More Stories

Informist, Thursday, Jan. 8, 2026

MUMBAI – On Friday, government bond prices are seen tracking the result of the weekly gilt auction of INR 290 billion, dealers said. Gilts and overnight indexed swap rates may also track the overnight movement in US Treasury yields after the release of jobs data. 

Jobless claims in the US rose lower than expected to 208,000 in the week ended Jan. 3 against a Wall Street Journal poll estimate of 210,000, data released post Indian market hours showed. US non-farm payrolls data for December is scheduled for release after Indian market hours Friday, ahead of the US Federal Open Market Committee's meeting scheduled for the end of the month. The impact of the data on US rate expectations and US yields will influence domestic OIS rates but are unlikely to significantly impact bond yields as focus remains on bond supply, dealers said. Bond prices are likely to react to US yield movements only if the 10-year US yield falls below 4.10% or rises above 4.20%, the current trading range, dealers said.

On the domestic front, market participants await the announcement of the inclusion of India's fully accessible route bonds in Bloomberg's flagship Global Aggregate Index. The announcement is expected next week. The rupee's movement against the dollar in early trade will also provide cues as will the movement in crude oil prices, dealers said. Traders will also monitor developments in the India-US negotiations for a trade deal and geopolitical developments for cues. 

On Friday, the three-day call money rate may open above the Reserve Bank of India's repo rate of 5.25% as liquidity in the banking system is expected to remain tight until inflows from the bond redemption and scheduled open market operation auctions infuse durable liquidity. The RBI's variable rate repo auction may ease the upward pressure on rates, depending on how much subscription the auction gets. The central bank will conduct a four-day variable rate repo auction for INR 500 billion 0930 IST-1000 IST Friday. Mutual funds are likely to continue lending at higher rates due to the cash crunch, dealers said. During the day, the three-day call money rate is expected to move in the range of 4.70-5.50%, dealers said.

GOVERNMENT BONDS

On Friday, gilt prices will track the results of the weekly gilt auction, in which the government will sell INR 160 billion of the 6.68%, 2040 bond and INR 130 billion of the 6.90%, 2065 bond. After strong demand from long-term bond investors such as insurance companies and pension funds in the past two state bond auctions and recent gilt auctions, demand for the 6.90%, 2065 bond is seen robust and its cut-off price could be at secondary-market levels, dealers said. However, some dealers expect investor demand to be tepid, as long-term investors have already met their requirements at the state bond auction this week. Demand for bond forward rate agreements is expected to be around INR 10 billion to INR 15 billion for the bond at auction, dealers said.  

Demand for the 15-year 6.68% 2040 paper is expected to be firm as some banks may buy it for their investment books after profit sales from these books to the RBI at OMO auctions. The bond's current yield is seen attractive, dealers said. Dealers said if FPIs are buying the 15-year gilt in the secondary market, they could also bid for the bond at auction through foreign banks. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.57-6.67% Friday. Thursday, it ended at INR 98.93, or 6.63% yield.

OIS RATES

On Friday, swap rates may track the overnight movement in US Treasury yields after the release of jobs data in the US. Swaps will also track the movement in gilt yields during the day, as traders gauge appetite for bonds at the weekly gilt auction, dealers said. Traders will closely track technical levels on swaps, as the five-year swap neared the key 6.00% level earlier this week. Without a strong trigger, the five-year swap rate is not seen falling below 5.89%, dealers said. The one-year swap rate is seen at 5.40-5.56% and the five-year at 5.85-6.12% Friday. The one-year rate Thursday ended at 5.48% and the five-year rate at 5.94%.

CALL

On Friday, the three-day call money rate may open above the RBI's repo rate of 5.25% as liquidity in the banking system is expected to remain tight until inflows from the bond redemption and scheduled open market operation auctions infuse durable liquidity. The RBI's variable rate repo auction may ease the upward pressure on rates, depending on how much subscription the auction gets. The central bank will conduct a four-day variable rate repo auction for INR 500 billion 0930 IST-1000 IST Friday. Mutual funds are likely to continue lending at higher rates due to the cash crunch, dealers said. 

Systemic liquidity is seen returning to a comfortable surplus by next week after one gilt redemption and two tranches of OMO auctions add nearly INR 2 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. During the day, the three-day call money rate is expected to move in the range of 4.70-5.50%, dealers said. The one-day call rate ended at 5.40% Thursday.

RBI AUCTION

--RBI to hold four-day variable rate repo auction for INR 500 billion 0930-1000 IST 

--Govt to auction two gilts worth INR 290 billion

LIQUIDITY

Total net inflows of INR 36.73 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 9.23 billion as coupon on state bonds

--INR 27.50 billion as coupon on 8.33%, 2026 gilt

* Outflows

--INR 191.56 billion as reversal of two-day variable rate repo tender

--INR 709.68 billion as reversal of overnight variable rate repo tender

End

US$1 = INR 90.0175

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

Reported by Cassandra Carvalho

Edited by Akul Nishant Akhoury

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.