More Stories

Informist, Friday, Jan. 2, 2026

MUMBAI – On Saturday, the two-day call money rate may open near the Reserve Bank of India's repo rate of 5.25% as liquidity is expected to remain tight unless a significant chunk of inflows from the Centre's expenditure are complete, dealers said. Trade volume is likely to be low, as is usual on Saturdays, as banks front-run their weekend requirements on Friday.

On Monday, the RBI will hold an overnight variable rate repo auction of INR 500 billion at 0930-1000 IST. Systemic liquidity is seen returning to a comfortable surplus only by mid-January, after two tranches of open market operation auctions add INR 1 trillion of liquidity by Jan. 12 and a three-year $10 billion dollar-rupee buy-sell swap auction on Jan. 13 that will add to durable liquidity. That may cause the central bank to begin conducting variable rate reverse repo auctions soon, dealers said. During the day, the two-day call money rate is expected to move in a range of 4.70-5.50%, dealers said. 

Government bonds and overnight indexed swap rates are not traded Saturdays.

GOVERNMENT BONDS

Gilt prices are seen plunging Monday after the RBI, post market hours Friday, said states plan to raise INR 5 trillion through bonds in Jan-Mar, the higher end of traders' expectations. Traders had expected the 10-year benchmark yield to hit 6.70%--the highest yield so far in the financial year ending March--if the state borrowing figure was near or above INR 5 trillion, a level that dealers expect the central bank to be uncomfortable with. The fall in prices may be offset, however, after RBI data showed the central bank bought gilts worth INR 41.55 billion onscreen Dec. 23, the day the 10-year benchmark yield rose to 6.70%.

Nine states aim to raise a heavy INR 301 billion through bonds Tuesday, most of them maturing in 10-20 years, tenures traders are not comfortable holding. This may further weigh on government bond prices.

Traders will also track the result of the INR 500-billion OMO auction Monday. The central bank will buy the 7.10%, 2029; the 7.95%, 2032; the 7.73%, 2034; the 7.40%, 2035; the 7.41%, 2036; the 8.30%, 2040; and the 7.09%, 2054 bonds at the auction. Traders do not favour these bonds much.

The rupee's movement against the dollar in early trade will also provide cues for bond prices, as will the movement in US Treasury yields and crude oil prices. Foreign banks are likely to front-run the likely announcement of India bonds' inclusion in the Bloomberg Global Aggregate Index in January. The government's first advance estimate of GDP for FY26 on Wednesday may also lend cues on interest rates next week, dealers said.

Developments in the India-US trade deal negotiations may also influence bond prices. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.57-6.70% Monday. On Friday, the 6.48%, 2035 bond ended at INR 99.09, or 6.61% yield.

OIS RATES

On Monday, swap rates may track the movement of bond yields. Trade volumes are expected to revive next week with the return of several foreign banks and offshore traders from New Year holiday, dealers said.

Foreign banks, primary dealers, and offshore traders are expected to receive swap rates this month, dealers said. Market participants expect inflows into debt instruments from foreign portfolio investors to begin in the new year and to exceed $25 billion in 2026 as India's fully accessible route bonds are expected to be added to Bloomberg's flagship Global Aggregate Index.

The government's advance estimate of GDP for FY26, to be released Wednesday, may also be crucial for traders to place bets on further repo rate cuts by the RBI's Monetary Policy Committee, though no rate-cut bets for February are currently reflected in OIS rates, dealers said. After India's CPI for November was essentially a "non-event" for swaps, traders are focusing on CPI prints from January onwards, with the RBI projecting retail inflation to average 2.9% in the March quarter. 

Traders will monitor developments in the India-US negotiations for a trade deal. They may also track crude oil prices for cues. The one-year swap rate is seen at 5.40-5.52% Friday and the five-year at 5.85-6.02%. The one-year rate Friday ended at 5.48% and the five-year rate closed at 5.96%.

RBI AUCTION

--Nil

LIQUIDITY

Total net inflows of INR 22.69 billion. The calculation of flows does not take into account redemption of the standing deposit facility and scheduled variable rate repo and variable rate reverse repo operations.

* Inflows

--INR 22.69 billion as coupon on state bonds

* Outflows

--Nil

End

Reported by Cassandra Carvalho

Edited by Deepshikha Bhardwaj

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2026. All rights reserved.