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Informist, Thursday, Sept. 24, 2026

 

--India's 10-yr benchmark gilt yield ends at 7.1067%, highest since May 21 

 

By Aaryan Khanna

 

NEW DELHI – Government bond yields ended higher Thursday, tracking an overnight surge in US Treasury yields and crude oil prices, which rose further intraday before cooling by the time the market closed at 1700 IST, dealers said. The negative global cues and fading hopes of a quick end to the war in West Asia added to investor caution before the INR 340-billion auction of the 10-year benchmark 6.94%, 2036 gilt Friday, they said.

 

The benchmark bond ended at INR 98.84, down from INR 99.27 Wednesday. Its yield rose to 7.1067% from 7.0447% at the end of the previous session, ending at its highest level since May 21. The impact of the global cues was apparent as the government bond yield curve "bear flattened", with short-term yields rising more than those on long-term bonds, dealers said. Some traders expect the benchmark yield to approach 7.14%, its highest level in 2026-27 (Apr-Mar), at the time of the auction Friday after topping out at 7.1155% Thursday.

 

"The market ran ahead of itself in expecting a peace deal. Now we are dealing with a brutal reversal because the UN meeting is over and the statements are only more fiery," a dealer at a primary dealership said. "If crude goes towards $110 per barrel or the 10-year US yield hits the target of 5.25%, it is easy to see the high of 7.14% (for the 10-year yield in FY27) break as well."

 

Brent crude for November delivery topped $106 per barrel during Indian market hours from less than $100 per barrel at 1700 IST Wednesday. The 10-year US Treasury yield jumped to as high as 5.15%, the most since 2007, from less than 5.00% at the close of Indian markets Wednesday. The adverse global cues led to consistent selling from foreign banks and foreign portfolio investors through the day, especially with reports that some factions in Iran want to intensify the war with the US, dealers said. The upward pressure on gilt yields eased towards the end of the session as the Brent contract eased below $105 per barrel and the 10-year US yield was at 5.12% at 1700 IST.

 

State-owned banks stepped up purchases as benchmark yields surged to multi-month highs, keeping the 10-year benchmark gilt yield below 7.10%. Banks flush with cash from robust foreign currency non-resident (banks) deposits also picked up the five-year benchmark 6.36%, 2031 gilt for their asset-liability management as its yield rose to levels last seen in April, dealers said. Even with the Reserve Bank of India selling short-term gilts through open market operation auctions in September, some banks still had excess funds which they wanted to park in gilts before liquidating those investments in the festival season, they said.

 

However, traders continued to short-sell the 6.94%, 2036 gilt before its auction after a wave of short-covering earlier this week, when reports suggested that the US and Iran were engaging diplomatically to end the war. In part due to the significant short sales, the supply should sail through provided US yields and crude oil prices don't rise further, dealers said. This is likely to be the last auction of the 6.94%, 2036 gilt as its outstanding will top the key INR 2-trillion mark at which the government usually replaces a bond to avoid bunching up repayments.

 

With crude oil remaining above $100 per barrel, traders continue to expect the RBI's Monetary Policy Committee to raise interest rates at its October meeting. Comments from RBI Deputy Governor Poonam Gupta after market hours Wednesday were considered "dovish" and not suggestive of an imminent repo rate hike but they did not change market expectations, dealers said. Gupta said CPI inflation would remain within the RBI's 2-6% target band throughout FY27. Traders expect monthly readings above 6% in the December quarter. Meanwhile, the rise in long-term yields was capped by robust demand from life insurance companies in a week with lower-than-expected supply of state bonds and no long-term bonds at the weekly gilts auction, dealers said.

 

Total turnover in the government securities market was INR 434.35 billion Thursday, higher than INR 396.70 billion Wednesday, data from Clearing Corp. of India Ltd. showed. There were no trades using the RBI's e-rupee wholesale pilot Thursday, as has been the case for several months now.

 

OUTLOOK

On Friday, gilt prices will track movements in US yields and crude oil prices at the open. Later in the day, bond prices are likely to take cues from the result of the 10-year 6.94%, 2036 bond's auction at 1030-1130 IST, dealers said. Bond prices may be under pressure before the auction though the supply is likely to sail through on short-covering and investor demand at the highest yields on offer in FY27, they said. 

 

Many traders expect the Monetary Policy Committee to hike the repo rate by 25 basis points and the RBI to announce more measures to drain durable liquidity, including more OMO sales of up to INR 1 trillion in October. Some traders find current yields attractive for buying bonds, since the 10-year bond is unlikely to sustain a rise above its May high of 7.14%, 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. Informist reported, quoting a senior finance ministry official, that the calendar is likely to be released Friday. Some expect more supply of seven-year bonds while others expect more 15-year bond supply, and still others expect more supply of three- to five-year bonds. 

 

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 expected to move between 7.00% and 7.18%, dealers said.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	98.8400	7.1067%	99.2650	7.0447%
6.48%, 2035	96.0075	7.0856%	96.4000	7.0245%
6.36%, 2031	98.2900	6.8147%	98.6000	6.7310%
7.06%, 2041	98.2700	7.2507%	98.7600	7.1958%
7.24%, 2055	95.6800	7.6108%	96.1000	7.5735%

 

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India Gilts: Near day's low as Brent rises on US-Iran war escalation risk

 

--Dealers: Gilts down more as crude, US yields rise to day's highs 

--Dealers: Gilts at day's low on report Iran could extend war 

--Dealers: Gilts slump; traders reassess hope of quick end to W Asia war 

--Dealers: PSU bank buys to limit losses in gilts seen moderating 

--Dealers: 10-year gilt yield may hit FY27 high of 7.14% by auction Fri 

 

	1500 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.79	99.00	98.78	99.00	99.27
YTM (%)	7.1137	7.0834	7.1155	7.0834	7.0447

 

MUMBAI--1500 IST--Government bond prices traded near the day's low Thursday after Brent crude oil prices rose past the psychologically crucial level of $105 per barrel on media reports that Iran may extend the war with the US, dealers said. Consequent to the rise in oil prices, US bond yields also rose, which further weighed on Indian bond prices, dealers said. 

 

The yield on the 10-year benchmark 6.94%, 2036 bond rose to 7.1133%, hitting its highest level since May 22, 2026. Traders reassessed the likelihood of an end to the war in West Asia after Iran's FARS News said Iran could extend the war to the Indian Ocean if it is attacked again by either US or Israel. "Since the conflict has spread from the Persian Gulf and Strait of Hormuz to the Red Sea, it is possible that, in response to more war, the front will expand even further, reaching the Indian Ocean and perhaps beyond," said Yahya Rahim Safavi, an adviser to Iran's supreme leader Mojtaba Khamenei, in a video released by Fars news agency.

 

The expectations of an escalation in the war have pushed oil prices above $105 per barrel. Brent crude oil futures for November delivery traded at $105.46 per barrel at 1500 IST, up over 3% from 0900 IST. The rise in oil prices pushed elevated US yields to even higher levels during the day. The yield on the 10-year benchmark US Treasury note touched the day's peak of 5.15%, the highest since 2007. The 30-year Treasury yield rose to 5.4440%, its highest level since 2004, as per Dow Jones. Traders will closely track the movement in crude oil pries and US yields as a further rise could push Indian bond yields to higher levels. 

 

Some dealers also believe the yield on the 10-year benchmark 2036 bond could rise to the current financial year's high of 7.14% by its auction Friday. The government will sell INR 340 billion of 6.94%, 2036 bond at the auction between 1030 IST and 1130 IST Friday. Traders are likely to cover short positions, which is likely to help the auction demand, they said.    

 

Thursday, state-owned banks and traders also bought bonds as the yield on the 10-year 2036 bond rose above 7.10%, which limited losses, dealers said. Some traders also covered short positions as the price of the 2036 benchmark bond fell to the day's low of INR 98.78.

 

The total turnover in the government securities market at 1500 IST was INR 347.55 billion, up from INR 311.50 billion at 1530 IST Wednesday, data from Clearing Corp. of India Ltd. showed. Traders will closely track developments in the war in West Asia which could impact crude oil prices and, in turn, bond prices. The yield on the 10-year gilt is seen in a range of 7.05-7.14% for the rest of the day, dealers said.  (Diksha Tripathy)

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India Gilts: Fall more on intraday rise in crude oil; short covering helps

 

--India's 6.94%, 2036 gilt yield hits 7.1053%, highest since May 22 

 

	12145 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.85	99.00	98.84	99.00	99.27
YTM (%)	7.1053	7.0834	7.1067	7.0834	7.0447

 

MUMBAI--1215 IST--Government bond prices fell further following an intraday rise in Brent crude prices which had already risen above the crucial $100 per barrel near the end of the Indian trading session Wednesday, weighing on the sentiment, dealers said. Moreover, the rise in 10-year US Treasury yields to their highest level in nearly two decades also weighed on bond prices. The fall in bond prices led traders to cover short positions, which limited the fall. 

 

"Currently the market is reacting only to crude and US yields," a dealer at a primary dealership said. "I don't think the yield will sustain above 7.10% until crude remains below $105 per barrel."

 

Tracking a sharp fall in bond prices, traders covered some of their short bets placed in the 6.94%, 2036 bond ahead of its weekly auction Friday, which also supported 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 1104 IST showed trades worth INR 184.75 billion in the 6.94%, 2036 gilt, down from INR 186.50 billion Wednesday. Traders had placed short bets on this bond as they wished to cover these positions at the auction, driving demand for the 6.94%, 2036 bond at the auction.

 

Public sector banks likely bought bonds at levels seen as attractive, which capped any significant rise in the 10-year bond yield above the crucial 7.10%, dealers said. Foreign sector banks, on other hand, likely sold gilts, continuing their selling from Wednesday's session when they sold INR 32.15 billion worth of gilts. 

 

The total turnover in the government securities market at 1215 IST was INR 213.45 billion, up from INR 144.75 billion at 1230 IST Wednesday, data from Clearing Corp. of India Ltd. showed. In the secondary market, 76% of the total trade volume was concentrated in the most liquid 6.94%, 2036 bond, as traders refrained from building aggressive positions ahead of the Reserve Bank of India's Monetary Policy committee's decision in October, dealers said. Traders also remained uncertain about the development in the West Asia war after Brent crude oil prices rebounded from the previous session's low.

 

Brent crude oil futures for mid-month delivery were at $103.72 per barrel, up from $102.15 per barrel at 0900 IST and up from $100.19 per barrel at the end of Indian trading hours Wednesday. Traders had earlier expected Brent crude oil prices to fall on hope of a potential ease in oil supply, concerns which could have pushed down the yield on the 10-year benchmark bond to near the 6.98% mark. However, given the fresh escalation in the west Asia war, the yield on the 10-year gilt is seen in a range of 7.05-7.12% during the day, dealers said. Traders largely expect the bond yields to remain below the historically significant 7.14% level till the RBI's MPC.  (Janwee Prajapati)

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India Gilts: Slump as US yields surge, Brent crude oil price tops $100/bbl

 

--Gilts slump as US yields surge, Brent crude oil price back above $100/bbl 

 

	0945 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.91	99.00	98.89	99.00	99.27
YTM (%)	7.0965	7.0834	7.0994	7.0834	7.0447

 

MUMBAI--0945 IST--Government bond prices slumped Thursday, following a sharp overnight rise in US Treasury yields and Brent crude oil prices, dealers said. However, purchases from some state-owned banks near 7.10% yield on the benchmark 10-year 6.94%, 2036 bond limited a fall in bond prices, dealers said. 

 

Traders also maintained caution amid no clarity over the end of the war in West Asia, which weighed on market sentiment Thursday. The 6.94%, 2036 bond remained under pressure ahead of its fresh INR 340 billion supply at the auction Friday, dealers said. The higher yields in the secondary market are likely to pose a challenge at the auction, dealers said. 

 

Bond prices also faced the heat of a rise in US yields Thursday, dealers said. The yield on the 10-year benchmark US Treasury note was 5.12% at 0945 IST, sharply up from 4.98% at the end of Indian gilt market hours Wednesday. Brent crude oil prices also rose post market hours Wednesday. Brent crude oil futures for November delivery were trading at $102.27 per barrel at 0945 IST, up over 2% from 1700 IST Wednesday. Traders will closely track any further movement in oil prices and US yields as it could lend direction to the market during the day, they said.

 

"Mostly, higher crude and US yields are affecting the market," a dealer at a state-owned bank said. "Some buying is there at these levels by PSUs (state-owned banks), but mostly people are cautious because macroeconomic factors are not supporting the market. The risk appetite has been affected."

 

The total turnover in the government securities market at 0945 IST was INR 73.10 billion, up from INR 33.15 billion at 0930 IST Wednesday, data from Clearing Corp. of India Ltd. showed. Traders will closely track developments in the war in West Asia which could impact crude oil prices and, in turn, bond prices. The yield on the 10-year gilt is seen in a range of 7.05-7.12% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen down as US ylds soar; Brent above $100/bbl likely to weigh

 

MUMBAI – Government bond prices are seen opening lower Thursday due to a sharp overnight rise in US Treasury yields, dealers said. Bond prices are also likely to face pressure as Brent crude oil prices climbed back above $100 per barrel, after remaining lower for the past few sessions, dealers said. Traders are likely to maintain caution amid no clarity over the end of the US-Iran war, which is likely to weigh on the trading volume Thursday. 

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 7.06% Thursday and move between 7.03% and 7.10% during the day, dealers said. Wednesday, it ended at INR 99.27, or 7.0447% yield. The 10-year 2036 bond is likely to remain under pressure ahead of its fresh supply at an auction Friday. The government will sell INR 340 billion of the 6.94%, 2036 bond Friday. Traders are likely to place short bets Thursday as they look to cover these positions at the auction Friday, they said. 

 

Bond prices are likely to face the heat of rising global bond yields, dealers said. US Treasury yields jumped late Wednesday and remained elevated in early trade Thursday, with traders increasingly pricing in the possibility of further Federal Reserve rate hikes as inflation remains above the central bank's 2% target. The 10-year Treasury yield climbed to a multi-year high of 5.13%, marking its biggest one-day increase since the market turmoil triggered by Trump's April 2025 tariff announcement. A lacklustre $70 billion auction of five-year Treasury securities also pushed yields above 5% for the first time since 2007. At 0800 IST, the yield on the 10-year bond was 5.12%, up from 4.98% at the end of Indian gilt market hours Wednesday. Traders will closely track any movement in US yields as it could affect Indian bond prices. 

 

An overnight rise in Brent crude oil prices is also likely to put pressure on bond prices Thursday, dealers said. Oil prices climbed back above $100 per barrel after markets parsed competing speeches from Iran and the US at the UN General Assembly. Iran said it remained open to diplomacy to end the US-Iran war, although the two sides remained far apart on how to reach a resolution. The comments came after Iran's president told the UN General Assembly that Tehran would never surrender to US pressure. Any development in US-Iran peace talks or further escalation in the war in West Asia could impact oil prices, which in turn would impact prices of Indian gilts, dealers said. 

 

Traders will also track any major movement in the rupee after the Reserve Bank of India Deputy Governor Poonam Gupta's remark Wednesday. Gupta said there was a fair case for the rupee to appreciate going forward. "The rupee has cumulatively depreciated by 13.1% (on a point-to-point basis) from March 31, 2025, to September 16, 2026... One may think of the cumulative depreciation of the INR (or shall one say its overcorrection) in the past year and a half to be a temporary phenomenon," Gupta said, while speaking at the SBI Conclave in Mumbai. "There seems to be a fair case for the rupee to not just stabilise but perhaps even appreciate from the current levels," she said. A significant movement in the rupee may lend cues to the market during the day, dealers 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. Most traders expect little change in the Centre's plan compared with those in Apr-Sept, though bankers have put forth several preferences to the central bank. The RBI has held several meetings with market participants this month to discuss the Centre's borrowing calendar, they said. Some expect more supply of seven-year bonds, while others expect more 15-year bond supply, and still others expect more supply of three- to five-year bonds.  (Diksha Tripathy)  End

 

US$1 = INR 95.95

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

 

Edited by Rajeev Pai

 

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