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Informist, Thursday, Sept. 17, 2026

 

By Diksha Tripathy

 

MUMBAI – Government bond prices ended slightly higher Thursday, tracking a fall in Brent crude oil prices and US Treasury yields during the day, dealers said. However, with the US Federal Reserve raising the policy rate, expectations of a hike in the Reserve Bank of India's repo rate have also gained pace, dealers said. 

 

The 10-year benchmark 6.94%, 2036 gilt ended at INR 99.25, against INR 99.21 on Wednesday. The bond's yield fell to 7.0463% from 7.0524% at the end of the previous session. The yield on the 10-year 2036 gilt moved between 7.04% and 7.08% during the day, with some buying near the upper end of the range preventing a further fall in bond prices, dealers said. The total turnover in the government securities market was INR 496.35 billion at 1700 IST, up from INR 332.85 billion at the end of Indian gilt market hours on Wednesday, data from Clearing Corp. of India showed.

 

Bond prices closely tracked the movement in Brent crude oil prices and US Treasury yields on Thursday, dealers said. Brent crude oil futures for November delivery were at $103.29 per barrel at 1700 IST, down 3.53% from 1700 IST on Wednesday. US Treasury yields also fell during the day after rising overnight following the US Federal Open Market Committee's decision to raise its policy rate by 25 basis points to the 3.75%-4.00% range. The yield on the 10-year US Treasury note was at 4.97% at 1700 IST, down from the crucial 5.00% level it had crossed after the Fed's rate hike announcement late Wednesday.

 

Kevin Warsh, the US central bank chief,  said the rate hike was due to higher inflation and fuel prices stemming from the war in West Asia. The rate hike in the world's largest economy strengthened expectations of rate hikes in India as well, dealers said.

 

The chances of a repo rate hike by the RBI's Monetary Policy Committee at its October meeting – which, if it happens, would be the first since February 2023 – pushed Indian bond yields higher earlier in the day, dealers said.

 

"The expectations of a rate hike in October have certainly increased with the Fed hiking rates in the US," a dealer at a state-owned bank said. "The impact of the rate hike by the Fed will have global impact and a 25-basis point rate hike by the MPC in October won't be a surprise to the market now."

 

 

Bond prices also reacted sharply to the result of the open market operation, wherein the Reserve Bank of India invited bids to raise INR 500 billion through a bond sale auction, dealers said. The RBI offered to sell six gilts at the auction – the 7.59%, 2029 bond, the 6.79%, 2029 bond, the 7.61%, 2030 bond, the 5.77%, 2030 bond, the 6.68%, 2031 bond, and the 8.28%, 2032 bond.

 

While the auction sailed through and the RBI raised the entire notified amount, the cut-off prices were lower than traders' expectations, dragging down bond prices in the secondary market. State-owned banks were likely to have been the major participants at the auction and bid aggressively, dealers said. Some dealers expect these banks to have bought the bonds to switch securities at the INR-300-billion switch auction on Monday.

 

The RBI accepted all bids at the OMO sale, contrary to traders' expectations that the market would not absorb the full notified amount. Some traders viewed the higher cut-off yields at the auction as a signal of a potential rate hike by the RBI's Monetary Policy Committee at its October meeting, which pushed up bond yields further in the secondary market.

 

Traders said the Fed's policy rate hike may act as a push for the RBI's MPC to raise rates at its October meeting. However, some traders said the OMO cut-off should not be seen as a rate signal, but rather as a measure to mop up excess liquidity from the banking system. Traders expect the central bank to announce more such operations as banking system liquidity remains in large surplus, dealers said. The RBI's net absorbed liquidity – a proxy for the surplus – stood at INR 7.38 trillion on Wednesday, down from INR 9.85 trillion on Tuesday.

 

The RBI set a cut-off price of INR 105.63 for the 8.28%, 2032 gilt, INR 99.05 for the 6.68%, 2031 gilt, INR 96.34 for the 5.77%, 2030 gilt, INR 102.50 for the 7.61%, 2030 gilt, INR 100.24 for the 6.79%, 2029 gilt, and INR 102.25 for the 7.59%, 2029 gilt at the OMO sell auction on Thursday.

 

Some traders said the cut-off price set for the 8.28%, 2032 paper was significantly higher than market expectations. At subsequent OMO auctions, dealers expect cut-off yields to be even higher.

 

"PSUs actively bought today (Thursday) because they wanted to add these securities to their investment books and later at the switch auction, they will switch these tenures," a dealer at a private sector bank said. "No doubt they were actively there at the auction."

 

On Thursday, some traders also placed short bets ahead of the weekly gilt auction on Friday, as they expect to cover their positions at the auction, 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 at the auction from 1030 IST to 1130 IST on Friday. Traders called the current bond yields attractive for placing short bets as they expect yields to rise further. Some traders also made space in their portfolios for the fresh supply of gilts at Friday's auction, which weighed on bond prices, dealers said.

 

The fall in bond prices was limited as both public and private sector banks likely bought bonds at levels seen as attractive, while some traders covered short positions, dealers said. However, foreign banks, which likely bought bonds in early trade, trimmed their positions, dealers said.

 

OUTLOOK

On Friday, gilt prices will take direction from developments in the war in West Asia and its impact on crude oil prices. Traders will also track movements in US yields, they said. Elevated US yields have pushed Indian gilts out of favour with foreign investors and strengthened the case for a domestic repo rate hike as soon as October, dealers said.

 

Traders are likely to refrain from placing aggressive bets ahead of the weekly gilt auction on Friday, they said. Traders expect the auction to sail through; however, higher yields in the secondary market may dampen demand for the papers at the auction, in turn impacting cut-off prices. Some traders are likely to cover short positions at the auction, which could support higher cut-off prices for the papers, dealers said. The auction result is likely to lend direction to the market later in the day on Friday, 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. The proportion of different bond tenures in the calendar will provide cues on the shape of the gilt yield curve, dealers said.

 

The RBI has held several meetings with market participants this month to discuss the Centre's borrowing calendar, they said.

 

Any significant movement in the rupee and swap rates will also lend cues, dealers said. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 7.00% and 7.10%, dealers said.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	99.2525	7.0463%	99.2100	7.0524%
6.48%, 2035	96.3200	7.0359%	96.3500	7.0310%
6.36%, 2031	98.4000	6.7837%	98.4650	6.7661%
7.06%, 2041	98.6200	7.2115%	98.7450	7.1975%
7.24%, 2055	95.9300	7.5886%	95.5200	7.6251%

 

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India Gilts: Down as cut-off prices at RBI's OMO auction lower than view

 

--Dealers: Gilts fall as cut-off prices at RBI's OMO auction lower than view 

 

	1536 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.13	99.22	99.01	99.08	99.21
YTM (%)	7.0641	7.0517	7.0816	7.0714	7.0524

 

MUMBAI--1536 IST--Government bond prices were sharply down as the Reserve Bank of India set lower-than-expected cut-off prices at INR 500 billion worth of bond sales through open market operations, dealers said. Some traders also placed short bets ahead of the weekly gilt auction Friday, which also pulled down bond prices, dealers said. Losses were limited due to likely purchases by banks, dealers said.

 

"The cut-off yields are higher than expected...especially for the 8.28%, 2032 bond, the 6.68%, 2031 bond, the 5.77%, 2030 bond, and the 7.61%, 2030 bonds," a dealer at a primary dealership said. "Though people are already expecting a rate hike, so higher cut-off yields was also a kind of signal for the market."   

   

The Reserve Bank of India accepted all bids for the INR-500-billion OMO sale, contrary to traders' expectations that the market would not absorb the full notified amount. Some traders viewed the higher cut-off yields at the auction as a signal of a potential rate hike by the RBI's Monetary Policy Committee at its October meeting, which pushed up bond yields in the secondary market, dealers said. Traders see the policy rate hike by the Federal Open Market Committee meeting as an incentive for the RBI's MPC to hike rates at its October meeting, dealers said. 

 

However, some traders said the OMO cut-off should not be seen as a rate signal but rather as a measure to mop up excess liquidity from the banking system. Traders now expect the central bank to announce more such operations as banking system liquidity remains in large surplus, dealers said. The RBI's net absorbed liquidity — a proxy for the surplus — stood at INR 7.38 trillion on Wednesday, down from INR 9.85 trillion on Tuesday.

 

The RBI set a cut-off of INR 105.63 cut-off for 8.28%, 2032 gilt, INR 99.05 cut-off for 6.68%, 2031 gilt, INR 96.34 cut-off for 5.77%, 2030 gilt, INR 102.50 cut-off for 7.61%, 2030 gilt, INR 100.24 cut-off for 6.79%, 2029 gilt, and INR 102.25 cut-off for 7.59%, 2029 gilt at the OMO sell auction Thursday. Some traders said the cut-off price set on the 2032 paper was significantly higher than market expectations. "If the RBI is accepting such tail (high yields) in the first (OMO) auction itself, then the cut-off at subsequent auctions will be even higher," a dealer at a small finance bank said.

 

Some traders also placed some short bets ahead of the weekly gilt auction Friday as they expect to cover their positions at the auction, dealers said. Some traders said the levels are lucrative to place short bets as they expect the yield to rise further going ahead. Some traders also made space in their portfolios for the fresh supply of gilts at the auction Friday, which also weighed on bond prices, dealers said. A proxy for tracking short sales in a particular bond is the number of trades in the paper in the special repo segment of the Clearcorp Repo Order Matching System. The data at 1530 IST showed trades worth INR 150.23 billion in the 6.94%, 2036 gilt, up from INR 141.17 billion Wednesday. The government will sell INR 170 billion of the 7.06%, 2041 bond, and INR 110 billion of the 7.43%, 2076 bond at auction at 1030-1130 IST Friday. 

 

The loss in bond prices was limited as both public and private sector banks likely bought bonds at levels seen as attractive while some traders covered short positions, dealers said. However, foreign banks which likely bought bonds in early trade trimmed their positions. The total traded volume in the government securities market at 1536 IST was INR 359.30 billion, higher than INR 250.55 billion at 1530 IST Wednesday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt was seen in a range of 7.00-7.10% during the day, dealers said.  (Janwee Prajapati)

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India Gilts: Recover most losses as US ylds ease; OMO participation seen weak

 

	1200 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.20	99.20	99.01	99.08	99.21
YTM (%)	7.0546	7.0546	7.0816	7.0714	7.0524

 

MUMBAI--1200 IST--Government bond prices recovered most losses after Brent crude oil prices and US Treasury yields eased during the day, dealers said. Traders awaited the result of the open market operations, wherein the Reserve Bank of India invited bids to raise INR 500 billion through sales of bonds at an auction. 

 

The RBI offered to sell six gilts – the 7.59%, 2029 bond, the 6.79%, 2029 bond, the 7.61%, 2030 bond, the 5.77%, 2030 bond, the 6.68%, 2031 bond, and the 8.28%, 2032 bond – at the auction. Demand for the papers at the auction was seen weak with a lower risk appetite amid higher yields in the secondary market, dealers said. The cut-off yields on the paper at the OMO auction are expected to be higher than the Financial Benchmarks India Pvt. Ltd.'s indicative levels, dealers said. For the 6.68%, 2031 bond, the cut-off price is seen at INR 99.37, or 6.83% yield, according to an Informist Poll. The paper was last valued at INR 99.49, or 6.80% yield, according to indicative prices published by Financial Benchmarks India Pvt. Ltd. Wednesday.

 

State-owned banks with a higher risk appetite were likely the major participants at the auction Thursday, dealers said. Traders do not expect the RBI to accept bids worth the entire notified amount at the OMO sale as it would have to set cut-off yields sharply higher than market levels to drain liquidity, dealers said. The total accepted amount at the auction is likely to be around INR 200-300 billion, dealers said. 

 

"At this OMO, the appetite was actually lower because people want to see how the RBI sets cut-offs this time around. That will lend cues for the other two OMOs," a dealer at a state-owned bank said. "For 5-year paper, we are seeing a cut-off (yield) of 6.85%." 

 

Intraday, Brent crude oil prices fell below the crucial $105 per barrel, which fuelled a recovery in bond prices, dealers said. The yield on the 10-year US Treasury note also eased by up to 2 basis points to 4.99%, which further helped bond prices. Traders will closely track the US yields and oil prices as any significant movement could impact bond prices, they said.  

 

The total traded volume in the government securities market at 1200 IST was INR 203.80 billion, higher than INR 131.95 billion at 1230 IST Wednesday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt was seen in a range of 7.00-7.10% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Down as 10-yr US yld remains at 5%; fall in Brent oil helps

 

	1000 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	99.04	99.10	99.01	99.08	99.21
YTM (%)	7.0772	7.0684	7.0816	7.0714	7.0524

 

MUMBAI--1000 IST--Government bond prices were down Thursday, tracking a rise in US Treasury yields after the US Federal Market Open Committee raised its benchmark overnight interest rate by 25 basis points to the 3.75%-4.00% range, dealers said. The expectations of more hikes in coming months also weighed on market sentiment, dealers said. 

 

The yield on the 10-year benchmark US Treasury note was at 5.01% at 0955 IST, up from 4.97% at the end of Indian gilt market hours Wednesday. US central bank chief Kevin Warsh said the rate hike was due to higher inflation and fuel prices stemming from the war in West Asia. A rate hike in the world's largest economy has strengthened expectations of rate hikes in India as well, dealers said. The chances of a repo rate hike by the Reserve Bank of India at the October Monetary Policy Committee meeting pushed Indian bond yields higher, dealers said. 

 

"Mostly, (a rise in) UST (US Treasury yields) is the main factor for the market today (Thursday)," a dealer at a private-sector bank said. "Bets of rate hike have certainly gone up now, even in India, and that is impacting bond prices."  

 

Some traders, especially state-owned banks, likely bought bonds as the yield on the 10-year benchmark bond approached the day's low of 7.08% Thursday. This prevented a further fall in bond prices in the secondary market, dealers said. An overnight fall in Brent crude oil prices also supported bond prices Thursday. Futures for November delivery were at $105.86 per barrel, down from $107.07 per barrel at 1700 IST Wednesday. Traders will closely track developments in West Asia and its impact on crude oil prices as it can lend further cues to the market.

 

Traders will also track the result of the INR-500-billion open market operations where the RBI will sell the 7.59%, 2029 bond, the 6.79%, 2029 bond, the 7.61%, 2030 bond, the 5.77%, 2030 bond, the 6.68%, 2031 bond, and the 8.28%, 2032 bond at an auction. Traders do not expect the RBI to accept bids worth the entire notified amount at the OMO sale as it would have to set cut-off yields sharply higher than market levels to drain liquidity, dealers said. A lower-than-expected cut-off price on these papers could result in yields rising further in the secondary market, dealers said.

 

The total traded volume in the government securities market at 1000 IST was INR 50.7 billion, higher than INR 43.95 billion at 1030 IST Wednesday, according to data from the Clearing Corp. of India Ltd. The yield on the 10-year gilt was seen in a range of 7.00-7.10% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen dn on high US ylds, fall in Brent to aid; OMO auction eyed

 

MUMBAI – Government bond prices are seen opening lower Thursday after the US Federal Open Market Committee unanimously decided to raise the policy rate by 25 basis points, which pulled up the yield on the 10-year US benchmark note to over 5?ter the decision, dealers said. However, Brent crude oil futures prices fell on easing concerns over supply from West Asia, which is likely to limit the fall in bond prices, dealers said. Later in the day, traders will track the result of the first open-market operations auction to sell bonds in five years. Traders are also likely to make some space in their portfolios ahead of the fresh supply at the weekly gilt auction Friday, which is likely to weigh on bond prices, dealers said.

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 7.08% Thursday and move between 7.00% and 7.15% during the day, dealers said. Bond prices will closely track the movement in Brent crude oil prices throughout the day, dealers said. However, traders expect the yield on the benchmark bond to remain below the historically significant 7.14% mark, at least till the decision of the Reserve Bank of India's Monetary Policy Committee next month. Public sector banks are likely to continue their buying momentum Thursday at attractive levels as these banks net bought about INR 16.73 billion worth of gilts Wednesday, which will limit the losses. Wednesday, the benchmark bond ended at INR 99.21, or a yield of 7.0524%.

 

Wednesday, the FOMC raised interest rates in the world's largest economy for the first time in over three years, as was widely expected. The 12-member panel voted unanimously to hike the Fed funds target range by 25 basis points to 3.75-4.00% to curb inflation that remains well above its target. The Summary of Economic Projections released along with the statement showed the median estimate of Fed officials was that the target rate would be raised by another 25 bps in the remainder of 2026. Though widely expected, the rate hike by the FOMC will weigh on market sentiments as traders expect the RBI's Monetary Policy Committee to follow suit. High US yields and crude oil prices have pushed India's gilts out of favour with foreign investors and made the case for a domestic repo rate hike as soon as October, dealers said. The yield on the 10-year benchmark US Treasury note was at 5.00%, up from 4.97% at the end of Indian trading hours Wednesday.

 

Brent crude futures for November delivery were at $105.45 per barrel, down from $107.03 at the end of Indian trading hours. Crude oil prices fell after reports of additional Saudi cargoes via Oman eased concerns over supply from West Asia, while a smaller-than-expected decline in US crude inventory added downward pressure on prices. Saudi Arabia plans to restore about 50% of its damaged East-West pipeline's capacity within days, with full restoration expected within six weeks, Bloomberg reported citing a person familiar with the matter.

 

Domestically, the RBI will sell the 7.59%, 2029 bond, the 6.79%, 2029 bond, the 7.61%, 2030 bond, the 5.77%, 2030 bond, the 6.68%, 2031 bond, and the 8.28%, 2032 bond at the auction at 0930-1030 IST. Traders do not expect the RBI to accept bids worth the entire notified amount at the OMO sale as it would have to set cut-off yields sharply higher than market levels to drain liquidity, dealers said. Although there were some concerns that the RBI could conduct more OMO sale auctions than the three announced, traders expect the central bank to switch to other methods after the Monetary Policy Committee's rate decision on Oct. 7. Any significant movement in the rupee and swap rates will also lend cues, they said.  (Janwee Prajapati) 

 

End

 

US$1 = INR 95.93

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

 

Edited by Avishek Dutta

 

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