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Informist, Monday, May 4, 2026

NEW DELHI – On Tuesday, government bond prices and overnight indexed swap rates are seen tracking developments in West Asia war and the impact on crude oil prices, dealers said. Overnight movement in US Treasury yields will also lend cues to swap rates and gilt prices.

Brent crude oil prices remained above the key level of $110 per barrel Monday at the close of Indian gilt market hours, which is likely to weigh on bond prices, dealers said. Following the rise in oil prices, traders are worried the Centre might hike petrol and diesel prices to support oil marketing companies, which are losing money on retail sales after crude oil prices jumped because of the West Asia conflict. This will lead to a rise in inflation and strengthen the chances of rate hikes, dealers said.

Most traders do not expect a sharp reaction in bond prices from the Assembly election results, though the Bharatiya Janata Party's win in West Bengal may lead to some positive sentiment in bonds. 

Dealers expect the call rate to be at 4.75-5.30% during the day, while the tri-party repo rate is expected to be in the range of 4.80–5.15%, as the liquidity surplus has reduced considerably from its high of INR 5.50 trillion seen in earlier April.

The weighted average call rate will be in the 5.15-5.20% range and that in the tri-party repo market is likely to be in the band of 5.00-5.10% Tuesday, dealers said.

OUTLOOK

GOVERNMENT BONDS

Tuesday, bond prices will track developments in the conflict in West Asia and their impact on Brent crude oil prices, dealers said. Most traders do not expect a sharp reaction in bond prices from the Assembly election results, though the BJP's win in West Bengal may lead to some positive sentiment in bonds. Traders will also track the movement of overnight indexed swap rates and the rupee, they said.

The result of the auction of state government securities Tuesday is likely to lend cues to the gilt market, dealers said. Five states will raise INR 186 billion through the sale of bonds Tuesday. Traders expect the auction to sail through smoothly as the auction size is smaller than the INR 258 billion indicated in the calendar for state borrowing. However, if banks' poor risk appetite pushes up cut-off yields for state bonds, gilt prices may also fall, dealers said.  

Brent crude oil prices remained above the key level of $110 per barrel Monday at the close of Indian gilt market hours, which is likely to weigh on bond prices, dealers said. The yield on the 10-year benchmark is seen opening at 7.02%, they said. It is expected to rise to 7.05% if the US-Iran war escalates and crude oil prices shoot up to $115 per barrel, though firm appetite from state-owned banks and mutual funds is likely to keep it in check at that level, dealers said. The yield on the benchmark 10-year 6.48%, 2035 bond is seen in a range of 6.92-7.05%.

OIS RATES

Traders will track crude oil prices and developments in the war in West Asia that started on Feb. 28, dealers said. An overnight move in US yields will also lend cues, they said.

On the domestic front, traders are worried the Centre might hike petrol and diesel prices to support oil marketing companies, which are losing money on retail sales after crude prices jumped because of the West Asia conflict. If pump prices go up, CPI inflation could climb toward the top of the RBI's 2-6% tolerance band later in financial year 2026-27 (Apr-Mar). Swap rates have already factored in multiple repo rate hikes in India in FY27 and beyond.

Traders will also track the liquidity surplus, which has reduced considerably from its high of INR 5.50 trillion in April. Tuesday, the one-year swap rate is seen at 5.90-6.15% and the five-year swap at 6.40-6.75%.

CALL

Tuesday, the interbank call money rate for one-day loans is likely to open around 5.10-5.15%. Dealers expect the call rate to be at 4.75-5.30% during the day, while the tri-party repo rate is expected to be in the range of 4.80–5.15%, as the liquidity surplus has reduced considerably from its high of INR 5.50 trillion seen in earlier April.

The weighted average call rate will be in the 5.15-5.20% range and that in the tri-party repo market is likely to be in the band of 5.00-5.10% Tuesday, dealers said.

RBI AUCTION

--Five states to raise INR 186 billion via bond sale

LIQUIDITY

Total net inflows of INR 61.39 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 4.42 billion as coupon on state bonds

--INR 56.97 billion as coupon on 6.33%, 2035 gilt

* Outflows

-Nil

End

US$1 = INR 95.09

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

Reported by Vaishali Tyagi

Edited by Deepshikha Bhardwaj

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