the secondary market, dealers said. At the state government bond auction last week, the cut-off yield on Tamil Nadu's 10-year bond re-issue was set at 7.61%, a spread of 63 basis points over the gilt of similar maturity issued by the Centre.

 

Intraday, a rise in Brent crude oil prices weighed on bond prices, dealers said. Brent crude oil futures for November delivery were at $98.34 per barrel at 1135 IST, up from $97.44 per barrel at 0900 IST. Near-month Brent crude futures hit a six-week high Tuesday. With a rise in oil prices, US yields also rose Tuesday. The yield on the 10-year US treasury note was at 4.80% at 1130 IST, up from 4.78% at 0900 IST.    

 

Trade volume in the market remained low amid the likelihood of further escalations between the US and Iran, dealers said. The total traded volume in the government securities market at 1140 IST was INR 105.85 billion, lower than INR 133.60 billion at 1130 IST Monday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.92–7.00% during the day, dealers said. (Diksha Tripathy) 

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India Gilts: Steady; brent crude unch on pause in escalation in war in W Asia

 

	0938 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.84	99.86	99.83	99.86	99.84
YTM (%)	6.9614	6.9582	6.9622	6.9582	6.9607

 

MUMBAI--0938 IST--Government bond prices were steady as no escalation in war in West Asia kept Brent crude oil prices unchanged overnight, dealers said. Traders refrained from aggressively building positions amid a lack of major domestic triggers which kept trading volume subdued, dealers said. Brent crude oil prices remain higher than the crucial $95 per barrel mark, which weighed on market sentiment, dealers said. Traders are likely to track the result of a state government bond auction for cues, dealers said.

 

"The market is steady...trading volume is also very small," a dealer at a primary dealership said. "For today, I think, the state auction is the only event and might lend some cues."

 

Brent crude oil futures for mid-month delivery were largely unchanged at $97.63 per barrel from $97.45 per barrel at the end of Indian trading hours Monday. However, traders refrained from placing aggressive bids as uncertainty hovered around the potential ceasefire in the West Asia war which kept Brent crude oil prices above the psychologically crucial $95 per barrel. The yield on the 10-year benchmark US Treasury note was higher at 4.78%, up from 4.77% at the end of Indian trading hours Monday, which also weighed on bond prices.

 

At the state bond auction, eight states will raise a total of INR 169 billion on Tuesday. The quantum is 35% lower than the INR 260 billion scheduled for this week in states' indicative borrowing calendar for Jul-Sept. Traders expect the demand for these bonds to be firm due to lower supply. However, they expect the spread between state bonds and central government bonds to remain similar to last week's auction. Some traders are concerned about states' fund raising being unusual. The result of the auction is likely to lend cues, dealers said.

 

The total traded volume in the government securities market at 0938 IST was INR 11.50 billion, lower than INR 26.85 billion at 0930 IST Monday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt is seen in a range of 6.94–6.98% during the day, dealers said.

 

Traders refrained from building aggressive positions ahead of the release of US CPI data scheduled this week and the Federal Open Market Committee meeting in mid-September. Traders will closely track the decision of the US rate-setting panel on policy as it will be a key trigger for the Reserve Bank of India's Monetary Policy Committee to raise the repo rate, dealers said. Some traders expect the MPC to hike rate even if the US keeps its policy rate unchanged. Traders also expect the Indian central bank to announce measures to absorb liquidity from the banking system which will likely pull up bond prices.  (Janwee Prajapati) 

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India Gilts: Seen steady as oil remains up; state bond auction to lend cues

 

MUMBAI – Government bond prices are seen opening steady as prices of Brent crude oil remained largely unchanged from Monday, dealers said. A slight rise in US Treasury yields is likely to weigh on Indian bond prices, dealers said. Traders will also closely track the result of the auction of state government securities Tuesday, which is likely to lend further cues to the market.

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 6.96% Tuesday and move between 6.92% and 7.00% during the day, dealers said. Monday, the bond ended at INR 99.84, or a yield of 6.9607%. Trading volume is likely to remain low as most traders are expected to remain cautious amid escalating tension in West Asia. Traders will also refrain from placing aggressive bets ahead of the state bond auction. 

 

Demand from banks and other investors at the auction is expected to be firm due to low supply, dealers said. Eight states will raise INR 169 billion through the sale of bonds Tuesday. The auction will take place between 1030 IST and 1130 IST. The size of the actionable securities is smaller than INR 260 billion indicated for the week in the calendar for state borrowing for Jul-Sept.  

 

On the global front, strikes between the US and Iran are likely to dampen market sentiment, dealers said. Brent crude oil prices remained above $97 per barrel, well above the psychologically crucial $95 level, and marginally changed from the end of Indian gilt market hours Monday.

 

Oil prices remained elevated as Iran allegedly threatened Monday to retaliate against any fresh US attacks on its assets, warning that energy infrastructure across the region, including US oil and gas interests, could be vulnerable, according to a Reuters report. Investors closely track a shipping arrangement between Iran and Oman concerning the Strait of Hormuz, which Tehran said was close to being finalised, as per a Bloomberg report. The development has raised questions over how Washington could respond following its weekend strikes on Iranian vessels. Iran has also warned that vessels near Oman's coast remain at risk of attack, the report said.

 

The rise in oil prices has renewed concerns over a potential inflationary shock, particularly as investors assess the implications for central banks' interest rate paths. Market attention now turns to US inflation data due this week, the final major economic indicator before the Federal Open Market Committee's September 15-16 meeting. Expectations from US monetary policy have also shifted after Friday's stronger-than-expected nonfarm payrolls data, with markets now pricing in roughly a 60% probability of a rate hike this month. A hike would significantly impact US yields, dealers said. At 0800 IST, the yield on the 10-year benchmark US Treasury note was 4.78%, up from 4.77% at the end of India gilt market hours Friday. US markets were shut Monday for Labor Day. 

 

On the domestic front, traders are likely to look out for any measures by the RBI to drain surplus liquidity. Given the expectations of a rate hike, some traders expect the central bank to announce additional measures to absorb excess liquidity from the banking system amid such a large surplus, dealers said. The surplus liquidity in the banking system is expected to warrant measures to drain durable liquidity beyond the variable rate reverse repo operations the RBI is currently conducting, they said.

 

Traders are also awaiting the release of the borrowing calendar for state and central government bond issuances for the next quarter and the second half of the current financial year, respectively. Traders will also focus on the proportion of different bond tenures in the calendar, dealers said. The RBI has begun meetings with market participants to discuss the Centre's borrowing calendar, they said.  (Diksha Tripathy) 

 

End

 

US$1 = INR 94.8175

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

 

Edited by Rajeev Pai

 

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