India Money Market Outlook
2-day call rate seen below repo Sat in thin trade
This story was originally published at 23:15 IST on 17 April 2026
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MUMBAI – On Saturday, the two-day call money rate is likely to open at 5.05-5.15% in a thin trade, as is usually seen on working Saturdays. Dealers expect the call rate around 4.80–5.10% during the day, whereas the tri-party repo rate is expected in the range of 4.80–5.00% on the back of ample surplus liquidity in the banking system.
Outflows for payment of goods and services tax of INR 1.8 trillion–INR 2 trillion is scheduled by Wednesday, but liquidity is still seen in ample surplus even after the payments, dealers said. On Friday, the three-day call money rate ended at 5.11%.
Government bond yields and overnight indexed swap rates are not traded on Saturdays.
GOVERNMENT BONDS
On Monday, bond prices will open steady, provided there are no major developments in the situation in West Asia over the weekend, dealers said. Bond prices will also take cues from the movement in Brent crude oil prices. Crude oil prices plunged over 10% after Iran declared the Strait of Hormuz open. The switch auction results will lend direction to bond prices later on Monday, dealers said.
The government will switch INR 300 billion of nine short-term gilts with eight longer-term securities, the central bank announced Wednesday. Traders do not expect any major impact on gilt prices if the cut-offs set on the bonds are within expected lines, dealers said. However, traders will focus on the cut-off set on the 6.33%, 2035 bond as most expect the spread between the erstwhile 10-year benchmark and current 10-year benchmark bond to narrow, dealers said.
Traders expect the US-Iran ceasefire to hold, which should keep the 10-year benchmark bond yield below 7.00%. Traders will also track US Treasury yields. 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 Friday, it ended at INR 97.08, or 6.9049% yield.
OIS RATES
On Monday, traders will track geopolitical developments in peace talks between the US and Iran, and Israel and Lebanon. Their impact on Brent crude oil prices and US Treasury yields will also be tracked. Post Indian market hours, crude oil prices slumped over 10% after Iran declared the Strait of Hormuz open as long as the Israel-Lebanon ceasefire is in place. US President Donald Trump said the next round of peace talks between the US and Iran will take place this Sunday.
The one-year swap rate is already pricing in three repo rate hikes of 25 basis points each to 6.00% by April 2027. Some traders are of the view that the Reserve Bank of India's Monetary Policy Committee will not hike the repo rate so much unless the West Asia conflict extends and may receive fixed rates, dealers said. Even as outflows of around INR 1.80 trillion begin next week for goods and services tax payments, liquidity is still seen ample, and overnight rates are likely to be below repo this month, dealers said.
On Monday, the one-year swap rate is seen at 5.50-6.00% and the five-year swap at 6.15-6.50%. Friday, the one-year swap rate ended at 5.81% and the five-year swap rate at 6.39%.
RBI AUCTION
--Nil
LIQUIDITY
Total net inflows of INR 67.83 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 11.53 billion as coupon on state bonds
--INR 56.30 billion as coupon on 7.10%, 2029 gilt
* Outflows
--Nil
End
US$1 = INR 92.93
Reported by Meera Nair
Edited by Deepshikha Bhardwaj
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