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Informist, Tuesday, Jun. 9, 2026

MUMBAI – On Wednesday, government bond prices are likely to take cues from developments in the West Asia war and their impact on Brent crude oil prices, dealers said. 

Traders will also track any development in the inclusion of Indian government bonds on Bloomberg Index Services' flagship Global Aggregate Index after the Reserve Bank of India and the Centre Friday unveiled a slew of measures to improve foreign inflows, dealers said. Government sources said that such measures were intended to secure the inclusion. 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. A likely liquidity boost due to the RBI's measures to shore up capital could also temper a rise in short-term rates, dealers said.

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

On Wednesday, government bond prices are likely to take cues from developments in the West Asia war and their impact on Brent crude oil prices, dealers said. The yield on the benchmark 10-year 6.48%, 2035 bond is expected to move in a range of a 6.88-7.00%. Dealers said a ceasefire agreement could pull the benchmark yield towards 6.85%. However, any setback in negotiations and a renewed rise in crude oil prices could push the yield closer to 7.00%.

On Tuesday, the 10-year 6.48%, 2035 bond ended at INR 97.08, or 6.9082% yield. The new 10-year 6.94%, 2036 bond, the most-traded security of the day, ended at INR 100.16, or 6.9163% yield. 

OIS RATES

On Wednesday, swap rates will continue to track crude oil prices and developments in US-Iran peace negotiations. However, swaps are seen trending lower in the near term due to expectations of foreign flows. Swaps could tumble if a peace deal between the US and Iran is announced. On the monetary policy front, 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 the monsoon is expected to be weak, stoking inflation, dealers said. 

The movement of the rupee and US Treasury yields could also lend cues. Traders await the US FOMC's rate decision later this month, wherein status quo on interest rates is expected. Fed fund futures are pricing in a 43% chance of a 25 bps rate hike by the FOMC by the end of 2026, according to the CME FedWatch tool. The one-year swap rate is seen at 5.85-6.10% and the five-year at 6.30-6.64%.

The one-year swap rate ended at 5.99% Tuesday. The five-year OIS rate ended at 6.43%. 

CALL

The one-day interbank call money rate is likely to open above the RBI's repo rate of 5.25% on Wednesday due to initial demand from primary dealerships and some banks in early trade, dealers said. Dealers expect the call rate to be in the 4.70–5.40% 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. Surplus liquidity is expected to remain between INR 1.20 trillion and INR 1.30 trillion due to lack of major scheduled outflow or inflows for this week. 

The one-day call rate ended at 5.27% Tuesday, up from 5.25% Monday. The weighted average call rate was 5.27%, slightly lower than 5.30% Monday.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 120 billion

--RBI to auction 182-day T-bills worth INR 60 billion

--RBI to auction 364-day T-bills worth INR 60 billion

LIQUIDITY

Total net outflows of INR 134.16 billion Wednesday. 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 13.84 billion as coupon on state bonds

* Outflows

--INR 148.00 billion on payment on state bond

End

US$1 = INR 95.3500

Reported by Meera Nair

Edited by Avishek Dutta

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