More Stories

Informist, Monday, Jun. 8, 2026

MUMBAI – Government bond prices are on Tuesday likely to take cues from developments related to the West Asia conflict and its impact on crude oil prices, dealers said. Domestically, traders will also assess the Reserve Bank of India's directions on the swap facility RBI Governor Sanjay Malhotra had announced Friday for foreign-currency non-resident deposits and public-sector undertakings' external commercial borrowing. The RBI released the guidelines late Monday. Dealers said the directions bode well for bond prices. Traders also interpret that all Authorised Dealer Category I banks can raise overseas foreign currency borrowings, not just state-owned entities, as was assumed earlier. The three- to five-year foreign-currency non-resident deposits are exempt from maintenance of cash reserve ratio and statutory liquidity ratio requirements, which is in line with traders' expectations. The swap positions for the above-mentioned facilities are also exempt from the central bank's latest limits on net open positions. 

"As market was assuming - they've allowed leverage for FCNR. Absence of it would have been extremely bad - as the measure would have fallen flat," a dealer at a private sector bank said. "Now it's for the actual flows to come."

Traders will also monitor the outcome of Tuesday's state government securities auction, where 10 states are scheduled to raise INR 148 billion through bonds. The auction size is smaller than the INR-182.50-billion indicated in the borrowing calendar for the June quarter, and dealers expect demand to outstrip supply, leading to aggressive bidding. Demand for state bonds at the auction is likely to come from banks, insurance companies and pension funds, dealers said.  

Traders will also track any development on the inclusion of Indian government bonds on Bloomberg Index Services' flagship Global Aggregate Index after the RBI and the Centre Friday unveiled a slew of measures to improve foreign inflows, dealers said. Bloomberg, which deferred its decision on the inclusion of Indian bonds in January, said it plans to provide the next update on the potential inclusion by mid-2026. Most traders expect the review this month.

Traders await India's CPI inflation data for May, scheduled for Friday. Headline retail inflation is likely to have risen to a 16-month high of 4% in May, reaching the Reserve Bank of India's medium-term inflation target, according to the median in an Informist Poll of 12 economists.

GOVERNMENT BONDS

Bond prices are likely to take cues from developments related to the Israel-Iran conflict and their impact on crude oil prices on Tuesday, dealers said. The yield on the benchmark 10-year 6.48%, 2035 bond is expected to move within a 6.90-7.00% range. Dealers said a ceasefire agreement could push the benchmark yield towards 6.90%. Conversely, any setback in negotiations and a renewed rise in crude oil prices could drive the yield closer to 7.00%.

The 10-year benchmark 6.48%, 2035 bond ended at INR 96.78, or 6.9532%, Monday. The newer 6.94%, 2036 bond ended at INR 99.88, 6.9558% yield. 

OIS RATES

On Tuesday, swap rates will track crude oil prices and developments in the US-Iran peace negotiations. Swaps could tumble if a peace deal between the US and Iran is announced. However, traders will still price in a quicker rate cycle in India, likely to begin as early as August due to elevated oil prices and as monsoon is expected to be weak, stoking inflation, dealers said.

Traders expect the swap rate curve to steepen, as longer-term rates rise on high inflation, but short-term rates will be anchored due to a likely liquidity boost once the RBI's measures to shore up capital kick in. 

The movement of the rupee and US Treasury yields could also lend cues. The one-year swap rate is seen at 5.90-6.10% and the five-year at 6.40-6.64%. The one-year swap rate ended at 6.05% Monday. The five-year OIS rate ended at 6.54%.

CALL

The one-day interbank call money rate on Tuesday is likely to open above the RBI's repo rate of 5.25%, owing to likely demand for funds at the beginning of trade from primary dealerships and some banks, dealers said. Dealers expect the call rate to be in the 4.60–5.40% range. The tri-party repo rate is expected to trade in a 4.90–5.30% band. The weighted average call rate is expected to be around 5.25–5.30%, and the weighted average rate in the tri-party repo market is likely to be around 5.15-5.20%, they said. The surplus liquidity is expected to be at INR 1.40 trillion to INR 1.60 trillion for the rest of the week, dealers said. 

The one-day call rate ended at 5.25% Monday, up sharply from 4.70% on Saturday for two-day loans. The weighted average call rate was 5.30%, also higher than 4.88% Saturday.

RBI AUCTION

--10 states to raise INR 148 billion via bond sale on Tuesday

LIQUIDITY

Total net inflows of INR 26.28 billion Tuesday. 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 13.33 billion as coupon on state bonds

--INR 12.95 billion as coupon on 6.64%, 2027 gilt 

* Outflows

--Nil

End

US$1 = INR 95.7075

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

Reported by Meera Nair

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.