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Time of India
3 days ago
- Business
- Time of India
India bonds steady ahead of New Delhi's debt sale
Indian government bonds were rangebound on Thursday, with investors awaiting New Delhi's debt auction for more clues into the yield trajectory. The benchmark 10-year bond yield was at 6.4826% as of 10:00 a.m. IST, compared with Wednesday's close of 6.4811%. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Bedridden for 2 years, please help my husband walk again! Donate For Health Donate Now Undo New Delhi is set to raise 280 billion rupees ($3.20 billion) through a debt sale, which includes a 5-year bond and a new 30-year security. Bonds Corner Powered By Fixed Income Outlook: Sideways rates offer opportunities in short-to medium-term debt funds India's fixed income market remains steady despite global uncertainty. With inflation below the RBI's target and yields expected to stay in a narrow range, Canara Robeco's Avnish Jain advises focusing on short- to medium-term debt funds for better risk-adjusted returns, while keeping selective long-duration exposure for potential policy easing gains. Is the rally over in long-duration bonds? Is investing in T-bills via SIP a smart move compared to FDs? India's bond market signals extended rate pause despite low inflation RBI allows non-residents to invest rupee surplus in vostro accounts in G-secs Browse all Bonds News with The auction is being seen as a key test of demand for longer-term notes, traders said. "Pre-policy, we had seen a lot of participation by banks in the longer end. If that repeats today, then we will see government securities sustaining levels," a fund manager at an AMC said. Live Events "Today's auction will be a deciding factor for volatility or recovery of bonds." Traders are also likely to keep positions light ahead of a long weekend. The local debt market shut on Friday for Independence Day . Any dips will trigger opportunistic buying during the day, traders said. The Reserve Bank of India will hold an eight-day variable rate reverse repo auction to withdraw two trillion rupees from the banking system later in the day. The banking system's liquidity surplus continues to remain above 1% of deposits at 2.9 trillion rupees as on Wednesday. RATES India's overnight index swap (OIS) rates continued to see receiving, with traders expecting at least one rate cut in 2025. Meanwhile, falling U.S. Treasury yields and rising wagers for a September rate cut by the Federal Reserve are aiding the sentiment for longer-duration rates. The one-year OIS rate INR1YMIBROIS=CC fell 1 basis point to 5.4950% and the two-year OIS rate was steady at 5.44%. The liquid five-year OIS rate dipped more than 1 bp to 5.6325%.
Time of India
4 days ago
- Business
- Time of India
Fixed Income Outlook: Sideways rates offer opportunities in short-to medium-term debt funds
India's fixed income market remains resilient despite global headwinds, with stable macroeconomic indicators supporting investor sentiment. According to Avnish Jain, Head – Fixed Income, Canara Robeco Asset Management Company , recent global trade tensions and the imposition of a 25% tariff by the US have added uncertainty to the global economic landscape. However, India continues to stand out, with inflation undershooting forecasts in the first quarter and remaining well below the Reserve Bank of India's (RBI) 4% target. Bonds Corner Powered By Fixed Income Outlook: Sideways rates offer opportunities in short-to medium-term debt funds India's fixed income market remains steady despite global uncertainty. With inflation below the RBI's target and yields expected to stay in a narrow range, Canara Robeco's Avnish Jain advises focusing on short- to medium-term debt funds for better risk-adjusted returns, while keeping selective long-duration exposure for potential policy easing gains. Is the rally over in long-duration bonds? Is investing in T-bills via SIP a smart move compared to FDs? India's bond market signals extended rate pause despite low inflation RBI allows non-residents to invest rupee surplus in vostro accounts in G-secs Browse all Bonds News with Jain noted that the RBI's recent shift to a neutral stance suggests a pause in the current rate-cut cycle. Nevertheless, 'if the undershoot of inflation continues for the next one or two quarters, there is an expectation that the RBI may deliver one more 25 bps rate cut by December,' he said. In terms of yields, Jain expects the 10-year government bond benchmark to trade in the 6.30%–6.45% range in the near term. Live Events Market movements will likely be driven by a combination of global and domestic factors—international crude oil prices, US Treasury yields, and geopolitical developments on one hand, and India's inflation trajectory and growth data on the other. Importantly, he does not foresee any major sell-offs in the bond market, citing a healthy demand-supply balance and continued appetite for government securities from institutional investors. Given this backdrop, Jain believes that duration strategies may not deliver significant returns in a largely sideways interest rate environment. Instead, he recommends that investors focus on short- to medium-term fixed income categories such as corporate bond funds, short duration funds, and banking & PSU debt funds , which are positioned to offer better risk-adjusted returns in the current scenario. For long-term investors, maintaining selective exposure to duration could still be valuable—particularly if an additional policy easing materialises later this year. Such a move could provide capital gains potential while retaining the carry benefits of high-quality long-duration instruments. Overall, Jain's outlook suggests a balanced approach: tactically positioning portfolios to benefit from steady yields in the short term, while keeping optionality open for potential gains if monetary policy turns more accommodative. ( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Time of India
4 days ago
- Business
- Time of India
Is the rally over in long-duration bonds?
After delivering stellar returns over the past 12–15 months, India's long-duration government securities may have reached the fag end of their rally, according to Axis Mutual Fund 's Acumen report dated July 31, 2025. The sharp gains were driven by falling yields and narrowing spreads, aided by macroeconomic easing , fiscal discipline, and favourable demand-supply dynamics. The three drivers of the rally Axis MF notes that the surge was underpinned by: Macro slowdown and policy easing – Slowing GDP growth in 2024 prompted the Reserve Bank of India (RBI) to front-load rate cuts, culminating in a surprise 50 bps cut in June 2025 alongside a 100 bps CRR reduction. Fiscal consolidation – The fiscal deficit fell from 9% at the COVID peak to 4.4%, with stable borrowing levels boosting market confidence. Tactical demand-supply tailwinds – RBI's Rs 5 lakh crore in OMO purchases and US$22 billion of FPI inflows—especially after JP Morgan's index inclusion—spurred demand for long bonds. Why the rally may be nearing its end Bonds Corner Powered By Is the rally over in long-duration bonds? After a period of impressive returns, India's long-duration government securities may be nearing the end of their rally, according to Axis Mutual Fund. The surge was fueled by factors like policy easing and fiscal discipline. However, the report suggests these catalysts are losing momentum. Deteriorating demand-supply dynamics and regulatory changes are reducing the appetite for long-duration bonds. Is investing in T-bills via SIP a smart move compared to FDs? India's bond market signals extended rate pause despite low inflation RBI allows non-residents to invest rupee surplus in vostro accounts in G-secs Debt funds witness best month of FY25 as investors return to safety and yield Browse all Bonds News with The report argues that these catalysts are losing steam. The RBI has shifted to a neutral stance, leaving room for at most one or two small rate cuts. Fiscal consolidation is likely to plateau due to slower growth, the upcoming 8th Pay Commission, and potential declines in RBI dividends. On the demand side, OMO purchases have paused, liquidity is already in surplus, and FPI flows have turned negative over the past four months. Demand-supply mismatch looms Live Events Axis MF highlights that in FY26, gross long-bond supply is expected to far exceed demand. Regulatory changes—such as revised Held-to-Maturity limits for banks, higher equity limits for NPS, and restrictions on FPI investments beyond 14 years—are further reducing appetite for long-duration paper. Spreads and historical context Long-bond spreads over 10-year G-Secs have already widened by 54 bps in the current cycle, close to levels seen at the end of previous rate-cut cycles. The report also notes that 30-year G-Sec yields rarely fall below 6.75%, suggesting limited scope for further price gains. Investor strategy According to Axis MF, 'the primary concern for long-duration bonds is no longer about spreads or yield levels—it lies in the deteriorating demand-supply dynamics.' Unless there's a major growth shock triggering aggressive rate cuts, or renewed foreign interest from Bloomberg index inclusion, the scope for a further rally appears limited. The fund house advises real-money investors with long-term liabilities to consider long bonds only if they can stomach short-term volatility. For most others, the steepening yield curve makes 2–5-year corporate bonds a more attractive risk-reward bet. Tactical opportunities in long bonds may still offer 10–15 bps of upside, but these are likely to be short-lived. ( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Time of India
4 days ago
- Business
- Time of India
India's bond market signals extended rate pause despite low inflation
Mumbai: India' bond market is signalling a long pause in the central bank's rate-easing cycle despite the retail inflation gauge falling to an eight-year low of 1.55%, way below Mint Road's ordinary legal mandate of 4%. A spike in yields has widened the spread between 10-year bonds and the repo rate to almost one percentage point-the most in 2025. "The widening of the spread between the 10-year yield and repo rate is an indication that the market is pricing in an extended policy pause," said Churchil Bhatt, executive vice-president, investment, Kotak Mahindra Life Insurance. "After the last monetary policy , market participants believe that the bar for further rate cuts is fairly high. Traders have given up hopes of an October rate cut." The spread widened to 99 basis points on Tuesday, compared with around 20 bps just before the Reserve Bank of India (RBI) started the rate-cutting cycle in February under its new governor Sanjay Malhotra. One basis point is a hundredth of a percentage point. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Wildlife Cameras Capture What No One Should See Ohi Blog Undo Bond traders now expect 5.5% as the terminal repo rate, against 5% expected before last week's policy. The central bank has eased rates by a cumulative one percentage point this year. Bonds Corner Powered By RBI allows non-residents to invest rupee surplus in vostro accounts in G-secs The Reserve Bank of India (RBI) on Tuesday said non-residents maintaining special rupee vostro accounts (SRVA) can invest surplus balances in central government securities (G-secs). Debt funds witness best month of FY25 as investors return to safety and yield Indian bonds muted ahead of domestic, US CPI data Bond yields climb to steepest since April at 6.44% India bonds rangebound ahead of state debt supply, CPI data Browse all Bonds News with Inflation as measured by the consumer price index (CPI) fell to 1.55% in July, below the lower bound of the central bank's target range of 2-6% with 4% as the mid-point. Economists had anticipated a CPI reading of below 2%. However, despite the low CPI print, the bond markets are not pricing in a rate cut in October because the central bank's projections show inflation would climb toward the end of FY26. The yield on the benchmark 10-year paper, which serves as the basis for pricing of corporate loans, closed on Tuesday at 6.49%, the highest since early April. Live Events The central bank kept rates on hold and continued with a 'neutral' monetary policy stance last week. While this was expected, the absence of dovish stance along with RBI's inflation forecast of 4.9%-higher than its medium-term target-for the first quarter of next fiscal year dampened hopes of rate cut in October unless there is a sharp growth shock-whether domestic or external. Last week, the RBI retained the growth projection at 6.5%. "The combined fear of the rate cut cycle ending and a higher fiscal deficit-caused by weaker revenue and easing measures to support sectors hit by tariffs-has soured sentiment for the market," said Abhishek Upadhay, economist at ICICI Securities Primary Dealership. Bond dealers said the spread between the 10-year yield and the repo rate was lower in early 2025 because RBI's open market operations skewed the demand-supply balance in favour of bonds as the central bank absorbed much of the supply. The current widening of the spread should also, therefore, be viewed in the context of the absence of this demand.
Time of India
26-06-2025
- Business
- Time of India
Are PPF, NSC and other small savings schemes headed for historic low interest rates? Govt to decide next week
RBI has cut repo rate by 1% Academy Empower your mind, elevate your skills Why bond yield and repo rate cuts matter Will interest rate on PPF, NSC, SCSS and other small savings be cut? What should investors do before a small savings rate cut happens? The interest rates for PPF, NSC and other small savings schemes are set to be reviewed on June 30, 2025. The new rates will take effect for the July-September quarter of FY 2025-26. So far this year, the interest rates for Post Office savings schemes, including the Sukanya Samriddhi Yojana and the Senior Citizens Savings Scheme, have remained unchanged. But this could change starting July 1, Reserve Bank of India (RBI) has cut the repo rate thrice since the start of 2025. The central bank first cut the repo rate by 25 basis points in February, then again by 25 basis points in April and by 50 basis points in June. To date, the central bank has cut the repo rate by 1%.The banks have reduced the interest rate on fixed deposits in response to the repo rate cut. Some banks have also discontinued their special FDs, which offered higher interest rates compared to normal bank FDs for a specified 1% cut in repo rates has also brought down bond yields. Investors need to keep in mind that there is a positive correlation between bond yields and the RBI's policy rates. So, whenever market expects the RBI to reduce the repo rate, bond yields tend to drop as per data from the 10-year G-sec bond yield was at 6.779% on January 1, 2025. But by June 24, 2025, it had fallen to 6.247%. This means the bond yield has decreased by 0.532% so far and a further downward adjustment cannot be ruled interest rate on the Post Office Savings Scheme is determined on the basis of the recommendations of the Shyamala Gopinath Committee. According to the recommendations accepted by the Finance Ministry, secondary market yields on Central Government Securities of comparable maturities should serve as benchmarks for the interest rates on various small savings instruments, along with a positive spread of 25 basis means that the interest rate of a 5-year time deposit should be based on the yield of 5-year G-secs prevailing in the secondary market plus 25 basis PPF, the average yield of 10-year G-sec between March 24, 2025, and June 24, 2025, is 6.325%, according to Adding 25 bps on this, will bring the PPF interest rate to 6.575% as per the formula recommended by the committee. Currently, PPF offers 7.10% to the by the set methodology, a repo rate cut and a fall in bond yield indicate that interest rate on small savings scheme may also be cut keeping in view of the prevailing interest rate in the market. However, this does not always reflect in the final decision taken by the Wealth Online spoke to experts to determine whether interest rates on PPF, NSC, and other small savings are likely to be cut. Here's what they have to say:Given its focus on fostering economic growth through a more accommodative monetary policy, the Reserve Bank of India (RBI) reduced the repo rate by 0.5% on June 6th, bringing the total reduction to 1% in 2025. As a result, interest rates for small savings scheme are likely to be lowered. So, a reduction in interest rates for small savings schemes is anticipated. Since the RBI is prioritising growth through lower borrowing costs, a corresponding rate cut for small savings schemes is expected in the next update. The final decision will depend on the government's quarterly review and prevailing economic the Reserve Bank of India cutting the repo rate by a cumulative 100 basis points in 2025, attention is now on the upcoming quarterly revision of small savings scheme (SSS) interest rates. SSS rates, while administratively set, are typically aligned with prevailing interest rate trends and yields on government securities. In recent weeks, several banks have already begun reducing their fixed deposit rates, signalling broader rate transmission across the financial system. Given the sharp monetary easing and the government's emphasis on fiscal prudence, it is likely that SSS rates for instruments such as the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), and National Savings Certificate (NSC) could be cut by 25-50 basis interest rates on small svaings schemes usually move with market trends, but the decision is not automatic as while deciding rates, the government also takes note of savers' year, the RBI has cut the repo rate by 1%, pushing overall interest rates lower. Normally, this would mean small savings rates could drop too, to stay in line with bank FDs and bonds. But there's a catch: these schemes are a lifeline for retirees, pensioners, and middle-class households. A big cut could hurt their income, especially when inflation is low and bank FD rates are already falling. The government also keeps political and social factors in mind, after all, millions depend on these schemes. So, while a small cut (say, 0.1-0.3%) is possible, a sharp reduction seems unlikely. The government might even hold rates steady to support savers, now that elections are over and inflation isn't a worry. A minor trim could happen, but don't expect a major drop. The government will likely balance market trends with savers' planning to invest in various small savings schemes should do so on or before June 30, 2025. This is because any rate cut will take effect from July 1, you invest in time deposits, recurring deposits, Senior Citizens Savings Scheme, Monthly Income Account, National Savings Certificate and Kisan Vikas Patra, on or before June 30, 2025, your investment will be locked at current high interest rate and will not be impacted by subsequent rate cut effective from July 1. This is because once the investment is made, then interest rates are locked till maturity investment in PPF and SSY will be impacted, as interest on account balances keep changing with time and are calculated on a monthly says, "Investors may consider locking into current Small Savings Scheme rates before the revision. Additionally, as interest rates trend lower, long-duration debt funds and target maturity bonds become more attractive for investors seeking to preserve real returns in a softening rate environment."
