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Informist, Friday, Jan. 23, 2026

MUMBAI – Government bond prices may open higher on Tuesday after the Reserve Bank of India's open market operation announcement, ahead of the heavy supply of state bonds at auction, dealers said. Gilts and overnight index swap rates may also take cues from the movement in US Treasury yields due to lack of domestic interest rate triggers, they said.

The RBI, post market hours Friday, announced INR 1 trillion of OMO to be conducted in two tranches of INR 500 billion each on Feb. 5 and Feb. 12. Traders had expected the quantum to be INR 1 trillion-INR 2 trillion in February.

Traders will also monitor developments in the India-US trade negotiations, crude oil prices, and the global geopolitical situation.

Money markets will be closed on Monday on account of Republic Day. On Tuesday, the one-day call money rate may open above the RBI's repo rate of 5.25% due to early demand for funds.

GOVERNMENT BONDS

Gilts are not traded Saturday. Bond market is shut Monday on account of Republic Day. On Tuesday, gilt prices may open higher after the RBI's OMO announcement, ahead of the heavy supply of state bonds at auction, dealers said. The state bond auction result may lend cues.

The RBI, post market hours Thursday, announced that 15 states aim to raise INR 398.00 billion through bonds Tuesday. The indicative calendar for state borrowing for Jan-Mar showed states would borrow INR 473 billion on Tuesday. While the announced size is lower than indicated, the quantum is large for the bond market to absorb and is likely to impact traders' appetite for gilts, dealers said.

Traders are also keenly tracking the Union Budget for 2026-27 (Apr-Mar), which will be presented on Feb. 1. The Centre's gross borrowing aim is expected to be between INR 16 trillion and INR 17 trillion, compared with INR 14.72 trillion for FY26. A number higher than expected may weigh on bond prices while an increase in funding through Treasury bills or small savings and a gross borrowing number below INR 16 trillion would boost bond prices, dealers said. Bets on rate cuts at the Monetary Policy Committee's February meeting remain muted.

Gilts may also be influenced by the overnight movement in US Treasury yields. Any development on the India-US trade deal may also influence bond prices. Significant movement in the five-year OIS rate, the rupee, and crude oil prices may also lend cues, dealers said. 

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.62-6.70%.

OIS RATES

Swap rates are not traded Saturday. India's financial markets are shut Monday for Republic Day. On Tuesday, OIS rates may take cues from the movement in US Treasury yields due to lack of domestic interest rate triggers, dealers said. With most traders not betting on any further rate cuts in India, benchmark OIS rates may continue to rise, dealers said.

Some domestic traders have been unwinding paid fixed rate bets at a profit, while offshore traders are expected to continue paying fixed rates, dealers said. The Monetary Policy Committee is expected to next take action on the repo rate by raising it in 2027.

Traders will also monitor developments in the India-US trade negotiations, crude oil prices, and the global geopolitical situation. On Tuesday, the one-year swap rate is seen at 5.48-5.62% and the five-year at 6.03-6.20%.

CALL

Money markets will be closed on Monday on account of Republic Day. On Tuesday, the one-day call money rate may open above the RBI's repo rate of 5.25% due to early demand for funds. Liquidity is expected to return to a surplus after the settlement of the RBI's INR-500-billion purchase of gilts through OMOs, with no major inflows or outflows. 

During the day, the call money rate is expected to move in a range of 4.70-5.55%, dealers said.

RBI AUCTION

--15 states to raise INR 398 bln via bond sale Tuesday 

LIQUIDITY

Total net outflows of INR 6.29 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 19.77 billion as coupon on state bonds on Saturday

--INR 61.75 billion as coupon on 7.18%, 2037 gilt on Saturday

--INR 27.41 billion as coupon on state bonds on Sunday

--INR 15.00 billion as redemption of state bonds on Sunday

--INR 115.15 million as coupon on FRB, 2035 on Sunday

--INR 12.88 billion as coupon on state bonds on Monday

--INR 21.04 billion as coupon on state bonds on Tuesday

--INR 160.00 billion as redemption of state bonds on Tuesday

--INR 2.84 billion as coupon on 7.10%, 2028 green bond on Tuesday

--INR 2.92 billion as coupon on 7.29%, 2033 green bond on Tuesday

* Outflows

--INR 330.00 billion as payment for gilts

End

US$1 = INR 91.95

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

Reported by Kabir Sharma

Edited by Deepshikha Bhardwaj

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