More Stories

Informist, Wednesday, Sept. 9, 2026

 

By Cassandra Carvalho

 

MUMBAI – Prices of government bonds ended lower Wednesday as near-month Brent crude oil futures topped $100 per barrel for the first time since July as the US and Iran continued their strikes in the Persian Gulf region. Albeit, systemic liquidity hovered near a record high, limiting a fall in bond prices as banks, especially private-sector banks, pumped cash into government bonds, dealers said. Considering just geopolitical factors, traders had expected the yield on the 10-year benchmark 6.94%, 2036 bond to hit the psychologically crucial level of 7.00% if Brent hit $100 per barrel. However, hitting 7% is currently unlikely if systemic liquidity remains flush, dealers said. 

 

The 10-year benchmark 6.94%, 2036 bond ended at INR 99.87 from INR 99.97 Tuesday. The yield on the bond rose to 6.9568% from 6.9431% at the end of the previous session. "In G-sec (government securities), the levels indicate more of a buying just because of FCNR (foreign currency non-resident deposits), because if you look at crude and US 10-year (yield), the inflationary pressure is there, and rate hikes are expected," a dealer at an insurance company said. "There could be a rate hike in December, but as of now banks are buying because of the liquidity."

 

The price of Brent crude oil for delivery in November rose to $100.71 per barrel at the end of gilt market hours, from $99.48 at 0900 IST, also rising overnight from $98.53 per barrel at 1700 IST Tuesday, as the US attacked Iranian tankers and Iran attacked American bases in the region.

 

The yield on the benchmark 10-year US Treasury note hit 4.82%, the highest since November 2023, tracking the rise in crude oil prices, as inflation fears mounted nearing the release of US CPI data for August, due Friday. The 10-year US yield has risen 87 basis points since the US-Iran war began late February, while the 10-year Indian government bond yield has risen a mere 30 bps in the same period. The narrowing of the interest rate differential between the two rates is of concern to domestic traders, with foreign portfolio investors likely to sell gilts given the global backdrop, dealers said. As of 1800 IST, foreign portfolio investors net sold gilts worth INR 2.53 billion through the Fully Accessible Route Wednesday, according to data from Clearing Corp. of India Ltd., making them net sellers for the third consecutive session. The data get updated with a lag. FPIs have, however, net sold a tiny sum of INR 7 billion through this route so far this month.

 

Domestically, however, surplus liquidity remained near a record high, prompting banks to park funds in gilts, with some buying the 15-year benchmark while several traders from asset and liability management desks favoured short-term gilts. The ample liquidity was reflected in the cut-off yields at the Treasury bill auction. Mutual funds and some banks bid aggressively, especially for the 91-day T-bill, with its cut-off yield at the lowest since July 2022. This was when the 364-day T-bill yield was the highest since May. This disparity comes as traders price in rate hikes by the Reserve Bank of India's Monetary Policy Committee but surplus liquidity keeps the short-end rates anchored, dealers said. 

 

"Now that psychological barrier has come off, we will only go near 7.00% (yield on the 10-year benchmark) if RBI comes up with some durable liquidity (draining) measures," a dealer at a state-owned bank said. 

 

Total turnover on the RBI's Negotiated Dealing System–Order Matching system was INR 379.55 billion, dropping from INR 424.85 billion Tuesday amid caution ahead of inflation data and expectations of liquidity-draining measures.

 

OUTLOOK

Thursday, gilts may continue to 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 liquidity in the banking system is also being closely watched. The central bank likely conducted dollar-rupee sell-buy swaps of about a month's tenure in the foreign exchange market Wednesday.

 

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, beyond the variable-rate reverse repo operations the RBI has been conducting, they said. Traders expect the yield on the 10-year benchmark bond to hit 7.10%, tracking global yields and as rate hikes are priced in, though this is seen to be unlikely in the near term amid flush liquidity.

 

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's Monetary Policy Committee's repo rate decision in October, dealers said. US CPI inflation for August, due Friday, is seen rising 3.4% on year, according to a survey compiled by The Wall Street Journal. India's CPI inflation for August is seen at 4.9-5.1%, rising further from the central bank's 4% target.

 

Traders are also waiting for 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 want to see the proportion of different bond tenures in the calendar, dealers said. The RBI has held several meetings with market participants this week and the last 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.

 

	WEDNESDAY		TUESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	99.8700	6.9568%	99.9650	6.9431%
6.48%, 2035	97.0875	6.9165%	97.1500	6.9069%
6.36%, 2031	99.4300	6.5085%	99.5000	6.4900%
7.06%, 2041	99.5850	7.1044%	99.6100	7.1017%
7.24%, 2055	96.2500	7.5604%	96.1600	7.5684%

 

---

India Gilts: Down more as Brent crude tops 100/bbl; surplus liquidity cap ylds

 

	1454 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.86	99.92	99.84	99.86	99.97
YTM (%)	6.9582	6.9499	6.9611	6.9582	6.9431

 

MUMBAI--1454 IST--Government bond prices fell further after Brent crude oil prices rose past $100 per barrel mark, a six-week-high, dealers said. Brent crude oil prices rose due to the renewed escalation in the US-Iran war which also weighed on market sentiment, dealers said. However, the fall in bond prices was limited due to excess liquidity in the banking sytem, dealers said. Likely purchases from banks also supported the bond prices, dealers said.

 

Brent crude oil futures for mid-month delivery were at $100.53 per barrel, up from $99.53 at 0900 IST and up from $98.62 per barrel at the end of Indian trading hours Tuesday, which weighed on bond prices.  

 

"Brent is above $100 per barrel... We should have been around 7% already, but due to the liquidity surplus, we (bond yields) are still around 6.95%-96% (yield on the 10-year 6.94%, 2036 bond)," a dealer at a public sector bank said. "If we talk about the mid-term, I do not think we will rise above 7.05%...at least till MPC (Reseve Bank of India's Monetary Policy Committee meeting)." RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was little changed at INR 10.49 trillion Tuesday from INR 10.36 trillion Monday. The banking system liquidity surplus has risen to upwards of INR 11 trillion, which was the highest level of liquidity surplus since the RBI started compiling the data in January 2019.         

 

The cut-off yield on the 182-day T-bill was down 5 basis points and the cut-off yield on the 364-day T-bill was down less than 1 basis point from the cut-off set at the auction last week. The cut-off yield on the 364-day T-bill was little changed as traders continue to price in the likelihood of a repo rate hike by the RBI's MPC, dealers said. Some dealers expect at least two repo rate hikes in the current financial year.

 

The excess liquidity in the banking system also pulled down the cut-off yield set on the 91-day T-bill to 5.2089%, which was the lowest since Jul. 6, 2022. The RBI set a cut-off yield of 5.6174% and 5.9148% on the 182-day and 364-day T-bills, respectively. Mutual funds likely picked up the 91-day T-bills at the auction, dealers said.  

 

Traders also await the state borrowing calendar for the December quater and the G-sec borrowing calendar for the second half of the current financial year. Some traders expect the state borrowing calendar to be around INR 2.5 trillion–INR 2.8 trillion, while the borrowing calendar for the centre is likely to be around INR 8 trillion, dealers said. Traders will closely track the distribution of securities across tenures, as some traders expect the supply to be higher in the shorter tenure for the deployment of foreign currency non-resident (bank) deposits, dealers said. Others, however, expect the yield curve to flatten and a higher supply in short tenure will likely put more pressure on the shorter end of the curve, they said.  

 

The total traded volume in the government securities market at 1454 IST was INR 277.60 billion, lower than INR 312.25 billion at 1530 IST Tuesday, 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.  (Janwee Prajapati) 

---

India Gilts: Stay down as oil above $99/bbl; 91-day T-bill demand seen firm

 

	1145 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.88	99.92	99.85	99.86	99.97
YTM (%)	6.9561	6.9499	6.9604	6.9582	6.9431

 

MUMBAI--1145 IST--Government bond prices remained down as Brent crude oil prices stayed above $99 per barrel during the day Wednesday, dealers said. A slight intraday fall in US Treasury yields supported Indian bond prices, dealers said. Some traders bought bonds near 6.95% yield on the 10-year benchmark 6.94%, 2036 bond, which also supported bond prices. Traders now await the result of the Treasury bills' auction, which could lend cues to the market, they said.

 

The Reserve Bank of India invited bids to sell INR 90 billion of 91-day T-bills, INR 80 billion of 182-day T-bills, and INR 70 billion of 364-day T-bills between 1030 IST and 1130 IST. The demand at the auction was seen firm for the 91-day T-bills, dealers said. Mutual funds likely placed aggressive bids at the auction as they looked to deploy funds amid a large liquidity surplus, they said. This is likely to bring down the cut-off on the 91-day security, dealers said. 

 

For the 364-day T-bills, traders expect the auction cut-off yield to be higher than the market view amid concern about high inflationary pressures stemming from the war in West Asia. However, banks bid for the 364-day securities at the auction for asset-liability management, they said. The RBI is likely to set a cut-off of INR 98.7104, or 5.24% yield, on the 91-day Treasury bill at the auction Wednesday, according to an Informist Poll. The cut-off on the 182-day T-bill is seen at INR 97.2741, or 5.62% yield, and that on the 364-day T-bill is seen at INR 94.4431, or 5.90% yield, as per the poll.

 

"The 91-day (T-bill) cut-off (yield) will definitely be lower than last time because mutual funds were looking to deploy funds with so much liquidity in the system," a dealer at a private-sector bank said. "The 364-day (T-bill) cut-off may see some pressure."    

 

At the previous auction, the RBI had set a cut-off yield of 5.26% on the 91-day T-bill, 5.66% on the 182-day T-bill, and 5.91% on the 364-day T-bill. 

 

Intraday, bond prices stayed at a lower level than Tuesday as Brent crude oil hovered around $99 per barrel, dealers said. Traders remained watchful of Brent crude oil prices amid the likelihood of further escalations in the US-Iran war, dealers said.

 

Some traders bought bonds near 6.95% yield on the 10-year 2036 bond, which supported gilt prices, dealers said. The total traded volume in the government securities market at 1145 IST was INR 129.00 billion, higher than INR 95.85 billion at 1130 IST Tuesday, 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) 

---

India Gilts: Dn as Brent crude near $100/bbl; mkt cautious before US CPI Fri

 

	0945 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.91	99.92	99.85	99.86	99.97
YTM (%)	6.9517	6.9499	6.9604	6.9582	6.9431

 

MUMBAI--0945 IST--Government bond prices fell in early trade tracking a rise in Brent crude oil prices due to escalation in the West Asia war, dealers said. However, traders picked up bonds at levels seen attractive, limiting the fall in bond prices. Traders were cautious ahead of the release of US CPI inflation data Friday, dealers said.  

 

"The market is down because of Brent crude...though it has eased slightly from opening, it is still higher than yesterday's level," a dealer at a primary dealership said. "Everybody is buying at these levels, simply because there is so much liquidity in the market." RBI's net liquidity absorbed--a proxy for the banking system liquidity surplus--was little changed at INR 10.49 trillion Tuesday from INR 10.36 trillion Monday. Some traders expect the RBI to announce measures to absorb excess liquidity from the system which will likely weigh on bond prices, dealers said. However, until such a measure is announced, traders do not expect the bond yields to rise above 6.98%, and it is unlikely to sustain any rise above these levels, dealers said. 

 

Brent crude oil futures for mid-month delivery were trading close to $100 per barrel at $99.53 per barrel, up from $98.62 per barrel at the end of Indian trading hours Tuesday. Crude oil prices climbed following an escalation in the US-Iran conflict after the US launched strikes on Iranian targets, saying they were in response to Tehran's attempt to target a US warship with ballistic missiles, and Iran retaliated by attacking 20 vessels, including two American ships, according to media reports. Iran also fired a barrage of missiles at US military positions in Jordan in direct retaliation for attacks on Iranian oil tankers near Kharg Island and the port of Jask.

The rise in crude oil raised concern about a potential inflationary shock, particularly as investors assessed the implications for central banks' interest rate paths. Traders will closely track the release of the US CPI inflation data scheduled to be released on Friday, which is likely to give a signal on the Federal Open Market Committee's decision on a policy rate, dealers said. 

 

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 0945 IST was INR 43.95 billion, lower than INR 11.30 billion at 0930 IST Tuesday, 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.  (Janwee Prajapati) 

---

India Gilts: Seen down as Brent nears $100/bbl; volume likely to remain low

 

MUMBAI – Government bond prices are seen opening lower Wednesday, tracking a rise in Brent crude oil prices, dealers said. The elevated US Treasury yields are also likely to weigh on Indian bond prices, dealers said. Traders expect the total turnover in the government securities market to remain low Wednesday as escalations in the US-Iran war are likely to dampen sentiment.        

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 6.95% Wednesday and move between 6.92% and 7.00% during the day, dealers said. Tuesday, the bond ended at INR 99.97, or a yield of 6.9431%. At a 6.95% yield, some state-owned banks may buy the 10-year benchmark bond, which could help defend the level. However, most traders are likely to avoid aggressive bets amid renewed fighting between the US and Iran, which is likely to weigh on bond prices. 

 

Brent crude oil futures for November delivery rose overnight and were at $99.34 per barrel at 0750 IST, up from $98.53 per barrel at the end of Indian gilt market hours Tuesday. Oil prices rose significantly after Iran launched fresh attacks on US military assets in the Gulf. Attacks on Saudi energy facilities have also pushed oil prices higher.

   

The steady rise in oil prices over the past four sessions and the escalation of the war in West Asia have fuelled concerns about 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 Friday, the final major economic indicator before the Federal Open Market Committee's September 15-16 meeting. Markets are 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 4.81%, unchanged from 1700 IST Tuesday.  

 

Wednesday, traders will also track the results of the Treasury bill auction later in the day. The RBI will auction INR 90 billion of 91-day T-bills, INR 80 billion of 182-day T-bills, and INR 70 billion of 364-day T-bills between 1030 IST and 1130 IST. The cut-off yields are likely to be similar to those set at last week's auction, as liquidity in the banking system remains comfortable, dealers said. The RBI had set a cut-off yield of 5.26% on the 91-day T-bill, 5.66% on the 182-day T-bill, and 5.91% on the 364-day T-bill at the previous auction. 

 

Traders will be closely watching for any measures by the Reserve Bank of India to drain surplus liquidity this week. 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 also await 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 95.1050

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.