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Informist, Monday, Apr. 20, 2026

MUMBAI – On Tuesday, government bond prices and overnight indexed swap rates are seen tracking the movement of Brent crude oil prices for delivery in June and developments around peace talks between the US and Iran, dealers said. US President Donald Trump said he would not open the Strait of Hormuz unless a deal with Iran was signed, as per media reports.

Traders await minutes of the Reserve Bank of India's Monetary Policy Committee's April meeting, due Wednesday. Later in the month, traders also await the US Federal Open Market Committee's interest rate decision, commentary by US Federal Reserve Chair Jerome Powell, and clarity on the next Fed chair once Powell's term ends in May. Fed fund futures are pricing in status quo in the federal funds rate next week, as inflation in the world's largest economy remains sticky. 

On Tuesday, the one-day call money rate is likely to open at 5.10-5.15%. Dealers expect the call rate around 4.80–5.15% during the day, whereas the tri-party repo rate is seen in the range of 4.80–5.00% due to ample surplus liquidity in the banking system and low demand for funds despite goods and services tax payments. 

GOVERNMENT BONDS

Government bond prices are seen opening steady Tuesday owing to lack of significant triggers on the domestic front, dealers said. Intraday, investors are likely to have improved risk appetite if there is progress in negotiations between the US and Iran.

While demand is set to exceed supply of gilts in April, traders still see offshore triggers being crucial to determine the movement of gilt prices this week as they hope for crude oil supplies to normalise. The 10-year gilt yield may fall to 6.80% on a breakthrough in negotiations between the US and Iran, but rise to 6.95% if Brent crude for June delivery tops $100 a barrel again.

Short-term bonds may be under pressure with INR 110 billion each of the three- and seven-year benchmark gilts to be sold at an auction Friday. On the other hand, long-term bonds may be in favour should there be further steps to extend the ceasefire between the US and Iran or signs of a more permanent peace deal, dealers said. Traders and mutual funds would want to pile on to gilts maturing in 15 years and above to maximise price gains if crude oil prices and gilt yields subsequently fall. On Monday, the 10-year benchmark 6.48%, 2035 gilt ended at INR 97.18 or 6.89% yield. 

OIS RATES

On Tuesday, traders will track developments around peace talks between the US and Iran, as well as between Israel and Lebanon and their impact on Brent crude prices and US Treasury yields.

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 MPC 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 began Monday for goods and services tax payments, liquidity is still seen ample, and overnight rates are likely to be below the repo rate this month, dealers said.

On Tuesday, the one-year swap rate is seen at 5.50-6.00% and the five-year swap at 6.15-6.50%. On Monday, the one-year swap rate ended at 5.78%, while the five-year swap ended at 6.35%

CALL

On Tuesday, the one-day call money rate is likely to open at 5.10-5.15%. Dealers expect the call rate around 4.80–5.15% 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 and low demand for funds despite goods and services tax payments. 

While rates could inch higher on Tuesday due to the scheduled outflows, it would not have any significant impact, dealers said. Inflow for coupon on state bonds of INR 4.26 billion is scheduled for Tuesday. More than 50% of the payment for goods and services tax outflows will take place Tuesday, dealers said. Monday, the one-day call rate ended at 5.13%.

RBI AUCTION

--Five states to raise INR 169 billion via bond sale

LIQUIDITY

Total net inflows of INR 4.26 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 4.26 billion as coupon on state bonds

* Outflows

--Nil

End

US$1 = INR 93.1275

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

Reported by Meera Nair and Cassandra Carvalho

Edited by Avishek Dutta

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