More Stories

Informist, Friday, May 8, 2026

 

NEW DELHI – Government bond prices and overnight indexed swap rates are likely to react to developments in the war in West Asia over the weekend as traders gauge their impact on India's economy, both through rates and the government's fiscal strength, dealers said. Money markets are shut on Saturday. 

 

Traders will also begin positioning for India's CPI inflation data for April, due at 1600 IST Tuesday. According to an Informist poll of 13 economists, CPI inflation is seen rising to a 15-month high of 3.8% in April from 3.4% in March. Some traders expect a print closer to 4%. Traders expect a larger rise in wholesale inflation due to oil supply disruptions since the Centre has not yet hiked retail energy prices. After state Assembly elections ended last week, several traders expect the Centre to announce such price hikes anytime this month.

 

A breakthrough in the war could pull down the 10-year benchmark 6.48%, 2035 gilt yield to 6.85% and the five-year OIS rate to 5.35%, dealers said. However, an intensification of the conflict that has been under a fragile ceasefire over the past month may push up the 10-year benchmark yield to over 7.00% and the five-year swap rate to near 5.75%, they said.

 

Meanwhile, the one-day call money rate is expected to open near the Reserve Bank of India's repo rate of 5.25% Monday due to early demand for funds from primary dealers and small finance banks. The one-day call money rate is seen in the range of 4.60–5.30% during the day.

 

GOVERNMENT BONDS

On Monday, traders will track developments in the West Asia war and Brent crude oil prices, after the US and Iran exchanged strikes in the Gulf region overnight, dealers said.

 

Traders will also begin positioning for India's CPI inflation data for April, due at 1600 IST Tuesday. According to an Informist poll of 13 economists, CPI inflation is seen rising to a 15-month high of 3.8% in April from 3.4% in March. Some traders expect a print closer to 4%. Traders expect a a larger rise in wholesale inflation due to oil supply disruptions since the Centre has not yet hiked retail energy prices. After state Assembly elections ended last week, several traders expect the Centre to announce such price hikes anytime this month.

 

Any major sign of an end to the war could pull Brent crude oil prices to near $90 a barrel, which may prompt the 10-year benchmark gilt yield to fall to 6.85%. Further fall in the bond yield is not expected as CPI inflation is likely to remain high through the year, which will prompt traders to take profits at that yield level, dealers said. However, any sign of escalation in the West Asia war could push the 10-year bond yield back above 7.00%, dealers said. Traders will also track the movement of overnight indexed swap rates and the rupee, they said.

 

The yield on the 6.48%, 2035 bond is seen in a range of 6.90-7.05% Monday. On Friday, the 10-year benchmark gilt ended at INR 96.58 or 6.9809% yield. 

 

OIS RATES

As has been the case since the war in West Asia began, swap rates on Monday will track crude oil prices and developments on US-Iran peace talks over the weekend, dealers said. 

 

Traders have opposing views on liquidity, with some expecting liquidity to improve next month or so after the RBI announces its transfer of surplus to the Centre--which is expected by the end of May, dealers said. Most traders expect liquidity to shrink going ahead, as has been the trend since the new financial year began April, they said. 

 

Traders also expect the government will hike petrol and diesel prices to support oil marketing companies, which are losing money on retail sales after crude prices jumped because of the war in West Asia. RBI's Monetary Policy Committee external member Ram Singh Tuesday said the government should hike retail fuel prices. If pump prices go up, CPI inflation could climb towards the top of the RBI's 2-6% tolerance band later in 2026-27 (Apr-Mar), dealers said. Swap rates have already factored in multiple repo rate hikes in India in FY27 and beyond and are largely pricing in a hike in retail energy prices. Dealers are just unsure of when such a price hike would happen and expect it this month. 

 

The movement in US Treasury yields, the rupee, and overnight money market rates will also affect swaps. On Monday, the one-year swap rate is seen at 5.75-6.15% and the five-year swap at 6.35-6.73%. The one-year rate ended 5.90% Friday and the five-year OIS rate closed at 6.56%.

 

CALL

The one-day interbank call money rate is likely to open at 5.25% Monday due to early demand for funds from primary dealerships and some small finance banks, dealers said. The one-day call money rate is seen in the range of 4.60–5.30% during the day, while the tri-party repo rate is expected in the band of 4.80–5.20%.

 

The weighted average call rate is likely to be in the range of 5.10–5.25%, while that in the tri-party repo market is seen at 5.05–5.15%, dealers said. Liquidity conditions remain comfortable but will not be enough for banks to lend funds below the repo rate in early trade, they said. The reversal of the INR 107.95-billion, four-day VRR auction is unlikely to have an impact on money market rates on Monday due to its small size, dealers said.

 

RBI AUCTION

--Nil

 

LIQUIDITY

Total net outflows of INR 79.47 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 38.63 billion as coupon on state bonds

--INR 38.43 billion as coupon on 7.61%, 2039 gilt Saturday

--INR 48.41 billion as coupon on 8.24%, 2033 gilt Sunday

--INR 32.31 billion as coupon on 5.79%, 2030 gilt Monday

--INR 102.75 billion as coupon on state bonds Monday

 

* Outflows

--INR 340.00 billion as payment for government bond auction

--INR 107.95 billion as redemption fo four-day variable rate repo auction

 

End

 

US$1 = INR 94.48

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

 

Reported by Aaryan Khanna

Edited by Avishek Dutta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.