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Informist, Thursday, Jul. 2, 2026

 

MUMBAI – Government bond prices and overnight indexed swap rates are expected to track overnight movement in US Treasury yields after the release of non-farm payrolls data in the US, dealers said. The monthly US jobs report for June, released after Indian market hours on Thursday, showed job gains were lower than expected.

 

Non-farm payrolls increased by 57,000 in June, against expectations of 115,000 jobs in a Wall Street Journal poll, and lower than the 129,000 added in May. Still, the US unemployment rate inched down 4.2% in June from 4.3% in May. Separately, US jobless claims for the week ended Saturday fell by 1,000 to 215,000, lower than a poll estimate of 220,000. After rising past 4.50?rlier in the day, the 10-year US Treasury yield was at 4.48% at 2040 IST.

 

That may push up bond prices while pulling OIS rates lower on Friday. Traders also remain optimistic that India's sovereign bonds will be added to Bloomberg's flagship Global Aggregate Index. Traders have already piled into gilts, expecting the addition, and may book profit after the inclusion is announced, which is expected by mid-July. If Indian bonds are included, dealers expect India's Fully Accessible Route bonds to have a weight of 0.8-1.0% in the index, driving in around $25 billion in foreign portfolio investment.

 

The prospect of a deficient southwest monsoon and higher food prices is expected to push up retail inflation in the coming months, dealers said. As of Thursday, the southwest monsoon was 33?low normal at 120.2 millimetres.

 

Meanwhile, the three-day interbank call money rate is expected to open near the RBI's repo rate of 5.25%, driven by early demand from primary dealers ahead of the weekly gilt auction. Dealers expect the call rate to be in the 4.60-5.40% range Friday.

 

GOVERNMENT BONDS

On Friday, bond prices will track overnight movement in US Treasury yields and any significant movement in Brent crude oil prices, dealers said. However, the INR-340-billion, 6.94 36bond supply will likely weigh on bond prices.

 

Traders may avoid taking large bets before the auction results are announced. While most expect the fresh supply to sail through near-market levels, some traders said demand for the bond may be lower as its yield approaches 6.70%, the lowest so far for the 10-year gilt in the current financial year, which began in April. The 10-year benchmark 6.94%, 2036 bond ended at INR 101.57, or 6.7180% yield, Thursday. 

 

OIS RATES

On Friday, swap rates are seen falling, tracking a decline in US Treasury yields after the release of US jobs data, dealers said. There are no scheduled interest rate triggers on the domestic front Friday. 

 

The movement of the rupee could also lend cues. The one-year swap rate is seen in the range of 5.60-5.90% and the five-year at 6.10-6.30%. On Thursday, the one-year swap rate closed at 5.79% and the five-year swap rate ended at 6.20%.

 

CALL

On Friday, the three-day interbank call money rate is expected to open around the RBI's repo rate of 5.25%, driven by early demand from primary dealers ahead of the weekly gilt auction, dealers said. Call money rates are expected to ease later in the day with systemic liquidity in a surplus and no major scheduled outflows on Friday, they said.

 

The maturity of the two-day RBI VRR auction of INR 296.95 billion is unlikely to materially push up money market rates, though it may increase banks' demand for funds during the day, dealers said. Dealers expect the call rate to be at 4.60–5.40% Friday. 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 5.05–5.30?nd, they said.

 

RBI AUCTION

--Govt to auction INR 340 billion of the 6.94%, 2036 gilt at 1030-1130 IST

 

LIQUIDITY

Total net inflow of INR 22.69 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 22.69 billion as coupon on state bonds

 

* Outflows

--INR 296.95 billion as reversal of two-day variable rate repo auction

 

End

 

US$1 = INR 95.39

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

 

Reported by Meera Nair

Edited by Saji George Titus

 

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