More Stories

Informist, Monday, Feb. 2, 2026

MUMBAI – On Tuesday, government bond prices and overnight indexed swap rates will track any confirmation of a trade deal being cemented between India and the US, after US President Donald Trump late Monday said the two countries have agreed to a trade deal. 

"Out of friendship and respect for (Indian) Prime Minister Modi and, as per his request, effective immediately, we agreed to a Trade Deal between the United States and India, whereby the United States will charge a reduced Reciprocal Tariff, lowering it from 25% to 18%," Trump said in a post on his social media site Truth Social. "They will likewise move forward to reduce their Tariffs and Non Tariff Barriers against the United States, to ZERO." 

Significant movements in the five-year overnight indexed swap rate, the rupee, crude oil prices and geopolitics may also lend cues, dealers said. 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 from primary dealerships. However, rates are likely to remain at the lower end of the liquidity adjustment facility during the day once demand for funds eases. The call rate is likely to trade between 4.40-5.30% during the day, dealers said.

GOVERNMENT BONDS

On Tuesday, bond prices will track the overnight movement in US Treasury yields and the result of the state bond auction, dealers said. However, prices will likely remain down, continuing the slump on Monday after the Budget for 2026-27 (Apr-Mar) pegged the government's gross market borrowing through dated securities at a record INR 17.20 trillion. Traders will refrain from placing aggressive bets ahead of the weekly state bond auction, dealers said.

Some traders expect the demand at the state bond auction Tuesday to remain firm from pension funds and provident funds, as most of the papers offered are long-term papers, dealers said. At the auction, the cut-off yields on state bonds will rise, following a rise in gilt yields of similar maturity, dealers said. However, traders expect the spread between the 10-year benchmark 6.48%, 2035 bond and state bonds of similar maturity to remain steady. Public sector banks are likely to prefer adding state bonds to their held-to-maturity or available-for-sale books, dealers said. Fourteen states will raise INR 365 billion through bonds Tuesday, lower than the indicative calendar amount of INR 428 billion for this week but a large quantum for investors to absorb, dealers said.  

Some traders also expect the RBI to announce open market operation auctions of INR 1 trillion to INR 1.5 trillion in February, with the number potentially rising to INR 2 trillion in the March quarter, dealers said. Such an announcement will likely come after the completion of the INR-500-billion OMO auction Thursday or at the Monetary Policy Committee meeting decision Friday, dealers said. 

"... Only a surprise in the MPC can change the yields now," a dealer at a small finance bank said. "But it does not make sense to change the stance and do not cut rates... and the rate cut seems unlikely due to higher inflation figures."

Traders are also awaiting the Monetary Policy Committee outcome Friday. Some traders expect the RBI Governor Sanjay Malhotra to signal measures that might ease the rise in bond yields, dealers said. However, most traders do not expect a rate cut at this policy meeting as inflation is expected to rise in Jan-Mar. The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.72-6.82%. On Monday, the bond ended at INR 97.98, or 6.77% yield.

OIS RATES

On Tuesday, overnight indexed swap rates will track the movement in US Treasury yields and Indian government bond yields. Traders will also closely track the systemic liquidity, and any indications of a liquidity infusion from the RBI. Later in the week, swap rates will track the outcome of the RBI's Monetary Policy Committee decision Friday. Traders do not expect the rate-setting panel to cut rates further, after cutting the repo rate by 25 basis points to 5.25% in December. Several participants see the terminal repo rate at 5.25%, with the MPC likely to opt for a "prolonged pause". Given the disruption to global trade and geopolitical conflicts, the MPC is unlikely to change its stance to "accommodative" after reverting to "neutral" in June, participants said. While nothing of significance is expected on the interest rate front, the focus is on the central bank's communication on liquidity at the post-policy announcement. Bond market participants expect at least INR 1 trillion of open market operation auctions to be announced at the MPC announcement Friday, along with assurance from the RBI Governor on continued liquidity infusions.

The movement of swaps will also hinge on offshore flows, as offshore traders continue to pay fixed rates, dealers said. The one-year swap rate is seen at 5.52-5.68% and the five-year at 6.10-6.36%. Monday, the one-year swap rate ended at 5.55% and the five-year swap rate ended at 6.20%. 

CALL

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 from primary dealerships. However, rates are likely to remain at the lower end of the liquidity adjustment facility during the day once demand for funds eases. The call rate is likely to trade in the range of 4.40-5.30% during the day, dealers said. The one-day call rate closed at 4.40% Monday.

RBI AUCTION

--14 states to raise INR 365 billion via bond sale

LIQUIDITY

Total net inflows of INR 48.87 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 13.39 billion as coupon on state bonds

--INR 35.49 billion as coupon on 5.77%, 2030 gilt

* Outflows

--Nil

End

US$1 = INR 91.5125

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

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.