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Informist, Friday, Aug. 7, 2026

 

MUMBAI – Government bond prices and overnight indexed swap rates will track the movement of US Treasury yields and crude oil prices over the weekend on Monday, dealers said. US yields fell post-market hours Friday after non-farm payrolls data in the US unexpectedly fell by 23,000 in July, against a Wall Street Journal poll estimate of an 83,000 rise. The CME FedWatch tool showed that Fed fund futures reflected a 42% probability of a 25 bps rate hike at the September meeting of the US Federal Open Market Committee, down from 55?ay ago. Bonds and swaps will also closely track developments in West Asia, dealers said. Money markets are shut Saturday.

 

On Monday, the one-day interbank call money rate is seen near the Reserve Bank of India's repo rate of 5.25%, with early demand for funds from primary dealerships for payment of INR 320 billion for the gilt auction conducted Friday. Due to a slew of initial public offerings, even as system-wide liquidity will be in a comfortable surplus, funds available with banks in hand are seen tight, dealers said.

 

GOVERNMENT BONDS

Gilts are not traded on Saturdays. Monday, gilt prices may take direction from developments in the war in West Asia and their impact on crude oil prices and US Treasury yields, dealers said. Government bond prices are likely to open higher if Brent crude oil prices fall over the weekend on hopes of a temporary US-Iran peace deal, dealers said. However, the rise in bond prices is likely to be limited by profit-taking by state-owned banks near the 6.75% yield on the 10-year benchmark gilt. 

 

The yield on the 6.94%, 2036 bond is seen between 6.72% and 6.82% Monday. Any significant movement in the rupee and swap rates will also lend cues, dealers said. The 10-year benchmark 6.94%, 2036 bond ended at INR 101.22, or 6.7651% yield. 

 

OIS RATES

Swaps are not traded on Saturdays. On Monday, swap rates are seen tracking movements in crude oil prices and US Treasury yields over the weekend. Swaps are seen little changed unless crude oil prices shift significantly overnight. Several traders are shifting to paid bets, with swaps unlikely to ease with elevated US Treasury yields, even as commentary by the Reserve Bank of India indicates no urgency to opt for a rate hike domestically, dealers said. Banks which were receiving fixed rates due to FCNR(B) deposits are reducing the pace of receiving, they said. Some foreign banks are still seen receiving fixed rates due to foreign inflows through these deposits, dealers said. Some fund-raisers could receive rates to hedge their bond issuances if swap rates rise, dealers said. The movement of the rupee and overnight borrowing rates will also lend cues. The one-year swap rate is seen in the range of 5.65-6.10% and the five-year at 6.07-6.40%. The one-year swap rate closed at 5.77%. The five-year swap rate settled at 6.26%.

 

CALL

The call money market is shut on Saturday. On Monday, the one-day interbank call money rate is seen near the RBI's repo rate of 5.25%, with early demand for funds from primary dealerships for payment of INR 320 billion for the gilt auction conducted Friday. Due to a slew of initial public offerings, even as system-wide liquidity will be in a comfortable surplus, funds available with banks in hand are seen tight, dealers said. However, in line with traders' expectations, the RBI said in post-market hours that it will conduct a seven-day variable rate reverse repo operation of INR 2 trillion on Monday, seen as a rollover of the four-day VRRR maturing Monday, which was subscribed at INR 1.30 trillion.  

 

While views on the trajectory of systemic liquidity remain mixed, traders are pricing out expectations of a hike in the repo rate in October after "dovish" commentary Wednesday. Surplus liquidity is seen remaining comfortable due to inflows from foreign currency non-resident (bank) deposits, at least until outflows for goods and services tax begin in the latter half of the month, dealers said. Dealers expect the one-day call rate at 4.60–5.25% Monday. The one-day tri-party repo rate is expected to be in the 4.60–5.15?nd. The weighted average call rate is expected to be in the 5.10–5.25?nd and the tri-party repo rate is likely to be 4.90-5.15%, dealers said. The three-day call money rate ended at 5.10% Friday. The weighted average call rate was 5.09%.

 

RBI AUCTION

--RBI to hold seven-day variable rate reverse repo auction for INR 2 trillion 0930-1000 IST Monday

 

LIQUIDITY

Total net outflows of INR 99.11 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 12.05 billion as coupon on state bonds Saturday

--INR 23.33 billion as coupon on state bonds Sunday

--INR 122.75 billion as redemption of state bonds Sunday

--INR 16.74 billion as coupon on state bonds Monday

--INR 46.03 billion as coupon on 7.50%, 2034 gilt Monday

--INR 1.30 trillion as redemption of four-day variable rate reverse repo tender Monday 

 

* Outflows

--INR 320 billion as payment for gilts Monday

 

End

 

US$1 = INR 95.2075

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

 

Reported by Cassandra Carvalho

Edited by Saji George Titus

 

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