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Informist, Friday, Aug. 14, 2026

MUMBAI – Government bond prices are seen tumbling Monday after the Reserve Bank of India unexpectedly cut short its concessional swap window for foreign currency non-resident (banks) deposits raised from Sept. 30 to Aug. 31, dealers said. Traders had priced in hefty inflows pulling down the shorter-end of the yield curve and ample surplus liquidity through such inflows lending appetite to buy bonds, dealers said. Traders had expected foreign inflows topping $100 billion, with FCNR(B) deposits leading these inflows, and thus had expected ample durable liquidity in the banking system. Traders had expected core systemic liquidity surplus to hit INR 9 trillion on the back of robust inflows from FCNR(B) deposits. These bets will be pared, and several banks had plans in place to raise such deposits through leveraging products in September. Further, RBI Governor Sanjay Malhotra had last week said there were currently no plans to extend or advance the closure of the FCNR(B) window, which had given comfort to traders. 

Money markets are shut Saturday for Independence Day.

GOVERNMENT BONDS

Gilts are not traded on Saturdays. Monday, gilt prices may intraday take direction from developments in the war in West Asia and their impact on crude oil prices and US Treasury yields over the weekend, dealers said. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.77% and 6.85% Monday, dealers said. 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 101.27, or 6.7578% yield. 

OIS RATES

Swaps are shut Saturdays. On Monday, swap rates are seen higher as traders pare expectations of foreign inflows rising after the RBI post-market hours said it will cease the concessional swap facility for foreign currency non-resident (banks) deposits for such deposits raised post Aug. 31.

Traders will track the movement of crude oil prices and US Treasury yields, dealers said. Elevated US Treasury yields are also a concern for traders, limiting a fall in swaps, they 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 6.12-6.40%. The one-year swap rate closed at 5.73%. The five-year swap rate settled at 6.25%. 

CALL

The call money market is shut Saturday for Independence Day. On Monday, the one-day interbank call money rate is seen above the RBI's repo rate of 5.25% after the RBI post-market hours said it will cease the concessional swap facility for foreign currency non-resident (banks) deposits for such deposits raised post Aug. 31. On expectations of lower systemic liquidity, borrowing rates are likely to rise, dealers said. 

The RBI will conduct a seven-day VRRR auction for INR 2 trillion Monday, which is likely to see moderate subscription since several traders do not prefer locking in funds for such a long duration. Traders have begun watching out for any drain in liquidity through currency in circulation, nearing the festive season. 

Liquidity is seen to be ample 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 4.60–5.50% on Monday. The one-day tri-party repo rate is expected to be in the 4.60–5.50% band. The weighted average call rate is expected to be in the 5.15–5.35% band and the tri-party repo rate is likely to be 5.05-5.30%, dealers said. The three-day call money rate ended at 5.25% Friday. The weighted average call rate was 5.23%.

RBI AUCTION

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

--Govt to switch 8 gilts worth INR 300 billion via auction 

LIQUIDITY

Total net outflows of INR 187.99 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 13.03 billion as coupon on state bonds Saturday

--INR 24.92 billion as coupon on 8.24%, 2027 bond Saturday

--INR 54.34 billion as coupon on 8.28%, 2032 bond Saturday

--INR 5.90 billion as coupon on state bonds Sunday

--INR 19.08 billion as coupon on 6.36%, 2031 gilt Sunday

--INR 14.74 billion as coupon on state bonds Monday

--INR 958.10 billion as redemption of seven-day variable rate reverse repo tender Monday 

--INR 802.35 billion as redemption of three-day variable rate reverse repo tender Monday 

* Outflows

--INR 320 billion as payment for gilts Monday

End

US$1 = INR 95.43

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

Reported by Diksha Tripathy

Edited by Deepshikha Bhardwaj

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