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Informist, Wednesday, Apr. 15, 2026

MUMBAI – Government bond prices and overnight indexed swap rates will continue to track movement in oil prices and developments in West Asia Thursday, dealers said. On the domestic front, the actions of mutual funds will lend direction, as due to surplus liquidity, these entities have been aggressively purchasing gilts and other debt, and unwinding their paid positions in swaps, dealers said. Mutual funds have net purchased gilts worth INR 122 billion in the secondary gilt market so far this month, as per data from Clearing Corp. of India, and net purchased Treasury bills worth INR 105.62 billion in the secondary market Wednesday.

The liquidity surplus is seen north of INR 5.00 trillion this entire week amid bond redemptions and lack of major outflows. Traders expect the Reserve Bank of India to conduct an overnight, or two to three day variable rate reverse repo auction this week, and hope that such an operation will reverse this week itself before outflows for goods and services tax scheduled at the beginning of the next week. Others said the central bank would only consider a rollover when the seven-day auction conducted Friday is due for reversal. However, even after GST payments, the liquidity surplus is seen above INR 3 trillion, dealers said.

Thursday, the one-day call money rate is likely to open at 5.10-5.15% on early demand for funds from primary dealerships and some small banks, dealers said. Dealers expect the rate to be in the range of 4.60–5.15% during the day on the back of ample surplus liquidity in the banking system.

The weighted average call rate is expected to be 5.05-5.15%, while the weighted average tri-party repo rate may be 4.80–4.90%, dealers said. On Thursday, outflows of INR 270 billion for the payment of T-bills are scheduled, which will be partly offset by inflows of INR 161 billion from the maturity of Treasury bills and coupons on state bonds. 

GOVERNMENT BONDS

Thursday, bond prices may track movement in crude oil prices and developments related to the conflict in West Asia, dealers said. Traders are betting that the US-Iran ceasefire will continue to hold and the yield on the 10-year benchmark 6.48%, 2035 bond is unlikely to rise above 7.00%, making current levels attractive for buying bonds, dealers said. However, any gains are likely to be capped as traders take the opportunity to book profit, after the yield on the 10-year benchmark bond hit its lowest in three weeks Wednesday. Traders may also track US Treasury yields after US President Donald Trump said he would have to fire US Federal Reserve Chair Jerome Powell if the latter does not leave the Fed at the end of his term next month.

Traders will also assess the Centre's choice of bonds it has chosen to switch via auction Monday. The govt will switch nine gilts maturing between 2026 and 2030 worth INR 300 billion with eight longer-term bonds in the first switch auction in FY27.

Traders have mixed views on rate-sensitive short-term bonds, with some preferring these tenures for their lucrative yield spreads over overnight borrowing rates, while others fear the RBI is likely to drain liquidity through a variable rate reverse repo auction this week amid surplus liquidity. Some dealers do not expect another VRRR until the one conducted Friday is reversed.

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 6.80-7.00%. On Wednesday, the bond ended at INR 97.34, or 6.87% yield.

OIS RATES

Swap rates will Thursday track crude oil price movement and developments relating to West Asia, dealers said. Traders are betting that the US-Iran ceasefire will continue to hold on and that swap rates are over-pricing in rate hikes, making current levels attractive to receive fixed rate contracts, dealers said. Traders may also track US Treasury yields after US President Donald Trump said he would have to fire US Federal Reserve Chair Jerome Powell if the latter does not leave the Fed at the end of his term next month.

On Thursday, the one-year swap rate is seen at 5.70-6.00% and the five-year swap at 6.25-6.50%. On Wednesday, the one-year swap rate ended at 5.76% and the five-year swap rate ended at 6.33%.

CALL

Thursday, the one-day call money rate is likely to open at 5.10-5.15% on early demand for funds from primary dealerships and some small banks, dealers said. Dealers expect the rate to be in the range of 4.60–5.15% during the day on the back of ample surplus liquidity in the banking system.

The weighted average call rate is expected to be 5.05-5.15%, while the weighted average tri-party repo rate may be 4.80–4.90%, dealers said. On Thursday, outflows of INR 270 billion for the payment of T-bills are scheduled, which will be partly offset by inflows of INR 161 billion from the maturity of Treasury bills and coupons on state bonds. On Wednesday, the one-day call money rate ended at 5.08%.

RBI AUCTION

--Nil

LIQUIDITY

--Total net outflows of INR 109.29 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 84.50 billion as redemption of 182-day T-bills

--INR 54.47 billion as redemption of 364-day T-bills

--INR 21.74 billion as coupon on state bonds

* Outflows

--INR 150.00 billion as payment for 91-day T-bills

--INR 60.00 billion as payment for 182-day T-bills

--INR 60.00 billion as payment for 364-day T-bills

End

US$1 = INR 93.3725

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

Reported by Cassandra Carvalho

Edited by Akul Nishant Akhoury

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