More Stories

Informist, Monday, Jun. 22, 2026

NEW DELHI – Government bond prices and overnight indexed swap rates are expected to change little Tuesday owing to the lack of significant domestic triggers, with the minutes of the Monetary Policy Committee's June meeting suggesting a repo rate hike is not imminent in August, dealers said. The movement in crude oil prices overnight may give direction at the open.

The near-month Brent Crude contract slid over 1.5% from 1700 IST Monday to under $78 per barrel at 2145 IST as peace talks between the US and Iran progressed, suggesting a positive opening for gilt prices and a fall in OIS rates. The movement in US Treasury yields and the rupee may also influence both markets during the day.

The one-day call money rate is expected to open above the Reserve Bank of India's repo rate of 5.25% Tuesday on early demand from primary dealers and some banks amid what is likely to be a liquidity deficit in the banking system, dealers said. Dealers expect the call rate to be at 4.60–5.50% Tuesday.

GOVERNMENT BONDS

Tuesday, government bond prices will track the overnight movement in crude oil prices, dealers said. The volume of trades is likely to remain low as traders await clarity on the US-Iran peace agreement, dealers said. Later in the day, traders expect the INR 169-billion state bond auction result to lend cues.

In case of the lack of any major triggers, traders expect the 6.94%, 2036 bond yield to remain in the 6.80-6.85% range throughout the week, dealers said. The 10-year benchmark gilt ended at INR 100.65 or 6.8473% yield Monday.

Even with a US-Iran peace deal, many traders think Brent crude is unlikely to remain around $80 per barrel due to continuing supply disruptions. The 10-year benchmark gilt yield is also seen to be unlikely to fall below 6.80%. Some traders do not expect crude oil prices to fall to pre-war levels. Instead they expect prices to continue to stay near the $75-$85 per-barrel mark, dealers said.

Traders also await the release of the state borrowing calendar for the September quarter. A higher-than-expected borrowing quantum will pull bond prices down, dealers said. Traders are divided on the size of state borrowing in Jul-Sept. Some expect it to be broadly in line with the borrowing quantum in the June quarter, dealers said. Others expect it to be slightly higher than the borrowing in the September quarter a year ago.

Market sentiment is expected to remain positive, given the likelihood of higher foreign portfolio investor inflows, dealers said. The inflows are expected to help the liquidity in the banking system, which is likely to support bond prices, they said. 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, dealers said. 

Traders remained optimistic about the inclusion of Indian bonds in Bloomberg's flagship Global Aggregate Index, which is likely to improve foreign inflows, dealers said. If the inclusion does take place, dealers expect India's Fully Accessible Route bonds to account for 0.8-1.0% of the Bloomberg Global Aggregate Index. In its September consultation note, Bloomberg had said a weightage of 0.7% was under consideration.

OIS RATES

Swap rates are seen opening steady Tuesday with no significant change in the domestic rate view, even as crude oil prices and US Treasury yields lend direction. Swap rates maturing in six months to one year may ease as the prospect of domestic rate hikes has diminished after the release of the minutes of the June policy meeting, dealers said.

Short-term swap rates may remain under pressure this week due to a crunch in banking system liquidity, before picking up next week on the government's spending. System liquidity is expected to go into deficit in the coming days due to goods and services tax payments, which will keep overnight rates high, dealers said. 

A likely liquidity boost from the RBI's measures to lure foreign capital is seen adding to the fall in short-term rates, but at the same time, the central bank is likely to drain this liquidity starting July, dealers said. While most traders do not expect a repo rate hike in August, concerns over deficient rainfall and higher food prices remain and the Monetary Policy Committee may raise the rate in October, especially if the US Fed begins raising interest rates, they said.

Swaps are seen rising in the medium term as domestic inflation is likely to rise due to the weak monsoon and supply disruptions in crude oil, dealers said. Swap rates may fall if there is an uptick in non-resident dollar-denominated bank deposits of three- to five-year tenors. This is likely to lead to demand for short-term bonds and banks may begin to unwind their paid fixed rate positions that were hedging against a fall in the prices of their bond holdings, dealers said.

The movement of the rupee could also lend cues. The one-year swap rate is seen at 5.75-6.00% and the five-year at 6.20-6.42%. Monday, the one-year rate ended at 5.88% and the five-year rate ended at 6.30%.

CALL

Tuesday, the one-day call money rate is expected to open above the RBI's repo rate of 5.25% on early demand from primary dealers and some banks amid what is likely to be a liquidity deficit in the banking system, dealers said. The RBI's large variable rate repo auction may keep the call money rate within the liquidity adjustment facility corridor, they said. The one-day call rate ended at 5.40% Monday. 

The central bank will conduct a seven-day VRR auction for INR 2.00 trillion from 0930 IST to 1000 IST Tuesday. The auction will help banks meet funding requirements after GST-related outflows and allow them to roll over funds borrowed from the RBI under previous liquidity injections, dealers said. The overnight VRR auction of INR 363 billion held Monday and the seven-day VRR auction of INR 894.40 billion conducted Jun. 16 will be reversed Tuesday.

Dealers expect the call rate to be at 4.60–5.50% Tuesday. 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. 

RBI AUCTION

--RBI to conduct seven-day, INR 2.00 trillion variable rate repo auction 0930-1000 IST

--Nine states to raise INR 169 billion via bond sale 1030-1130 IST

LIQUIDITY

Total net inflows of INR 82.02 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 16.02 billion as coupon on state bonds
--INR 29.32 billion as coupon on 6.75%, 2029 gilt

--INR 36.68 billion as coupon on 9.23%, 2043 gilt

* Outflows
--INR 363.00 billion as reversal of overnight variable rate repo auction

--INR 894.40 billion as reversal of seven-day variable rate repo auction

End

US$1 = INR 94.67

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

Reported by Aaryan Khanna

Edited by Rajeev Pai

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 (11) 4220-1000

Send comments to feedback@informistmedia.com

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