More Stories

Informist, Thursday, Jun. 25, 2026

 

NEW DELHI – Government bond prices will track movement in crude oil prices over the long weekend for direction at the market open Monday. Significant development in the peace negotiations between the US and Iran may also lend direction, though a flare-up is not expected, dealers said. With crude prices falling to levels seen before the war in West Asia, traders may shift their focus later in the day to domestic cues and US Treasury yields, they said.

 

Money markets are shut on Friday and Saturday. Overnight indexed swap rates may open steady Monday after the tumble in swap rates this week on easing concern over rate hikes in India. Though most traders still see a base case of a 50-basis-point repo rate increase in India in 2026-27 (Apr-Mar), comments from Reserve Bank of India Governor Sanjay Malhotra and the continued fall in crude oil prices suggest the Monetary Policy Committee may forego material policy tightening, dealers said.

 

The one-day interbank call money rate is expected to open above the policy repo rate of 5.25% due to early demand for funds from primary dealerships, dealers said. Banks will avoid lending and may be borrowers as they look to meet credit disbursal needs amid a liquidity crunch in the banking system. Dealers expect the call rate to be at 4.60–5.50% Monday.

 

GOVERNMENT BONDS

Monday, government bond prices will track overnight movements in crude oil prices and any significant development in the peace negotiations between the US and Iran, dealers said. Some traders, on the other hand, shifted their focus to domestic cues, with the price of Brent crude oil easing to almost pre-war levels. Further, they do not expect any major escalation in West Asia, dealers said. The 10-year benchmark 6.94%, 2036 gilt ended at INR 101.21 or 6.7690% Thursday.

 

Later Monday, bond prices are likely to take cues from the result of the INR 300-billion buyback auction, dealers said. The buyback should relieve market supply pressures and improve system liquidity, which will support bond prices, they said. Traders expect firm participation at the auction since most of the securities are "in the money" or profitable for banks to sell back. The RBI Tuesday said the government will buy back four gilts worth INR 300 billion Monday. The bonds are the 7.33%, 2026 bond, the 5.74%, 2026 bond, the 8.15%, 2026 gilt, and the 8.24%, 2027 bond. No separate buyback amount has been announced for each security.

 

Traders also await the release of the state borrowing calendar for the September quarter. Higher-than-expected state government borrowing will pull down bond prices, dealers said. Traders are divided on the size of state borrowing in Jul-Sept, dealers said. Some expect it to be in line with the borrowing quantum in the June quarter while others believe it will be slightly higher than the borrowing in the September quarter a year ago. Traders expect the borrowing to be between INR 2.60 trillion and INR 3.30 trillion, dealers said. The Treasury bill calendar released after market hours showed INR 3.36 trillion of T-bill issuances scheduled for the September quarter.

 

Traders remain optimistic that Indian bonds will be added to Bloomberg's flagship Global Aggregate Index. If the inclusion proceeds, they expect India's Fully Accessible Route bonds to account for 0.8-1.0% of the index. Bloomberg had said in its September consultation note that a weight of 0.7% was under consideration.

 

OIS RATES

Swap rates may open steady Monday after the tumble in OIS rates this week on easing concern over rate hikes in India. Though most traders still see a base case of a 50 bps repo rate increase in India in FY27, RBI comments and the continued fall in crude oil prices suggest the Monetary Policy Committee may forgo material policy tightening, dealers said.

 

A likely liquidity boost from the RBI's measures to attract foreign capital is seen adding to the fall in short-term rates but the central bank is also likely to drain this liquidity starting in July, dealers said. Another positive is the likely inflow of 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.

 

Deficient rainfall and higher food prices are expected to push up retail inflation in the coming months. Even though most traders no longer expect a repo rate hike in August or October, they are wary of a US Federal Open Market Committee rate hike sharply changing expectations for domestic rates, dealers said. Swap rates are seen rising in the medium term as domestic inflation is likely to increase due to a weak monsoon and crude oil supply disruptions, dealers said.

 

The movement of the rupee and US Treasury yields could also lend cues. The one-year swap rate is seen at 5.68-5.90% and the five-year at 6.05-6.30%. On Thursday, the one-year swap rate ended at 5.76% and the five-year swap rate closed at 6.18%.

 

CALL

On Monday, the one-day interbank call money rate is expected to open above the repo rate due to early demand for funds from primary dealerships, dealers said. Banks will avoid lending and may be borrowers as they look to meet credit disbursal needs amid a liquidity crunch in the banking system.

 

The RBI will conduct a two-day, INR-750-billion VRR auction at 0930-1000 IST Monday, it announced after market hours Thursday. Traders widely expected such an announcement as the central bank is seen trying to keep the call rate within the Liquidity Adjustment Facility corridor of 5.00-5.50%. The VRR auction will infuse liquidity at fortnight-end and quarter-end on Tuesday, when demand for funds from banks will be very high.

 

Dealers expect the call rate to be at 4.60–5.50% Monday. The tri-party repo rate is expected to be in the 4.90–5.45?nd. 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%, they said. 

 

RBI AUCTION

--Govt to buy back four gilts maturing in FY27 at auction 1030-1130 IST Monday

--RBI to conduct two-day, INR 750 billion variable rate repo auction 0930-1000 IST Monday

 

LIQUIDITY

Total net outflows of INR 151.25 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 106.39 billion as coupon on state bonds

--INR 60.00 billion as redemption of 182-day Treasury bills Friday

--INR 40.62 billion as coupon on 6.79%, 2029 gilt Friday

--INR 66.00 billion as redemption of state bonds Monday

 

* Outflows
--INR 280.00 billion as payment for gilt auction Monday

--INR 168.00 billion as reversal of four-day variable rate repo auction

 

End

 

US$1 = INR 94.40

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

 

Reported by Aaryan Khanna

Edited by Akul Nishant Akhoury

 

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.