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Informist, Wednesday, Jan. 14, 2026

NEW DELHI – Government bond prices are seen steady before the INR 310-billion weekly gilt auction at 1030-1130 IST Friday. Traders may short-sell gilts and make room in their portfolios for the fresh supply, which may weigh on bond prices, dealers said. India's financial markets are shut Thursday due to municipal corporation elections in Maharashtra.

The government will sell INR 180 billion of the 6.01%, 2030 bond and INR 130 billion of a new 50-year, 2076 bond at the auction. Bond prices are likely to take cues from the result of the debt sale in the second half of the day, dealers said.

Overnight indexed swap rates may open steady Friday given the lack of firm interest rate triggers. Traders may pay fixed rates with the Bloomberg Global Aggregate index inclusion not imminent and some traders betting on the five-year OIS rate topping the key 6.00% mark, dealers said.

The movement in US Treasury yields may also lend cues. The closely watched US Supreme Court ruling on the constitutionality of US President Donald Trump's tariffs will not happen Wednesday, unlike earlier expected. With the 10-year US yield in the 4.10-4.20% range it has been in since early December, the overseas trigger may have limited impact on domestic markets, dealers said. Fed funds futures reflect a 95.0% chance of status quo on rates at the FOMC's meeting in January, according to the CME's FedWatch tool.

The rupee's movement against the dollar will also provide cues as will the movement in crude oil prices, dealers said. Traders will also monitor developments in India-US negotiations for a trade deal and geopolitical developments across the world for cues.

On Friday, the three-day call money rate may open above the Reserve Bank of India's repo rate of 5.25% on early demand for funds despite a liquidity surplus. During the day, the call money rate is expected to move in a range of 4.70-5.50%, dealers said.

GOVERNMENT BONDS

Gilt prices may open steady Friday due to lack of firm domestic cues but prices may fall as traders will likely make space in their portfolio for the fresh supply of gilts at the weekly auction. The government will sell INR 180 billion of the 6.01%, 2030 bond and INR 130 billion of a new 2076 bond at 1030-1130 IST Friday.

Later in the day, bond prices will take cues from the auction result, dealers said. The disappointment over Bloomberg Index Services' announcement to still review India's inclusion in its flagship Global Aggregate Index may weigh on prices through the day, though traders expect the RBI to continue buying gilts on-screen, which may limit losses. The 10-year benchmark 6.48%, 2035 gilt may see firm demand from state-owned banks if its yield rises to 6.68-6.70%, dealers said.

The 6.33%, 2035 bond's yield has remained below the current 10-year benchmark gilt for a few days, an unusual occurrence, led by expectations that the bond would be included in the RBI's OMO auction on Jan. 22. However, a release after market hours showed the central bank would not buy the erstwhile 10-year gilt at its last scheduled OMO auction on Jan. 22. The RBI has offered to buy INR 500 billion of the 7.10%, 2029; the 6.10%, 2031; the 7.57%, 2033; the 6.19%, 2034; the 6.67%, 2035; the 7.54%, 2036; and the 7.09%, 2054 gilts next week.

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.60-6.70% Friday. On Wednesday, the benchmark gilt ended at INR 98.79 or 6.65% yield.

OIS RATES

Swap rates may open steady Friday given the lack of firm interest rate triggers. Traders may pay fixed rates with the Bloomberg Global Aggregate index inclusion not imminent and some traders betting on the five-year OIS rate topping the key 6.00% mark, dealers said.

The one-year swap rate is seen at 5.45-5.58% and the five-year at 5.91-6.05%. On Wednesday, the one-year swap rate ended at 5.51% and the five-year rate ended at 5.99%.

CALL

On Friday, the three-day call money rate may open above the RBI's repo rate of 5.25% on early demand for funds. A three-year, $10 billion dollar-rupee buy-sell swap auction conducted Tuesday will add to durable liquidity by Friday, which may cap money market rates, dealers said. During the day, the three-day call money rate is expected to move in a range of 4.70-5.50%, dealers said.

RBI AUCTION

--Govt to sell two gilts worth INR 310 billion at 1030-1130 IST

LIQUIDITY

Total net inflows of INR 27.5 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. Settlements due Thursday will be conducted Friday because of the holiday announced by the Maharashtra government.

* Inflows

--INR 164.01 billion as redemption of 91-day Treasury bills

--INR 62.80 billion as redemption of 182-day T-bills

--INR 92.76 billion as redemption of 364-day T-bills

--INR 40.33 billion as coupon on state bonds

* Outflows

--INR 127.40 billion as payment for 91-day T-bills

--INR 120.00 billion as payment for 182-day T-bills

--INR 85.00 billion as payment for 364-day T-bills

--INR 291.14 billion as reversal of two-day variable rate repo

End

US$1 = INR 90.30

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

Reported by Aaryan Khanna

Edited by Ashish Shirke

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