More Stories

Informist, Wednesday, May 27, 2026

MUMBAI – Government bond prices and overnight indexed swap rates will track developments in the war in West Asia and their impact on crude oil prices, dealers said. India's financial markets will remain shut Thursday for Id-ul-Zuha.

Bond prices were expected to rise on Friday after Iranian media reported Tehran had received an initial framework for a memorandum of understanding to end the war with the US, dealers said. Under the framework, Iran would allow commercial shipping through the Strait of Hormuz while the US naval presence in the region would reduce, Al Jazeera reported. However, the White House called the report a complete fabrication and said not to trust Iranian state media on the deal. 

Traders will also track US Treasury yields after the release of a slew of economic data in the US, dealers said. On the domestic front, focus is on the Reserve Bank of India's monetary policy meeting next week. Most traders expect the MPC to hold the repo rate steady while opting for a cautious tone that may signal more restrictive liquidity conditions in the months ahead. The RBI's Annual Report for 2025-26 (Apr-Mar) is set to be released at 1100 IST Friday, though that is not expected to have a major impact on that as the data and commentary are likely to be dated, dealers said.

Moreover, dealers hope that the central bank will announce measures to curb the rupee's depreciation, weakening the case for a policy repo rate hike. Some traders were also receiving swap rates Tuesday and Wednesday after the cut-off at the three-year, $5-billion dollar-rupee buy-sell swap auction was higher than expected. Some dealers expect more such auctions to be conducted.

The three-day call money rate is expected to open near the Reserve Bank of India's Marginal Standing Facility rate of 5.50% due to early demand for funds from primary dealers amid tight liquidity conditions prevailing in the banking system, dealers said. Dealers expect the call rate to be in the 4.70–5.50% range during the day.

GOVERNMENT BONDS 

On Friday, traders will track developments in a peace deal between the US and Iran and whether the war in West Asia is close to an end. The movement in crude oil prices will be closely tracked as well, dealers said.

The yield on the 10-year benchmark 6.48%, 2035 bond is seen in the 6.90-7.05% range Friday. The 10-year benchmark 6.48%, 2035 bond ended at INR 96.49 or 6.9960% yield. A finalised peace deal between the US and Iran could pull the benchmark yield towards the 6.85% level, dealers said. Traders widely expect the 10-year benchmark gilt yield to remain below the 7.05% level unless there is a major setback in the talks to end the war in West Asia.

Traders may avoid aggressive bets ahead of the weekly gilts auction at 1030-1130 IST, they said. The government will sell INR 170 billion of the 6.68%, 2040 bond and INR 110 billion of the 7.43%, 2076 bond at the auction. Traders expect demand for both securities to be robust. The 7.43%, 2076 bond is likely to attract life insurers and pension funds. Traders are expected to cover short positions in the 6.68%, 2040 bond at the debt sale.

OIS RATES

On Friday, swap rates will track developments in the war in West Asia and its impact on crude oil prices, dealers said. A peace deal between the two countries is likely to drag down the one-year swap rate to 5.90% and the five-year OIS rate to 6.40%, dealers said. However, 6.40% on the five-year OIS is seen as lucrative to pay fixed rates, limiting a fall in the rate, some dealers said. 

The movement in the rupee and overnight money market rates will also influence swaps. Friday, the one-year swap rate is seen at 5.90-6.40% and the five-year at 6.50-6.90%. The one-year swap rate was at 6.10% Wednesday while the five-year OIS rate ended at 6.61%.

CALL

On Friday, the three-day interbank call money rate is likely to open near the RBI's MSF rate of 5.50% owing to early demand from primary dealers and some banks, dealers said. The two-day call rate ended at 5.50% Wednesday, up from 5.30% for one-day loans Tuesday. 

On Friday, the three-day day interbank call money rate is likely to open near the RBI's MSF rate of 5.50% owing to early demand from primary dealers and some banks, dealers said.

Traders expect the RBI to conduct a VRR auction Friday as banks need for cash will spike ahead of the end of the reporting fortnight on Sunday. The maturity of a four-day VRR Friday worth INR 887 billion will also lead to demand for funds, dealers said. The settlement of the RBI's dollar-rupee swap auction and the government's month-end spending are expected to increase the liquidity surplus in the banking system, but the call money rate may still remain above the policy repo rate of 5.45%.

Dealers expect the call rate to be in the 4.70–5.50% range during the day, while the tri-party repo rate is expected to be in the range of 5.00–5.40%. The weighted average call rate is expected to be in the range of 5.25-5.45% while the weighted average tri-party repo market rate is likely to be in the range of 5.15-5.30%, they said.

RBI AUCTION

--Govt to auction two gilts worth INR 280 billion at 1030-1130 IST Friday.

LIQUIDITY

Total net inflow of INR 18.28 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 43.94 billion as coupon on state bonds

--INR 155.19 billion as redemption of 91-day Treasury bills Thursday

--INR 70.00 billion as redemption of 182-day T-bills Thursday

--INR 51.23 billion as redemption of 364-day T-bills Thursday

--INR 20.75 billion as coupon on 6.62%, 2051 gilt Thursday

* Outflows

--INR 166.83 billion as payment for 91-day T-bill auction Friday

--INR 82.00 billion as payment for 182-day T-bill auction Friday

--INR 74.00 billion as payment for 364-day T-bill auction Friday

--INR 887.45 billion as reversal of four-day variable rate repo auction Friday

End

US$1 = INR 95.69

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

Reported by Meera Nair and Aaryan Khanna

Edited by Deepshikha Bhardwaj

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 (22) 6985-4000

Send comments to feedback@informistmedia.com

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