April fillip

The yield on the 10-year benchmark government security (G-sec) ended April 2025 at 6.36%, down 22 basis points (bps) from the March close of 6.58% and outside Crisil’s forecast of 6.44-6.54%.

The first week opened with a bullish bias, with the benchmark yield at 6.48%, after the G-sec borrowing calendar for the first half of fiscal 2026 came in line with market expectations. Expectations of a policy rate cut and softer stance at the upcoming Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting aided gilt prices. Results aligning with expectations at the weekly G-sec auction also supported gilt prices to some extent. The yield closed the week at 6.47%.

The second week opened on a negative note, tracking an overnight surge in US Treasury yields. The session saw a slight easing of bond yields, with the cut-off rates for state development loans and the open market operation (OMO) purchase auction coming in line with market expectations. Subsequently, domestic bond prices surged, driven by the MPC's decision to cut policy rates by 25 bps and shift to an accommodative stance. Market participants also bet on another rate cut in the June 2025 policy review. An intraday decline in US Treasury yields at the last day of the week’s trading provided further support to bond prices. The 10-year benchmark yield closed the week at 6.42%.

In the third week, domestic bonds traded on a bullish note on account of an intraday decline in US Treasury yields. The market likely also saw buying interest from foreign portfolio investors (FPIs) and foreign banks. Trading volume increased ahead of the upcoming Rs 40,000 crore OMO purchase auction of G-secs, scheduled for the latter part of the week. As a result, gilt yields closed 1-9 bps weaker across the curve, with the benchmark ending at 6.37%.

The last week, too, started positively on speculation of additional OMO purchases and the RBI's announcement of Rs 1.25 lakh crore OMO purchases in May, supported by FPI buying. Better-than-expected auction cut-offs also supported gilt prices. However, despite a successful G-sec auction, sentiment turned negative mid-week, owing to terrorist attacks in Kashmir and profit-booking. Hence, the yields rose 1-5 bps across the curve. The 10-year benchmark closed the week at 6.36%.