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Informist, Wednesday, Apr. 22, 2026

MUMBAI – On Thursday, government bond prices are seen down and overnight indexed swap rates are likely to rise as Brent crude oil futures for delivery in June rose above $100 per barrel after market hours Wednesday, dealers said. Traders will also track the movement in the rupee against the dollar and fresh headlines emerging from developments on the US-Iran peace talks. In the longer run, traders also await economic data to assess the trajectory and impact of the rise in crude oil prices since the war began. Even if a peace deal is cemented, traders do not expect crude oil prices to cool off to pre-war levels immediately, and supply chains are likely to take months to return to normal, they said. 

The minutes of the Reserve Bank of India's Monetary Policy Committee meeting held earlier this month, released post market hours Wednesday, may provide some solace to some traders as the commentary made the panel sound slightly "dovish" and not as inclined to hike rates as traders had expected. "I think the minutes was dovish," a dealer at a state-owned bank said. "(The panel is) growth supportive, although inflation forecast is high." RBI Governor Sanjay Malhotra said it was prudent to wait and watch amid global uncertainty, as per the minutes. 

Traders are on the watch for the likelihood of El Nino and its impact on monsoon this year, and the subsequent impact on growth and inflation, they said. The India Meteorological Department sees a 62% chance of El Nino emerging in Jul-Aug, and expects it to persist till the end of 2026.

Later in the month, traders will await the US Federal Open Market Committee's interest rate decision, commentary by Fed Chair Jerome Powell, and clarity on his successor. Powell's term ends in May. Fed fund futures are pricing in a status quo in the federal funds rate next week as inflation in the world's largest economy remains sticky. 

After state assembly polls end in April, traders will also be on the watch to see if the Centre transmits the recent rise in crude oil prices to consumers by hiking energy prices. Once there is a concrete outcome to the West Asia crisis, traders are likely to refocus on tariffs and trade deals, they said.

On Thursday, the one-day call money rate is likely to open at 5.15-5.35%. Dealers expect the call rate to be around 4.80-5.35% during the day, while the tri-party repo rate is expected to be in the range of 5.00–5.25% on the back of ample surplus liquidity in the banking system. Dealers expect the weighted average call rate to be in the range of 5.25-5.35% for Thursday, while the weighted average tri-party repo market rate is likely to be in the range of 5.05-5.15%.

GOVERNMENT BONDS

Bond prices are seen opening lower Thursday as Brent crude oil prices rose further past the $100 per barrel mark after market hours Wednesday, dealers said. Traders may also begin placing short bets to make room for fresh supply at the weekly gilt auction Friday, they said.

Value-buying is likely to prevent the 10-year gilt yield from rising above 6.95%, with the market expecting the US-Iran peace deal to be inevitable, even if delayed, dealers said. The yield on the benchmark 10-year 6.48%, 2035 bond is seen in a range of 6.88-6.97%. On Wednesday, the 10-year benchmark 6.48%, 2035 gilt ended at INR 96.96, or 6.92% yield. 

OIS RATES

On Thursday, traders will track developments in West Asia and their impact on crude oil prices. The one-year swap rate already prices in three 25-bps repo rate hikes, bringing the rate to 6.00% by April 2027. Some traders believe the MPC will not raise the repo rate that much unless the West Asia conflict drags on, and they may, therefore, look to receive fixed rates, dealers said.

On Thursday, the one-year swap rate is seen at 5.60-6.00% and the five-year swap at 6.20-6.50%. On Wednesday, the one-year swap rate ended at 5.83%, while the five-year swap ended at 6.43%.

CALL

On Thursday, the one-day call money rate is likely to open at 5.15-5.35%. Dealers expect the call rate to be around 4.80-5.35% during the day, while the tri-party repo rate is expected to be in the range of 5.00–5.25% on the back of ample surplus liquidity in the banking system. Dealers expect the weighted average call rate to be in the range of 5.25-5.35% for Thursday, while the weighted average tri-party repo market rate is likely to be in the range of 5.05-5.15%.

Dealers are divided whether the central bank will roll over the seven-day variable rate reverse repo auction it had conducted for INR 2 trillion Friday. Most dealers expect that the RBI will not conduct any VRRR after a fall in surplus liquidity in the system this week. Some dealers said the RBI could conduct a VRRR of INR 1.00 trillion to INR 1.50 trillion for the same tenure, as the Centre's expenditure for government salaries and pensions are expected to begin by the middle of next week. Wednesday, the one-day call rate ended at 5.34%.

RBI AUCTION

--Nil

LIQUIDITY

Total net outflows of INR 366.20 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 115.00 billion as redemption of 91-day Treasury bills

--INR 56.06 billion as redemption of 364-day T-bills

--INR 26.63 billion as coupon on state bonds

--INR 21.74 billion as coupon on 7.37%, 2028 gilt

* Outflows

--INR 321.63 billion as payment for 91-day T-bills

--INR 204.00 billion as payment for 182-day T-bills

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

End

US$1 = INR 93.7950

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

Reported by Cassandra Carvalho

Edited by Deepshikha Bhardwaj

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