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Informist, Tuesday, Feb. 10, 2026

MUMBAI – Government bond prices and overnight indexed swap rates are seen opening steady Wednesday due to a lack of significant domestic cues. Traders may avoid large bets after the recent volatility and on caution before the release of CPI data for January on Thursday, dealers said.

Retail inflation in India likely rose in January mainly because of higher gold prices, with the new Consumer Price Index on the base year 2024 expected to show inflation at 2.8%, according to an Informist Poll. In the old series with base year 2012, retail inflation likely rose to an eight-month high of 2.5% in January from 1.33% in December, a separate Informist Poll showed. This would be the first time since August that consumer inflation returns to the Reserve Bank of India's 2-6% target band.

Significant movement in US Treasury yields, the rupee and crude oil prices may also influence both the markets, dealers said. The one-day call rate is seen opening near the RBI's Standing Deposit Facility rate of 5.00% due to low demand for funds amid surplus liquidity in the banking system. 

GOVERNMENT BONDS

On Wednesday, bond prices may open steady due to a lack of significant domestic cues. Some traders are likely to continue to pick up gilts after the rise in prices Tuesday, while others may make room for the fresh supply at the weekly gilt auction Friday, dealers said. The government will sell INR 180 billion of a new five-year, 2031 gilt and INR 130 billion of the 7.43%, 2076 bond at the auction.

Traders do not expect further liquidity infusion from the RBI and open market operation auctions to buy bonds after the comments of central bank officials following the MPC decision Friday. No further rate cuts are likely to be forthcoming from the rate-setting panel in the remainder of 2026, dealers said. This is likely to keep the 10-year gilt yield in a band of 6.60-6.85% till March, they said.

The RBI is expected to continue buying gilts sporadically in the secondary market to signal a cap on yields, dealers said. Traders will also track the liquidity conditions in the banking system, which rose to a six-month high of INR 3.62 trillion on Friday and has remained in hefty surplus since.

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.67-6.77% Wednesday. On Tuesday, the bond ended at INR 98.27, or 6.72% yield.

OIS RATES

On Wednesday, OIS rates may track the overnight movement of US Treasury yields, dealers said. With no strong domestic interest rate cues until Thursday, the release of CPI data for January, traders may closely track the offshore cue and economic data in the US.

Traders expect the overnight Mumbai Interbank Offered Rate to rise in the near-term, which could push up short-term swaps, they said. However, the five-year OIS rate is seen falling to a low of 6.05-6.06% before rising again, they said, especially if the 10-year US yield remains below the key 4.20% level. 

The one-year swap rate is seen at 5.40-5.60% and the five-year at 6.03-6.25%. On Monday, the one-year swap rate ended at 5.51% and the five-year swap rate ended at 6.13%.

CALL

On Wednesday, the one-day call money rate may open near the Standing Deposit Facility rate of 5.00% due to low demand for funds amid the surplus liquidity in the banking system. During the day, the call money rate is expected to move in a range of 4.25-5.15%. The one-day call rate ended at 4.45% Tuesday.

The settlement of the state bond auction worth INR 476.20 billion may reduce the liquidity surplus Wednesday. Rates are also seen inching up by Friday as banks look to meet cash reserve requirements at the end of the reporting fortnight, dealers said.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 140 billion

--RBI to auction 182-day T-bills worth INR 120 billion

--RBI to auction 364-day T-bills worth INR 80 billion

LIQUIDITY

Total net outflows of INR 471.42 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 4.78 billion as coupon on state bonds

* Outflows

--INR 476.20 billion as payment for state bond auction

End

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

Reported by Aaryan Khanna

Edited by Deepshikha Bhardwaj

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