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Informist, Friday, Jul. 17, 2026

 

MUMBAI – On Saturday, the two-day interbank call money rate is seen below the Reserve Bank of India's repo rate of 5.25% in thin trade, as is usually the case on Saturdays. Monday, demand for funds is likely to be high as outflows of around INR 1.8 trillion for goods and services tax payments begin. Later Monday, funds locked up in initial public offerings of SBI Funds Management will be released.

 

Traders have mixed views on whether the public issue will aid or erode surplus liquidity in the banking system. Some expect outflows if foreign investors are not allotted shares. Some others expect both anchor investment and qualified institutional purchases from foreign investors to boost rupee liquidity. A few traders expect Amundi India, which is selling 3.7% stake in the asset management company, to transfer the cash it receives from the public issue offshore.

 

The RBI will conduct a seven-day variable rate repo Monday for INR 1.25 trillion. Several traders were expecting the auction.

 

Dealers expect the call rate to be in the 4.60–5.20% range Saturday. The tri-party repo rate is expected to be in the 4.60–5.10?nd. The weighted average call rate is expected to be in the 4.90–5.10?nd, they said. The weighted average rate in the tri-party repo market is likely to be in the 5.00–5.10?nd, they added. The three-day call money rate ended at 5.40% Friday, slightly lower than 5.50% at one-day close Thursday. The weighted average call rate was also 5.40%, up from 5.35% Thursday.

 

Government bonds and overnight indexed swap rates are not traded Saturdays.

 

GOVERNMENT BONDS

Gilts are not traded Saturdays. Monday, traders will track crude oil prices at the market opening. Traders remain cautious about developments in West Asia and the movement of US Treasury yields closer to the US Federal Open Market Committee's July meeting. News regarding the inclusion of Indian gilts in Bloomberg's flagship index and foreign capital inflows following measures announced by the RBI last month will also be tracked. Several traders have pushed back expectations of the Bloomberg review being published this month to August or even September.

 

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. Traders will also track the progress of the monsoon, as deficient southwest monsoon rains are seen pushing inflation higher. Currently, domestic inflation is largely in check, dealers said, barring the inflation that gets imported with crude oil. 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. 

 

However, despite macroeconomic headwinds, traders are refraining from aggressive short positions on the expectation that Bloomberg will include Indian sovereign bonds in its flagship Global Aggregate Index. Demand from banks due to inflows from foreign currency non-resident bank deposits is also likely to support demand for gilts, along with purchases by foreign portfolio investors. "There is this view in the market that we will see $20 billion-$25 billion flows within the next two weeks," a dealer at a corporate house said.  

 

The 10-year 2036 bond yield is seen moving between 6.70% and 6.80%, dealers said. The 10-year benchmark bond ended at INR 101.12 Friday, down from INR 101.35 Thursday. The yield on the bond rose to 6.7799% from 6.7478% at the end of the previous session.

 

OIS RATES

Swaps are not traded Saturday. Monday, swap rates will track the movement in crude oil prices and US Treasury yields, dealers said. Offshore traders are likely to continue paying fixed rate contracts if the conflict in West Asia continues. The developments in West Asia will also influence traders' views on domestic interest rate hikes because of the potential impact from imported inflation. The one-year swap rate is roughly pricing in nearly three hikes in the repo rate within 12 months.

 

Traders will also keep track of any received bets by domestic banks' asset and liability management, with flows from these desks having been paused this week amid a rise in crude oil prices. Traders will also track foreign inflows through the various schemes the RBI rolled out last month to shore up capital. Some traders expect inflows of around $20 billion by the first week of August. 

 

The movement in the rupee could also lend cues. The one-year swap rate is seen in the range of 5.78-6.10%. The five-year swap is seen at 6.25-6.45%. Friday, the one-year swap rate closed at 5.93%, up from 5.89% Thursday. The five-year swap rate ended at 6.38%, up from 6.34%.

 

RBI AUCTION

--Nil

 

LIQUIDITY

Total net inflows of INR 7.06 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 7.06 billion as coupon on state bonds

 

* Outflows

--Nil

 

End

 

US$1 = INR 96.2800

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

 

Reported by Cassandra Carvalho

Edited by Rajeev Pai

 

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