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Informist, Tuesday, Apr. 28, 2026

MUMBAI - On Wednesday, government bond prices and overnight indexed swap rates are seen tracking developments related to the West Asia war and its impact on crude oil prices, as has been the case for the past two months, dealers said. As uncertainty loomed on when the Strait of Hormuz will reopen with no peace deal between the US and Iran in sight, most traders are likely to avoid view-based positions, they said. The movement of Brent crude prices will be closely tracked as reserves deplete and supply has no transit, dealers said. Traders will also assess the impact of the United Arab Emirates' decision to leave the Organization of the Petroleum Exporting Countries and its allies from May 1 on the oil supply to India.

With no interest rate cues scheduled domestically, traders will also track the movement in the rupee against the dollar. Some traders expect the Reserve Bank of India's Monetary Policy Committee to opt for a quicker rate-hike cycle to limit the fall of the rupee against the dollar, as the West Asia conflict is seen entering its third month this week, they said. After state Assembly polls end this week, traders will also be on the watch to see if the Centre transmits the recent rise in crude oil prices to consumers by hiking retail petrol and diesel prices. Other than the West Asia crisis, traders are tracking tariffs and trade deals amid scheduled talks between the US and India this week, they said.

The gilt yield curve is seen flattening, while the OIS rate curve is steepening, dealers said. In the near term, some mutual funds may face month-end redemptions, pushing up overnight borrowing rates.

Some traders are also looking ahead to the rate decision and commentary from the US Federal Open Market Committee Wednesday, which may influence offshore activity in India's OIS market. Dealers expect the US rate-setting panel to hold interest rates steady. Fed fund futures are pricing in no change to the federal funds rate as inflation in the world's largest economy remains sticky, according to the CME FedWatch tool.

Traders are also 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.

On Wednesday, the one-day call money rate is likely to open at 5.10-5.15%. Dealers expect the call rate to be around 5.15% during the day, while the tri-party repo rate is expected to be in the range of 4.90–5.10% on the back of ample surplus liquidity in the banking system.

GOVERNMENT BONDS

Wednesday, bond prices will track any development in the US-Iran peace talks and its impact on Brent crude oil prices, dealers said. Traders will also track the movement of overnight indexed swap rates, they said.

With oil prices hovering around $110 a barrel, the yield on the 10-year benchmark is seen opening at 6.98%, dealers said. The yield on the benchmark 6.48%, 2035 bond is seen in a range of 6.93-7.02%. On Tuesday, the 10-year benchmark 6.48%, 2035 gilt ended at INR 96.56, or 6.98% yield. 

OIS RATES

On Wednesday, traders will track developments in the West Asia war and their impact on crude oil prices, as has been the case over the past two months, dealers said. Domestically, traders also fear that after state Assembly elections end this week, the Centre may raise prices of retail petrol and diesel as reserves deplete and it bears the cost of high crude prices. In May, bond yields are also seen rising as net supply increases and traders begin pricing in higher inflation if the war continues, they said.

Wednesday, the one-year swap rate is seen at 5.80-6.15% and the five-year swap at 6.30-6.70%. On Tuesday, the one-year swap rate ended at 5.96%, while the five-year swap ended at 6.60%.

CALL

On Wednesday, the one-day call money rate is likely to open at 5.10-5.15%. Dealers expect the call rate to be around 5.15% during the day, while the tri-party repo rate is expected to be in the range of 4.90–5.10% on the back of ample surplus liquidity in the banking system.

For the rest of the week, rates in the overnight market will not fall below the Standing Deposit Facility rate and are also unlikely to cross the repo rate even as the government's payments of salaries and pensions begin, as there will be demand for funds later in the week. Indian financial markets are shut Friday for Maharashtra Day and Labour Day. The weighted average call rate will be in the 5.10-5.15% band and the weighted average tri-party repo rate is likely to be in the 4.95-5.05% band Wednesday, dealers said. Tuesday, the one-day call rate ended at 5.15%.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 120 billion

--RBI to auction 182-day T-bills worth INR 60 billion

--RBI to auction 364-day T-bills worth INR 60 billion

LIQUIDITY

Total net outflows of INR 129.13 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 14.33 billion as coupon on state bonds

* Outflows 

--INR 143.46 billion as payments for state bonds

End 

US$1 = INR 94.54

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

Reported by Cassandra Carvalho

Edited by Tanima Banerjee

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