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Informist, Friday, May 15, 2026

 

NEW DELHI – The two-day call money rate is likely to open below the Reserve Bank of India's repo rate of 5.25% Saturday after most banks met their cash needs for the weekend on Friday, dealers said. Both rates and volumes are likely to be subdued Saturday, as usual.

 

The two-day call money rate is seen in the 4.90–5.20% range during the day. On Friday, the three-day call money rate ended at 5.23%. Government bonds and overnight indexed swap rates are not traded on Saturday.

 

Goods and services tax outflows on Monday are likely to lift the call money rate at the open, with outflows of around INR 1.8 trillion to INR 2.0 trillion expected by Wednesday, dealers said. The RBI will conduct a seven-day variable rate repo auction for INR 1 trillion at 0930-1000 IST. This will help banks meet demand for funds amid the GST outflows, they said.

 

GOVERNMENT BONDS

On Monday, traders will track developments related to the West Asia war and Brent crude oil prices, dealers said. The absence of public progress in the resolution of the West Asia war during a summit between the US and Chinese presidents reduced risk appetite.

 

Any escalation in the West Asia war over the weekend could push bond yields higher, 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 the 7.00-7.10% range Monday. 

 

Traders will also closely track the result of the INR-300-billion switch auction, wherein the government announced it would switch eight gilts with five longer-term gilts. Traders expect the auction on Monday to be partially switched as the securities announced are similar to those at earlier auctions and banks do not hold many of these source securities since they have been switched already. More benchmark securities were expected at the switch auction, dealers said.

 

OIS RATES

On Monday, offshore players are likely to drive the trajectory of swap rates depending on developments in US-Iran peace talks and crude oil prices, dealers said. Traders will also track the RBI's action on liquidity, with outflows of around INR 2 trillion expected to drain the surplus next week for goods and services tax payments. Any announcement of a variable rate repo operation may lead to an easing of short-term swap rates. Traders also expect the RBI board to meet next week and announce the transfer of surplus to the Centre for 2025-26 (Apr-Mar). Traders expect a surplus transfer of INR 2.7 trillion to INR 3.5 trillion, with some expecting a cut in the contingency risk buffer to 6.5%. 

 

After state-owned oil marketing companies hiked retail petrol and diesel prices by INR 3 per litre Friday, traders expect more such hikes gradually. Due to a rise in pump prices, 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, which some dealers feel are overpriced and will receive fixed rate contracts, they said. 

 

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 6.05-6.30% and the five-year swap at 6.65-6.82%.

 

RBI AUCTION

--Nil

 

LIQUIDITY

Total net inflows of INR 4.63 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 4.63 billion as coupon on state bonds

 

* Outflows

--Nil

 

End

 

US$1 = INR 95.97

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

 

Reported by Aaryan Khanna

Edited by Avishek Dutta

 

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