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Informist, Saturday, Jul. 18, 2026

NEW DELHI – Government bond prices and overnight indexed swap rates are seen tracking crude oil prices when the market opens Monday, dealers said. Brent crude futures rose after the end of Indian market hours Friday and settled at $88.26 per barrel before the weekend. The depreciation of the rupee against the dollar is a concern for some traders as the fall comes despite the Reserve Bank of India deploying various measures to prevent it.

Traders remain cautious about developments in West Asia and the movement of US Treasury yields closer to the US Federal Open Market Committee's meeting later this month. News regarding the inclusion of Indian gilts in Bloomberg's flagship index and foreign capital inflows following the 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 and even September.

The call money rate is seen opening above the RBI's repo rate of 5.25% ahead of outflows for goods and services tax, dealers said. The one-day call money rate is seen in a range of 4.60-5.50%.

GOVERNMENT BONDS

Monday, traders will track crude oil prices at the market opening. The depreciation of the rupee against the dollar is a concern for some as the fall comes despite the RBI deploying various measures to prevent it, though optimism about foreign currency non-resident (bank) deposits picking up may curb this worry, dealers said.

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 FCNR(B) 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 6.94%, 2036 bond yield is seen moving between 6.70% and 6.80% Monday, dealers said. The 10-year benchmark bond ended at INR 101.12 or 6.7799% Friday.

OIS RATES

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% and the five-year swap rate ended at 6.38%.

CALL

The one-day call rate is seen opening above the repo rate 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 in the day, funds locked up in the initial public offering 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 expect both anchor investment and qualified institutional purchases by foreign investors to boost rupee liquidity. Yet others expect Amundi India, which is selling 3.7% stake in the asset management company, to transfer the cash it receives from the initial public offering offshore.

The RBI will conduct a seven-day variable rate repo auction at 0930-1000 IST Monday for INR 1.25 trillion, as several traders had expected. Dealers expect the call rate Monday to be at 4.60–5.50%. The tri-party repo rate is expected to be in the 4.60–5.30% band. The weighted average call rate is expected to be in the 5.10–5.40% range and that in the tri-party repo market is likely to be 5.00–5.30%, they said.

RBI AUCTION

--Govt to switch eight bonds worth INR 300 billion at auction 1030-1130 IST

LIQUIDITY

Total net outflows of INR 277.83 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 20.97 billion as coupon on state bonds

--INR 6.37 billion as coupon on 6.83%, 2039 gilt Sunday

--INR 4.83 billion as coupon on 7.43%, 2076 gilt Sunday

--INR 10.00 billion as redemption of state bonds Monday

* Outflows

--INR 320.00 billion as payment for gilts auction

--INR 750.03 billion as reversal of three-day variable rate reverse repo

--INR 8.16 billion as reversal of three-day variable rate reverse repo

End

US$1 = INR 96.28

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

Reported by Aaryan Khanna and Cassandra Carvalho

Edited by Rajeev Pai

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