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Informist, Monday, Mar. 2, 2026

MUMBAI – Government bond prices and overnight indexed swap rates are seen tracking crude oil prices and developments in the West Asia conflict Wednesday, dealers said. Indian financial markets are shut Tuesday for Holi. The movement of US Treasury yields will also lend direction to bond prices and swap rates, dealers said. Barring offshore cues, gilt prices may rise due to speculation about the Reserve Bank of India purchasing gilts onscreen Monday, after the 'Others' segment of gilt market participants net purchased gilts worth INR 98.07 billion in the secondary market, as per Clearing Corp. of India.

Brent crude oil futures are seen broadly above $80 per barrel for the rest of the week, as the US president has said its military operation with Israel in Iran may last four weeks. Iran's strikes on other countries which have US bases and oil refineries is disrupting oil supply along with the closure of the crucial Strait of Hormuz. India imports nearly 87% of its crude oil requirement and some traders fear a rise in inflation due to the conflict offshore.

On Wednesday, the one-day call money rate may open at 5.15%, below the RBI's repo rate of 5.25%, due to a comfortable liquidity surplus in the banking system following the Centre's month-end expenditure. During the day, the call money rate is expected to move in a range of 4.75-5.20%. They expect the tri-party repo rate to trade in a 4.60-4.95% range on Wednesday.

GOVERNMENT BONDS

On Wednesday, bond prices will open tracking developments in West Asia and the movement in US Treasury yields. Traders will most likely not build aggressive positions amid geopolitical uncertainty, dealers said. However, purchases from the 'Others' segment of market participants Monday may buoy prices Wednesday on speculation that the RBI purchased gilts onscreen to prevent the 10-year benchmark 6.48%, 2035 gilt yield rising above the key 6.70% level, dealers said.

Any significant movement in the rupee, the five-year overnight indexed swap rate, and crude oil prices will also lend cues to gilts. The government will sell INR 140 billion of 91-day Treasury bills, INR 120 billion of 182-day T-bills and INR 80 billion of 364-day T-bills Wednesday. Traders will track the result of the T-bill auction, and if cut-off yields are significantly higher than expectations then that may weigh on bond prices, dealers said. The 10-year benchmark 6.48%, 2035 bond is seen in a 6.64-6.73% range Wednesday. On Monday, it ended at INR 98.63, or 6.68% yield. 

OIS RATES

On Wednesday, OIS rates may track movement of US Treasury yields and crude oil prices and developments in the West Asia conflict. The five-year swap rate is expected to rise to 6.10% this week, as Brent crude is likely to remain above $80 per barrel, dealers said. If offshore traders, who had largely received fixed rates last month, aggressively pay fixed rates and if the 10-year US yield rises, then the five-year OIS rate could rise further, dealers said. On the downside, the five-year OIS rate could fall below 6.00% again if the 10-year US yield sustains a fall below 4% and falls to 3.80%, in which case the five-year OIS rate could fall to 5.85-5.90%, dealers said.

Swap rates maturing in up to one year may also rise in the near term as money market rates are expected to rise amid seasonally high demand for funds and credit growth nearing the end of the March quarter, dealers said. Significant movement in the rupee and Indian government bond yields may also lend cues, dealers said. On Wednesday, the one-year swap rate is seen at 5.40-5.60% and the five-year at 5.95-6.15%. Monday, the one-year swap rate ended at 5.50% and the five-year swap rate at 6.03%.

CALL

On Wednesday, the one-day call money rate may open at 5.15%, below the RBI's repo rate of 5.25%, due to a comfortable liquidity surplus in the banking system following month-end inflows. During the day, the call money rate is expected to move in a range of 4.75-5.20%. They expect the tri-party repo rate to trade in a 4.60-4.95% range on Wednesday. Monday, the two-day call rate closed at 4.75%.

RBI AUCTION

--RBI to auction 91-day Treasury bills worth INR 140 billion on Wednesday

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

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

LIQUIDITY

Total net outflows of INR 398.56 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 22.72 billion as coupon on state bonds Tuesday

--INR 22.02 billion as coupon on state bonds Wednesday

* Outflows

--INR 443.30 billion as payment for state bonds Wednesday

End

US$1 = INR 91.47

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

Reported by Cassandra Carvalho

Edited by Ashish Shirke

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