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Informist, Thursday, Oct. 1, 2026

 

By Diksha Tripathy and Aaryan Khanna

 

MUMBAI/NEW DELHI – Government bond prices ended sharply lower Thursday, wrapping up a volatile week, as persistent pressure from elevated crude oil prices and US Treasury yields hurt demand for bonds, dealers said. The rise in crude oil underscored a likely increase in inflation in the coming months, which is likely to prompt repo rate hikes starting next week, they said. However, the INR-330-billion weekly gilt auction sailed through at cut-off prices similar to market expectations. 

 

The benchmark 10-year 6.94%, 2036 bond ended at INR 98.12, or 7.2133% yield, compared with its previous close of INR 98.29, or 7.1879% Wednesday. The yield on the 10-year benchmark bond ended at its highest closing level since Apr. 19, 2024, and moved between 7.18% and 7.23% during the day. The volatile session closed out a holiday-shortened week; India's financial markets will be shut Friday for Gandhi Jayanti. 

 

The 2036 bond had opened lower but soon reversed losses amid buying as the yield on the paper approached they key 7.20% in the initial trading hours. The buying momentum was not able to sustain as crude oil prices and US Treasury yields rose sharply, dealers said. Brent crude oil futures rose over 3% since the beginning of gilt trading hours Thursday and were above $100.50 per barrel at 1700 IST. The rise in oil prices likely came after news reports said three oil tankers were struck in the Strait of Hormuz.

 

The signs of further escalation in the war in West Asia also pushed US Treasury yields higher. The US 10-year Treasury yield climbed to its highest level since early 2002 Thursday, deepening a global bond sell-off and putting fresh pressure on emerging markets including India's gilts and equities, dealers said. The yield rose as high as 5.34%, crossing its 2007 peak, as investors sold government bonds on concerns over inflation, higher crude prices, and the possibility that US interest rates may stay elevated for longer.

 

"The story has consistently been the same thing: every time the domestic market wants to show it has depth and appetite at a particular level, the global situation turns worse," a dealer at a state-owned bank said. "At some point, even PSU banks will have to stop buying and say, this is enough MTM (marked-to-market loss) for me."

 

Back home, traders remained cautious ahead of the Reserve Bank of India's Monetary Policy Committee decision next week. Most market participants expect the rate-setting panel to increase the RBI repo rate by 25 basis points to 5.50% Wednesday. Traders avoided taking fresh positions aggressively heading into the policy meeting, which starts Monday, dealers said. The anticipation ahead of the expected start of the rate hike cycle and the RBI's commentary to accompany it has weighed on volumes earlier this week and that was also the case Wednesday despite the swings in the overseas cues.

 

The total turnover in the government securities market was INR 488.90 billion Thursday, similar to INR 486.05 billion Wednesday, data from Clearing Corp. of India showed. There were no trades using the RBI's wholesale e-rupee pilot, as has been the case for months.

 

Bond prices also reacted to the result of the weekly gilt auction Thursday, as the cut-off price on the 7.63%, 2056 bond was lower than traders' view, they said. The RBI set a cut-off price of INR 99.30 for the INR-90-billion of the 30-year bond at the auction, lower than an Informist poll median of INR 99.41. Some of the 30-year auction supply was brought by traders instead of investors, which led to some selling pressure in gilts of other maturities, dealers said. Demand also diverted to sovereign green bond of the similar maturity, which had a higher-than-expected cut-off price as it counts towards insurers' infrastructure investments, they said. 

 

Insurers had been keen to pick up bonds at current yield levels but awaited clarity on the quantum of state borrowing in Oct-Dec before piling on to gilts, dealers said. Traders expect the supply of state government securities to ramp up in the second half of the financial year, as is usually the case. Market participants expect a calendar of around INR 3.50 trillion for the December quarter, with an issuance of around INR 3.25 trillion.

 

The government had invited bids to raise INR 330 billion through the sale of the 6.20%, 2029 bond, the 6.57%, 2033 bond, the 7.63%, 2056 bond, and the 7.50%, 2056 green bond Thursday. The cut-off prices for most bonds were largely in line with the market view, dealers said. However, the 30-year bond likely faced pressure at the auction, which led to its lower-than-viewed cut-off price.

 

Demand for the short-term bonds was on expected lines, with traders anticipating cut-off prices lower than market levels at the auction. The short-term bonds were picked up by both public and private sector banks for asset-liability management, dealers said. Moreover, while fears of further open market operation sales by the RBI remained an overhang, the lack of an announcement for more such auctions this week aided demand, they said. The RBI sold INR 1 trillion of gilts through three open market operation auctions in the second half of September.

 

OUTLOOK

India's financial markets are shut Friday. Gilts are not traded Saturdays. Developments in the West Asia war over the long weekend and their impact on crude oil prices and US Treasury yields will be closely watched, dealers said. Lower-than-expected inflation for August in the US eased bets of a rate hike at the US Federal Reserve's next meeting, but the September non-farm payrolls data on Friday will be closely watched to cement those bets.

 

Traders widely expect the RBI's MPC to begin a shallow rate hiking cycle in October with a 25-bps interest rate increase Wednesday, dealers said. They look ahead to the commentary of RBI officials after the rate decision, including Governor Sanjay Malhotra's assessment of growth and inflation. Gilts are pricing in repo rate increases of around 100 bps from current levels and a convincing argument from central bank officials on a shallower rate hike cycle despite high crude oil prices and US yields may lead to a sharp increase in bond prices, dealers said.

 

Traders also expect the release of the state borrowing calendar for the December quarter on Friday, with borrowing quantum likely to be between INR 2.7 trillion and INR 3.3 trillion, dealers said. Traders also expect the RBI to announce an open market operation to sell bonds and absorb liquidity from the banking system. Some dealers do not feel such an action would be necessary, while others see the RBI announcing it on Wednesday along with the rate decision and broader commentary on liquidity.

 

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 7.10% and 7.25%, dealers said.

 

	THURSDAY		WEDNESDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	98.1200	7.2133%	98.2900	7.1879%
6.48%, 2035	95.3500	7.1905%	95.5000	7.1661%
6.36%, 2031	97.8500	6.9365%	98.0100	6.8919%
7.06%, 2041	96.7700	7.4214%	97.1000	7.3835%
7.24%, 2055	94.7700	7.6925%	94.8000	7.6898%

 

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India Gilts: Fall more as oil rises; 30-yr bond cut-off price lower than view

 

	1515 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.11	98.35	98.03	98.20	98.29
YTM (%)	7.2156	7.1794	7.2267	7.2015	7.1879

 

MUMBAI--1515 IST--Government bond prices continued to fall during the day and were near the day's low Thursday after Brent crude oil prices neared $101 per barrel, dealers said. An intraday rise in US Treasury yields also pulled bond prices lower, dealers said. Bond prices also reacted to the result of the weekly gilt auction, as the cut-off price on the 30-year 7.63%, 2056 bond was lower than the traders' view. 

 

The government had invited bids to raise INR 330 billion through the sale of the 6.20%, 2029 bond, the 6.57%, 2033 bond, the 7.63%, 2056 bond, and the 7.50%, 2056 green bond Thursday. The cut-off prices for most bonds were largely in line with the market view, dealers said. However, the 30-year bond likely faced pressure at the auction, which led to its lower-than-viewed cut-off price at the auction. The Reserve Bank of India set a cut-off price of INR 99.30 on the 30-year bond at the auction, lower than an Informist Poll median of INR 99.41. Some of the 30-year auction supply was brought by traders instead of investors, which led to some selling pressure, dealers said. 

 

Demand for other papers at the auction was likely firm, which resulted in cut-offs being in line with the view, dealers said. The short-term bonds were picked up by both public and private sector banks for asset-liability management, dealers said. The 30-year green bond also saw good demand, dealers said. The cut-off price on 7.50%, 2056 green bond was set as INR 98.20, higher than an Informist Poll estimate of INR 98.13. 

 

"Largely, it's (auction cut-off prices) in line with our expectations," a dealer at a public-sector bank said. "The market was expecting some tail in the 2029 paper, so nothing surprising there. There was some reaction that was may be because of the 30-year, but mostly it is because of crude and US yields." 

 

Bond prices faced the heat of a rise in global yields, dealers said. The yield on the benchmark 10- and 30-year US Treasury notes went to fresh 24-year highs Thursday. At 1515 IST, the yield on the 10-year US note was at 5.32%, up from 5.29% at 0900 IST. The rise in oil prices also weighed on bond prices, dealers said. Brent crude oil futures for December delivery rose to $100.79 per barrel at 1515 IST, up over 3.5% from 0900 IST. The significant rise in oil prices likely came after news reports said three oil tankers were struck in the Strait of Hormuz, dealers said. 

 

Traders will closely monitor developments in the war in West Asia as it could lend direction to Brent and in turn bond prices, dealers said. The total turnover in the government securities market at 1515 IST was INR 374.05 billion, up from INR 355.40 billion at 1530 IST Wednesday, data from the Clearing Corp. of India showed. The yield on the 10-year gilt is seen in a range of 7.13-7.25% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: At day's low as crude, US yields rise; auction demand seen firm

 

	1250 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.14	98.35	98.11	98.20	98.29
YTM (%)	7.2104	7.1794	7.2148	7.2015	7.1879

 

NEW DELHI--1250 IST--Government bond prices fell again and hit the day's low as crude oil prices and US Treasury yields rose during the day. Regardless, bidding at the INR-330-billion weekly gilt auction suggested firm demand for bonds from investors after the sharp fall in bond prices this week, which has made current levels attractive, dealers said.

 

Brent crude for December delivery neared $99 per barrel from $97.38 a barrel at 0900 IST. Meanwhile, the 10-year US Treasury yield topped 4.32%, hitting its highest levels since 2004. Gilt prices fell sharply as the global triggers turned adverse, with the yield on the 6.94%, 2036 gilt rising to 7.2133% intraday, the highest for a 10-year benchmark bond since Apr. 26, 2024. The rise in crude oil prices and US yields is likely to offset the impact of a positive result at the auction, dealers said. 

 

The government offered to sell INR 90 billion of the 6.20%, 2029 bond, INR 120 billion of the 6.57%, 2033 bond, INR 90 billion of the 7.63%, 2056 bond, and INR 30 billion of the 7.50%, 2056 sovereign green bond at 1030-1130 IST. The short-term bonds were in favour with asset-liability managers at both public and private sector banks, dealers said. Moreover, while fears of further open market operations sales by the Reserve Bank of India were an overhang, lack of an announcement for more such auctions this week aided demand, they said. The RBI sold INR 1 trillion of gilts through three OMO auctions in the second half of September.

 

"Our sense is that cut-offs should not be at a tail to current market prices. People were selling in the second half yesterday, they've sold this morning," a dealer at a private sector bank said. "Prices are already beaten down, there's no further juice to bid at discounts in the auction."

 

With the view that bonds were already pricing in most negatives, some mutual funds were also keen to bid on the 30-year benchmark paper to maximise price gains in case yields fall from current levels after the Monetary Policy Committee's rate decision Wednesday, dealers said. Long-term investors found the levels attractive on the 2056 gilt and green bond both but said cut-off prices may be slightly lower than market levels due to uncertainty over both the size of the Oct-Dec borrowing programme by states and its composition. With state bonds maturing in over 15 years fetching close to or over 8% over the last three auctions, insurers said they would prefer the quasi-sovereign security over long-term gilts.

 

"The problem with this auction is it has come before the policy and before the calendar (for state bonds)," a dealer at a state-owned bank said. "So, in the three- and seven-year bonds, there is a fear that OMO sale would come in these securities and you have to prepare for that. For longer bonds, SDL (state bond supply) will be a big consideration)."

 

The total turnover in the government securities market at 1250 IST was INR 200.90 billion, up from INR 155.75 billion at 1230 IST Wednesday, data from CCIL showed. The yield on the 10-year gilt is seen in a range of 7.13-7.25% during the day, dealers said.  (Aaryan Khanna)

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India Gilts: Reverse early losses on buying as 10-yr benchmark yld hits 7.20%

 

	0945 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.34	98.35	98.20	98.20	98.29
YTM (%)	7.1816	7.1794	7.2015	7.2015	7.1879

 

MUMBAI--0945 IST--Government bond prices opened lower but soon reversed losses as traders bought bonds near 7.20% yield on the 10-year benchmark 6.94%, 2036 bond, dealers said. However, some traders trimmed positions ahead of the extended weekend which likely weighed on bond prices Thursday. Most traders refrained from placing aggressive bets ahead of the weekly gilt auction Thursday and the Reserve Bank of India's Monetary Policy Committee meeting next week.

 

Traders across the market likely bought bonds as a 7.20% yield on the 6.94%, 2036 gilt was seen as an attractive level to make purchases, they said. Private-sector banks, which have largely been the net sellers of gilts this week, also likely bought bonds Thursday as the yield on the benchmark 10-year paper touched the day's high, dealers said. Private sector banks net sold gilts worth INR 17.14 billion so far this week, data from the Clearing Corp. of India Ltd. showed.

 

"There is buying coming in from all kinds of market participants and not just PSUs (state-owned banks)," a dealer at a state-owned bank said. "7.20% (yield on the 10-year 6.94%, 2036 gilt) is a good level and buying was expected to come at that level." 

 

Gains on bond prices were capped as traders trimmed positions ahead of the long weekend. India's financial markets are shut Friday for Gandhi Jayanti. The uncertainty around the end of the US-Iran war also weighed on bond prices, dealers said. However, some correction in Brent crude oil prices helped bond prices. Brent crude oil futures for December delivery were at $96.98 per barrel, down from $97.34 per barrel at 0900 IST. Traders will closely watch out for developments in the war in West Asia as it can lend direction to Brent prices and in turn impact Indian bond prices, they said.   

  

An overnight rise in US Treasury yields also weighed on bond prices Thursday, dealers said. The yield on the 10-year benchmark US Treasury note was at 5.28% at 0945 IST, up from 5.23% at the end of Indian gilt market hours Wednesday. The US yields rose despite the personal consumption expenditures price index for August coming in below expectations. The metric rose 3.4% on an annual basis, below the Dow Jones consensus estimate of 3.7%. The 10-year Treasury yield breached 5.30%, trading near 2007 highs, while the 30-year yield surpassed 5.60%, reaching its highest level since 2002. Traders will monitor the movement in US yields during the day. 

 

The total turnover in the government securities market at 0945 IST was INR 41.65 billion, up from INR 39.45 billion at 0930 IST Wednesday, data from CCIL showed. The yield on the 10-year gilt is seen in a range of 7.13-7.25% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen down as US yields surge; gilt auction result may lend cues

 

MUMBAI – Government bond prices are seen opening lower due to a sharp overnight rise in US Treasury yields, dealers said. The rise in crude oil prices is also likely to put pressure on bond prices Thursday, dealers said. Traders may also trim positions during the day before heading into an extended weekend amid weak risk appetite due to uncertainty over the end of the US-Iran war, they said. Most traders are likely to maintain caution ahead of the Reserve Bank of India's Monetary Policy Committee meeting next week. 

 

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 7.20% and move between 7.13% and 7.25% during the day, dealers said. Wednesday, it ended at INR 98.29, or a yield of 7.1879%. If the yield on the 10-year benchmark bond crosses 7.20%, traders see 7.25% as the next technical level for it. However, heavy buying could come near 7.20% from market participants, who are likely to defend the 7.205% level, dealers said. 

 

Some traders are likely to make space in their portfolios for the fresh supply of gilts at the weekly gilt auction Thursday, which is likely to put pressure on bond prices in the initial trading hours. The government will sell INR 90 billion of the 6.20%, 2029 bond, INR 120 billion of the 6.57%, 2033 bond, INR 90 billion of the 7.63%, 2056 bond, and INR 30 billion of the 7.50%, 2056 sovereign green bond. Some traders said the cut-off could be near secondary market levels, though the movement in crude oil prices will be critical. Demand at the auction is seen firm from banks, insurance companies, and pension funds, dealers said. However, higher yields in the secondary market may play a spoilsport at the auction, dealers said. Later in the day, the auction result is likely to lend cues to the bond prices, dealers said.

 

Traders may also trim positions Thursday due to weak risk appetite amid lingering uncertainty around the end of the US-Iran war. Market participants are likely to avoid taking positions before heading in to an extended weekend amid the risk of escalations in the war in West Asia, they said. India's financial markets are shut Friday for Gandhi Jayanti. 

 

Traders also remain cautious ahead of the MPC meeting next week, where most expect a 25-basis-point rate hike by the rate-setting panel. Traders are expected to stay on the sidelines ahead of the MPC's Oct. 5–7 meeting. This is likely to weigh on the trade volume of the secondary market Thursday, dealers said. 

 

Global factors are likely to impact the movement of bond prices, dealers said. US Treasury yields rose overnight and were at 5.30% at 0800 IST, up from 5.23% at the end of Indian gilt market hours Wednesday. The US yields rose despite the personal consumption expenditures price index for August coming in below expectations. The metric rose 3.4% on an annual basis, below the Dow Jones consensus estimate of 3.7%. The 10-year Treasury yield breached 5.30%, trading near 2007 highs, while the 30-year yield surpassed 5.60%, reaching its highest level since 2002. 

 

Traders will also track movement in prices of Brent crude oil during the day. Futures for December delivery were at $98.05 per barrel at 0800 IST. An escalation in the US-Iran war or disruption in peace talks could push crude oil prices higher, which in turn will weigh on bond prices, dealers said. 

 

Traders also expect the release of the state borrowing calendar for the December quarter, with borrowing quantum likely to be between INR 2.7 trillion and INR 3.3 trillion, dealers said. Traders also expect the RBI to announce an open market operation to sell bonds and absorb liquidity from the banking system. Such an announcement ahead of the RBI's MPC meeting next week will likely keep traders cautious, dealers 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 expected to move between 7.10% and 7.25%, dealers said.  (Diksha Tripathy)

 

End

 

US$1 = INR 96.32

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

 

Edited by Avishek Dutta

 

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