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Informist, Thursday, Apr. 9, 2026

MUMBAI – Government bond prices are seen opening steady Friday ahead of the weekly gilt auction at 1030-1130 IST, dealers said. The government will sell INR 340 billion of the 6.48%, 2035 gilt.

Gilts and overnight indexed swap rates are also seen taking cues from geopolitical developments around the West Asia conflict. The two-week ceasefire between Iran and the US announced Wednesday is seen shaky amid reports of Israel's attacks on Lebanon.

Traders await CPI inflation data for March, due Monday, which is pegged at 3.4%, according to an Informist Poll of 13 economists. A print closer to 4.0% will again spur bets of a quicker rate hike cycle.

The three-day call money rate is seen opening at 5.10-5.15%, below the Reserve Bank of India's repo rate of 5.25%, due to the large liquidity surplus in the banking system. The call money rate is seen the 4.75-5.15% range during the day.

GOVERNMENT BONDS

Gilt prices will take cues Friday from overnight geopolitical developments in West Asia and their impact on crude oil prices and US Treasury yields, dealers said. Traders may avoid large bets before the INR 340-billion auction of the 10-year benchmark 6.48%, 2035 gilt at 1030-1130 IST.

Demand for the gilt is likely to be firm, led by short-covering interest from primary dealers and foreign banks. The auction result will lend direction to bond prices in the latter part of the day. State-owned banks and mutual funds may also consider the 10-year gilt lucrative if its yield climbs to near 7%, especially after the Monetary Policy Committee eased fears of rate hikes in India until October, dealers said.

However, these concerns may come to the fore again if Brent crude prices remain around $100 a barrel. Rate-sensitive short-term bonds may remain out of favour unless tensions in West Asia cool off and the ceasefire between the US and Iran holds, dealers said.

Data released after Indian market hours Thursday showed US core personal consumption expenditures rose 3.0% on year and 0.4% on month in February, accelerating from the previous month. The rise in the US Federal Reserve's preferred inflation gauge was in line with the consensus view in a Dow Jones poll. After the data, the CME FedWatch tool showed 72.1% of market participants see no change in the US federal funds rate in the remainder of 2026, 26.8% see a rate cut, and a minuscule number expect a rate hike.

The movement in overnight indexed swap rates and the rupee may also influence gilts. The yield on the 10-year benchmark 6.48%, 2035 gilt is seen at 6.86-7.10% Friday. On Thursday, the bond ended at INR 96.71 or 6.9601% yield.

OIS RATES

Swap rates will track crude oil price movement at open on Friday following overnight geopolitical developments around the West Asia conflict, dealers said. Concerns over the continuance of the ceasefire agreed to between the US and Iran Wednesday linger. Any significant movement in US Treasury yields will also lend cues to swap rates, dealers said.

Traders await CPI inflation data for March, due Monday, for clarity on the impact of the rise in crude oil prices. Comments from the rate-setting panel suggested the bar for rate hikes was higher than traders had earlier priced in, dealers said. 

The one-year swap rate is seen at 5.70-6.10% and the five-year at 6.30-6.80% Friday. On Thursday, the one-year swap rate is seen at 5.86% and the five-year swap rate ended at 6.39%.

CALL

On Friday, the three-day call money rate is likely to open at 5.10-5.15% on early demand for funds from primary dealerships. Ample liquidity in the banking system will keep rates near the RBI's Standing Deposit Facility rate throughout the day. The three-day call money rate is seen at 4.75–5.15% during the day and the weighted average call rate is likely to be around 5.09%. The one-day call rate ended at 5.10% Thursday.

The tri-party repo rate is expected to open at 4.85-4.90%, below the RBI's SDF rate, due to surplus liquidity in the banking system and weaker demand for funds. The only major scheduled inflow on Friday is INR 128 billion for the maturity of 364-day Treasury bills.

RBI AUCTIONS

--Govt to sell INR 340 billion of 6.48%, 2035 gilt at 1030-1130 IST

LIQUIDITY

--Total net inflows of INR 215.16 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 16.08 billion as coupon on state bonds

--INR 127.53 billion as redemption of 364-day Treasury bills

--INR 34.31 billion as coupon on 7.06%, 2028 gilt

--INR 37.24 billion as coupon on 7.06%, 2046 gilt

* Outflows

--Nil

End

US$1 = INR 92.66

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

Reported by Aaryan Khanna

Edited by Tanima Banerjee

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