India Money Market Outlook
Two-day call seen opening below repo rate Sat
This story was originally published at 23:17 IST on 16 January 2026
Register to read our real-time news.Informist, Friday, Jan. 16, 2026
NEW DELHI – The two-day call money rate may open below the Reserve Bank of India's repo rate of 5.25% as most banks have met their borrowing requirements Friday. During the day, the two-day call money rate is expected to move in a range of 4.70-5.50%, dealers said. As is usual on Saturdays, trading volume may be low.
Government bonds and overnight indexed swap rates are not traded Saturday. On Monday, government bond prices may rise after the state bond auction notified for next week was much smaller than indicated, dealers said. OIS rates may follow the decline in gilt yields.
GOVERNMENT BONDS
On Monday, gilt prices are likely to open higher due to the significantly lower quantum of state bond supply at the auction Tuesday. Six states will raise INR 130 billion on Tuesday, sharply lower than INR 386 billion indicated in the borrowing calendar for Jan-Mar.
Traders will likely focus on any significant movement in the five-year OIS rates. If the five-year OIS rate rises above key technical level of 6.05%, bond prices may see further fall and the 10-year gilt yields may rise to 6.70%, 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 near 6.70%, dealers said.
The movement in US Treasury yields may also lend cues. If the 10-year US yield is in the 4.10-4.20% range it has stuck to since early December, the overseas trigger may have a limited impact on gilt prices. Any development on the India-US trade deal may also influence bond prices.
The rupee's movement against the dollar will also provide cues to bond prices, as will movement of crude oil prices. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.62-6.70% Monday. On Friday, the gilt ended at INR 98.60, or 6.68% yield. The benchmark yield was at its highest closing level since Mar. 17.
OIS RATES
OIS rates may fall Monday, tracking an expected fall in gilt yields. Some traders may also unwind paid fixed rate positions or receive OIS rates at levels seen as lucrative and at multi-month highs, dealers said.
However, traders are expected to pay fixed rates below the 6.00% rate on the five-year swap. Swap rates are expected to continue rising as traders are betting that the Monetary Policy Committee will not ease rates further and its net action will be to raise the repo rate early in 2027.
The movement in US Treasury yields may also lend cues. With the 10-year US yield in the 4.10-4.20% range it has held since early December, the overseas trigger may have limited impact on OIS rates, dealers said. Fed funds futures reflected a 95.0% chance of status quo on rates at the US Federal Open Market Committee's January meeting, according to the CME's FedWatch tool.
Traders will also monitor developments in the India-US trade negotiations, crude oil prices, and further geopolitical developments. Monday, the one-year swap rate is seen at 5.45-5.58% and the five-year at 5.91-6.05%. On Friday, the one-year swap rate ended at 5.53% and the five-year rate at 6.03%, both multi-month highs.
RBI AUCTION
--Govt to sell two gilts worth INR 310 billion at 1030-1130 IST
LIQUIDITY
Total net inflows of INR 67.59 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 16.58 billion as coupon on state bonds
--INR 51.01 billion as coupon on 6.54%, 2032 gilt
* Outflows
--Nil
End
US$1 = INR 90.87
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Reported by Aaryan Khanna
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.
To read more please subscribe
Share this Story:
