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Informist, Friday, Feb. 13, 2026

MUMBAI – Government bond prices may open higher on Monday due to a fall in US Treasury yields after data released post-market hours Friday showed US CPI inflation in January fell more than expected, dealers said. Traders may avoid large bets due to lack of significant domestic cues. Overnight indexed swap rates may also track movement in US Treasury yields. 

The 10-year US Treasury yield fell to 4.06%, its lowest in over three months, after data showed US CPI inflation fell to 2.4% on year in January, from 2.7% in December and 2.5% expected. Core CPI inflation--which excludes volatile items like food and fuel--was 2.5% on year, in line with estimates.

The state bond auction announced after market hours for next week was in line with the indicated amount of INR 390 billion and may not have a significant impact on bond prices Monday, dealers said. Fourteen states will raise INR 379 billion through bonds at auction Tuesday, with four bonds having greenshoe options of up to INR 15.50 billion. 

Significant movement in the rupee and crude oil prices may also lend cues to both the markets, dealers said. Money markets are shut Saturday. On Monday, the one-day call money rate may open near the SDF rate of 5.00% due to low demand for funds amid the surplus liquidity in the banking system.

GOVERNMENT BONDS

Gilt prices are seen opening higher Monday owing to a fall in US Treasury yields after a lower-than-expected US CPI inflation data for January. 

The RBI's Monetary Policy Committee is now seen holding the policy repo rate at 5.25% through FY27, dealers said. Traders do not expect further liquidity infusions or open market operations auctions to buy bonds from the RBI following comments by central bank officials last week. This is likely to keep the 10-year gilt yield in a band of 6.55-6.85% till March, dealers 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 last week and has remained in hefty surplus since.

The 10-year benchmark 6.48%, 2035 bond is seen in a range of 6.62-6.74% Monday. On Friday, the bond ended at INR 98.59, or 6.68% yield.

OIS RATES

On Monday, OIS rates may track movement in US Treasury yields after the release of US CPI for January, dealers said. Domestic traders had not positioned aggressively before the data release after US non-farm payrolls unexpectedly surprised on the upside for January. 

Some traders expect the Overnight Mumbai Interbank Outright Rate to rise in the near term, which could push up short-term swaps, they said. The one-year swap rate is seen at 5.40-5.55% and the five-year at 6.00-6.20%. The one-year swap rate ended at 5.50% Friday and the five-year swap rate closed at 6.07%. 

CALL

On Monday, the one-day call money rate may open near the SDF rate of 5.00% due to low demand for funds amid the surplus liquidity in the banking system. According to latest data, the net liquidity absorbed from the banking system by the RBI--a proxy for the liquidity surplus--rose to INR 3.03 trillion Thursday from INR 2.86 trillion Wednesday.

During the day, the call rate is expected to move in a range of 4.50-5.15%. The three-day call rate ended at 5.05% on Friday. 

RBI AUCTION

--nil

LIQUIDITY

Total net outflows of INR 112.64 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 13.56 billion as coupon on state bonds Saturday

--INR 72.16 billion as coupon on 7.18%, 2033 gilt Saturday

--INR 12.65 billion as coupon on state bonds Sunday

--INR 38.75 billion as coupon on 8.24%, 2027 gilt Sunday

--INR 54.34 billion as coupon on 8.28%, 2032 gilt Sunday

--INR 5.90 billion as coupon on state bonds Monday

* Outflows

--INR 310.00 billion as payment for government bond auction Monday

End

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

Reported by Pratiksha and Aaryan Khanna

Edited by Akul Nishant Akhoury

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