More Stories

Informist, Wednesday, Jun. 17, 2026

 

MUMBAI – Government bond prices and overnight indexed swap rates are likely to take cues from movement in crude oil prices Thursday as traders remain cautious about whether the US-Iran peace deal will be signed on Friday. US President Donald Trump said Wednesday that an interim accord with Iran was not final, and that ‌he could resume the bombing campaign if he did not like it or if Tehran did not "behave".

 

Traders will also track the outcome of the first US Federal Open Market Committee meeting under new Fed Chair Kevin Warsh later Wednesday, wherein a status quo on interest rates is expected. Commentary on inflation in the wake of the likely end to the war in West Asia will be watched, 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 unveiled a slew of measures to improve foreign inflows earlier this month, dealers said. Bloomberg, which deferred its decision on the inclusion of Indian bonds in January, said it plans to provide an update on the potential inclusion by mid-2026. The review is expected this month, dealers said. The movement of the rupee could also lend cues. 

 

Market sentiment is expected to remain positive, given the likelihood that foreign portfolio inflows will be sustained for at least two weeks, dealers said. FPI inflows are expected to increase the liquidity in the banking system, which is likely to support the market, they said. Demand for short-term gilts in the secondary market is expected to rise as well, with more inflows, they added. If the US-Iran peace deal holds, traders are likely to pare bets of a rate hike by the RBI's Monetary Policy Committee in 2026.

 

GOVERNMENT BONDS

On Thursday, gilt prices will likely track crude oil prices as traders remain cautious about whether the US-Iran peace deal will be signed on Friday. Even with a US-Iran peace deal, many traders think Brent Crude is unlikely to sustain below $80 per barrel due to ongoing supply disruptions. The 10-year benchmark gilt yield is also seen as unlikely to fall below 6.80%. Traders expect the bond yield curve to steepen further, with strong demand expected at the shorter end. 

 

At the weekly gilt auction on Friday, traders expect the demand to be firm for short-term bonds. The long-term bonds are also likely to be absorbed as the quantum is low, dealers said. However, some traders said demand at the auction will also depend on the FOMC decision. The government will sell INR 110 billion of 6.03%, 2029 bonds, INR 110 billion worth of 6.68%, 2033 bonds, INR 50 billion of 7.24%, 2055 bonds and INR 50 billion of 7.50%, 2056 green bonds at the auction Friday.

 

The benchmark 6.94%, 2036 bond ended at INR 100.54, or 6.8626% Wednesday. The 6.94%, 2036 bond is seen moving in the 6.80-6.90% range Thursday.

 

OIS RATES

Swap rates are seen tracking US Treasury yields after the FOMC decision at 2330 IST Wednesday. However, caution ahead of the scheduled signing of the US-Iran peace deal Friday may limit a sharp move in swaps, dealers said. If a peace deal is signed and the FOMC decision is favourable, the one-year OIS rate could fall to 5.80% while the five-year swap rate is seen falling to 6.20%, they said.

 

A likely liquidity boost from the RBI's measures to shore up capital is expected to add to the fall in short-term rates, dealers said. Most traders no longer expect a repo rate hike in August, though concerns over deficient rainfall and higher food prices remain. The MPC may hike the repo rate in October, but a near-term rate hike seems unlikely with the peace deal likely to come to fruition and May's CPI inflation lower than expected, they said. 

 

On the domestic front, swaps are seen falling after the RBI post-market hours Wednesday removed the cap on rates on fresh foreign currency non-resident dollar-denominated bank deposits of three- to five-year tenures, allowing banks to set higher rates, boosting the chances of these deposit schemes attracting more inflows. 

 

The one-year swap rate closed at the lowest level since May 7 at 5.88% Wednesday, inching lower from 5.89% Tuesday. The five-year swap rate settled at its lowest level since Mar. 10, at 6.30%. The one-year swap rate is seen at 5.75-6.00% and the five-year at 6.20-6.42% Thursday.

 

CALL

The one-day call money rate is expected to open above the RBI's repo rate of 5.25% Thursday due to early demand from primary dealerships amid constrained liquidity, dealers said. Banks are likely to borrow to meet credit disbursal requirements during the quarter-end, they said. 

 

Dealers expect the call rate to be at 4.70–5.50% Thursday. The tri-party repo rate is expected to be in the range of 4.90–5.30%. The weighted average call rate is expected to be around 5.25–5.35%, and that of the tri-party repo market is likely to be at 5.20-5.30%, dealers said.

 

The one-day call rate ended at 5.30% Wednesday. The weighted average call rate was 5.35%.

 

RBI AUCTION

--NIL

 

LIQUIDITY

Total net outflows of INR 125.61 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 68.00 billion as coupon on 182-day T-bills

--INR 60.20 billion as coupon on 364-day T-bills

--INR 17.23 billion as coupon on state bonds

--INR 22.46 billion as coupon on 7.02%, 2031 gilt

 

* Outflows

--INR 154.00 billion as payment for 91-day T-bills

--INR 68.00 billion as payment for 182-day T-bills

--INR 71.50 billion as payment for 364-day T-bills

 

End

 

US$1 = INR 94.5250

 

Reported by Meera Nair

Edited by Saji George Titus

 

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.