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Informist, Monday, Jun. 29, 2026

 

NEW DELHI – Government bond prices Tuesday may track overnight movements in crude oil prices and any significant development in the peace negotiations between the US and Iran, dealers said. The result of the INR-136-billion state bond auction will lend cues later in the day, they said.

 

Overnight indexed swap rates are seen tracking US Treasury yields Tuesday. Traders are likely to play on spreads between swaps and gilt yields as the latter have greater scope to fall in the near term, dealers said.

 

The one-day interbank call money rate is likely to open above the Reserve Bank of India's repo rate on early demand for funds from primary dealerships and banks amid a persistent liquidity deficit, dealers said. Dealers expect the call rate to be at 4.60–5.50% Tuesday.

 

GOVERNMENT BONDS

Tuesday, 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. On Monday, the 10-year benchmark 6.94%, 2036 bond ended at INR 101.33 or 6.7515% yield. 

 

Traders will also track the result of the state bond auction, dealers said. Five states will raise INR 136 billion at the state bond auction, dealers said. The notified amount is the same as the indicative amount in the Jul-Sept state borrowing calendar. The demand at the auction is likely to be firm due to the small quantum, they said.   

 

Traders will also keep an eye on key US jobs data due later this week and on the tenuous ceasefire between the US and Iran. May's Job Openings and Labor Turnover Survey report, which measures US job openings, is scheduled for release Tuesday. The June nonfarm payrolls report, tracking jobs added last month, follows on Thursday. Investors will closely examine both to assess the strength of the US economy as it will impact the policy rate decisions, dealers said.

 

Some traders also eyed the INR-340-billion of 6.94%, 2036 bond auction Friday, dealers said. Some traders will likely make space in their portfolio for the fresh supply of bonds. Some traders will also place short bets on the bond in order to cover their positions at a lower price at the auction, which will weigh on bond prices.

 

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 are seen tracking US yields Tuesday. Traders are likely to play on spreads between swaps and gilt yields as the latter have greater scope to fall in the near term, dealers said.

 

Deficient rainfall and higher food prices are expected to push up retail inflation in the coming months while the RBI is likely to drain systemic liquidity ahead of a likely rate hike cycle, dealers said. 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 interest rates, dealers said.

 

The movement of crude oil price and the rupee could also lend cues Tuesday. The one-year swap rate is seen at 5.60-5.90% and the five-year at 6.02-6.25%. On Monday, the one-year swap rate ended at 5.77% and the five-year swap rates ended at 6.19%.

 

CALL

The one-day interbank call money rate Tuesday is likely to open above the RBI's repo rate on early demand for funds from primary dealerships, dealers said. Some banks are also likely to borrow to meet quarter-end funding requirements and maintain their cash balances with the RBI at the end of the reporting fortnight, they said.

 

The seven-day VRR of INR 1.41 trillion, conducted on Jun. 23, is scheduled to reverse on Tuesday. The RBI will conduct an overnight, INR-750-billion VRR auction at 0930-1000 IST Tuesday that will provide liquidity to the banking system across the quarter-end, in addition to the INR 750.21 billion injected via a two-day operation Monday. 

 

The government's bond buyback operation conducted on Monday would not have a significant impact on liquidity or money market rates, given the negligible amount, dealers said. The RBI accepted offers worth INR 73.88 billion to buy back four government bonds maturing in 2026-27 (Apr-Mar) at auction Monday, which will be settled 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 4.90–5.45?nd. The weighted average call rate is expected to be in the 5.25–5.35?nd, and that of the tri-party repo market is likely to be in the 5.20–5.30?nd, they said. 

 

RBI AUCTION

--Five states to raise INR 136 billion via bond sale 1030-1130 IST

--RBI to conduct overnight, INR 750 billion variable rate repo auction 0930-1000 IST

 

LIQUIDITY

Total net inflows of INR 54.44 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 12.98 billion as coupon on state bonds

--INR 5.00 billion as redemption of state bonds

--INR 15.07 billion as coupon on 5.91%, 2028 gilt

--INR 21.39 billion as coupon on 6.79%, 2031 gilt

 

* Outflows

--INR 1.41 trillion as reversal of seven-day variable rate repo auction

End

 

US$1 = INR 94.54

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

 

Reported by Aaryan Khanna

Edited by Akul Nishant Akhoury

 

 

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