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Informist, Wednesday, May 13, 2026

 

MUMBAI – Government bond prices and overnight indexed swap rates are likely to track developments related to US-Iran peace negotiations and Brent crude oil prices, dealers said. 

 

Traders expect the government to raise petrol, diesel and cooking gas prices to support oil marketing companies, which are losing money on retail sales after crude oil prices shot up because of the war. If pump prices rise, CPI inflation could climb towards the top end of the RBI's 2-6% tolerance band later in the financial year 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. 

 

According to an Informist poll of 11 economists, WPI inflation is expected to have risen to 5.5% in April from 3.88% in March. In April 2025, WPI inflation was 0.85%. In a poll by Informist, estimates for WPI inflation in April range from 4.4% to 7.9%. The commerce ministry will release WPI data for April at 1200 IST Thursday. 

 

The movement in US Treasury yields, the rupee, and overnight money market rates will also affect swaps. On Thursday, the one-year swap rate is seen at 5.95-6.15% and the five-year swap at 6.40-6.73%.

 

GOVERNMENT BONDS

On Thursday, traders will track developments related to the West Asia war and Brent crude oil prices, dealers said. The absence of a peace deal between the US and Iran kept Brent crude oil prices above $100 per barrel Wednesday. Any overnight escalation in the West Asia war could push bond yields higher, dealers said. Traders will also track wholesale inflation data for April, scheduled to be released at 1200 IST Thursday. 

 

Any major sign of an end to the war would 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 bond yields is not expected as CPI inflation is likely to remain high through the year, which will prompt traders to take profits at lower yield levels, dealers said. Traders will also track the movement of overnight indexed swap rates and the rupee, they said. If the rupee extends its fall on Thursday, bond prices are also expected to fall, tracking the Indian unit, dealers said. The yield on the 6.48%, 2035 bond is seen in the 6.98-7.10% range Thursday.

 

The 10-year benchmark 6.48%, 2035 government bond ended at INR 96.13, slightly lower than INR 96.15 Tuesday. Its yield ended at 7.0493%, similar to 7.0458% Tuesday. The benchmark yield ended above the psychologically crucial 7% mark for the third consecutive session Wednesday. The newly-issued 10-year 6.94%, 2036 bond ended at INR 99.49 or 7.0121% yield and traded between 6.97% and 7.02% yields during the day. The total traded volume of government securities was INR 484.10 billion, against INR 489.15 billion Tuesday, data from Clearing Corp. of India Ltd. showed. 

 

OIS RATES

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

 

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

 

The five-year swap rate ended at 6.66%, down from 6.68% Tuesday. The five-year swap rate traded in a thin band near the end of trade as traders likely paid one-year OIS to receive the five-year swap rate. The total notional trading volume reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 1.05 trillion at 1700 IST, up sharply from INR 717.55 billion Tuesday. 

CALL

On Thursday, the one-day interbank call money rate is likely to open above the RBI's repo rate of 5.25% due to early demand for funds from primary dealerships and some banks. Dealers expect the rate to be on the higher side, closer to the repo rate, due to the requirement for funds for the reporting fortnight ending Friday. 

 

The one-day call money rate ended at 5.20% on Wednesday, lower than 5.35% at open and sharply higher than 4.75% at close on Tuesday. The weighted average rate was 5.24%, slightly below 5.25% Tuesday. The volume in the overnight market was INR 157.71 billion, down from INR 160.51 billion Tuesday. 

 

The one-day call money rate is seen in the 4.80-5.30% range Thursday, whereas the tri-party repo rate is expected to be in the range of 4.90–5.15%, dealers said. The weighted average call rate will be in the range of 5.20-5.30% and in the tri-party repo market, it is likely to be in the 5.00-5.10?nd, dealers said. As there are no major inflows and outflows scheduled Thursday, rates are expected to trade at a similar level, they added.  

 

RBI AUCTION

--NIL

 

LIQUIDITY

Total net outflows of INR 3.35 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 150.00 billion as coupon on 91-day T-bills

--INR 70.00 billion as coupon on 182-day T-bills

--INR 57.11 billion as coupon on 364-day T-bills 

--INR 6.54 billion as coupon on state-bonds

 

* Outflows

--INR 147.00 billion as payment on 91-day T-bills

--INR 72.00 billion as payment on 182-day T-bills

--INR 68.00 billion as payment on 364-day T-bills

 

End

 

US$1 = INR 95.7050

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

 

Reported by Meera Nair

Edited by Avishek Dutta

 

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