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Informist, Wednesday, Jul. 15, 2026

MUMBAI – Government bond prices and swap rates are seen steady Thursday, though overnight developments in the war in West Asia and the movement in Brent crude oil prices will lend cues, dealers said. 

Deficient rainfall and higher food prices may 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. The RBI projects CPI inflation to average 5.9% in Oct-Dec, higher than the policy rate of 5.25%. The view of rate increase in India is influenced by the expectation that the US Federal Open Market Committee may also hike rates in 2026, dealers said. 

Traders await Bloomberg's decision on the inclusion of Indian gilts in its flagship index, with most traders betting on a favourable decision. Traders also expect overnight rates to ease due to a liquidity boost from inflows into foreign-currency non-resident bank deposits. The Bloomberg announcement on the inclusion of Indian bonds is expected any time between this week and September, dealers said. The movement in the rupee could also lend cues.

GOVERNMENT BONDS

On Thursday, traders will continue to maintain caution on developments in West Asia and their impact on Brent crude oil prices, along with the movement of US Treasury yields closer to the US Federal Open Market Committee's July meeting. Domestic focus will continue to be on news regarding the inclusion of Indian gilts in Bloomberg's flagship index and foreign capital inflows following measures announced by the RBI last month.

The depreciation of the rupee against the dollar is a concern for some traders, as the fall comes despite the RBI deploying various measures to prevent it. However, domestically, inflation is largely in check currently, dealers said, barring the imported inflation from a rise in oil prices. Traders now look to gauge whether the RBI's Monetary Policy Committee will raise the repo rate in October to curb inflation and stabilise the depreciating rupee. 

The 10-year 2036 bond is seen moving between 6.75% and 6.90%, dealers said. On Wednesday, the 10-year benchmark bond ended at INR 101.17, up from INR 101.02 Tuesday. The yield on the bond fell to 6.7738% from 6.7945% at the end of the previous session. 

OIS RATES

On Thursday, OIS rates will take cues from movements in crude oil prices and US Treasury yields, dealers said. Developments in West Asia will also influence traders' views on domestic rate increases due to the potential impact on imported inflation, they said. The one-year swap rate is seen in the range of 5.78-6.05% and the five-year at 6.18-6.45%. The one-year swap rate closed at 5.94%, unchanged from Tuesday. The five-year swap rate ended at 6.38%, up one basis point from Tuesday.

CALL

On Thursday, the one-day interbank call money rate is seen at or above the RBI's repo rate of 5.25% amid demand for funds on the last day of the IPO of SBI Funds Management and outflows linked to the RBI's foreign exchange management operations. 

Dealers expect the call rate to be at 4.60–5.40% on Thursday. The tri-party repo rate is expected to be in the 4.90–5.30% band. The weighted average call rate is expected to be in the 5.20–5.30% band, and that in the tri-party repo market is likely to be in the 5.00–5.20% band, they said. The one-day call money rate ended at 5.35% Wednesday, higher than 5.25% Tuesday. The weighted average call rate was 5.24%, the same as on Tuesday.

RBI AUCTION

--Nil

LIQUIDITY

Total net outflows of INR 88.79 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 150.00 billion as redemption of 91-day Treasury bills

--INR 63.18 billion as redemption of 364-day T-bills

--INR 21.21 billion as coupon on state bonds

* Outflows

--INR 153.18 billion as payment for 91-day T-bills

--INR 88.00 billion as payment for 182-day T-bills

--INR 82.00 billion as payment for 364-day T-bills 

End

US$1 = INR 96.2550

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

Reported by Cassandra Carvalho

Edited by Avishek Dutta

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