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Informist, Friday, Sept. 4, 2026

 

MUMBAI – The two-day call rate Saturday is seen below the Reserve Bank of India's Standing Deposit Facility rate amid a hefty surplus liquidity in thin trade on poor demand for funds. As has been seen the past week, the call money market rate is likely to open much later in the session, with borrowers likely to prefer borrowing funds from the tri-party repo markets. 

 

Systemic liquidity surplus is expected to hit INR 12 trillion over the weekend. Excise duty outflows of about INR 400 billion are scheduled by Monday, dealers said, barring which there is no major outflow and only further inflows expected until next week, dealers said. Outflows for advance tax and goods and services tax later this month will drain about INR 5 trillion. By the RBI's next policy meeting in October, core systemic liquidity could top INR 10 trillion, dealers said. Dealers expect the two-day call rate at 4.00–5.00% Saturday. The two-day tri-party repo rate is expected to be in the 3.50–5.00?nd.

 

Monday, the focus will be on the RBI's 30-day variable rate reverse repo operation, which most traders find as a relief since the central bank refrained from introducing permanent measures to drain the ample liquidity surplus in the system, dealers said.

 

GOVERNMENT BONDS

Gilts are not traded on Saturdays. Monday, gilt prices are seen opening higher after the RBI refrained from hikes in the cash reserve ratio or sale of government bonds through open-market operations, contrary to market participants' expectations. Gilts may also take cues from movements in US Treasury yields and crude oil prices. Traders are refraining from aggressive short positions at least until the window to swap FCNR(B) deposits shuts on Sept. 11, dealers said.

 

Focus will also be on the US Federal Open Market Committee's mid-month rate decision, dealers said. The FOMC decision will be a key trigger for the RBI Monetary Policy Committee's repo rate decision in October, dealers said. Traders expect the yield on the 10-year benchmark bond to hit 7.10% in about a month. As September nears its end, focus will also be on the Centre's and states' borrowing plans from October onwards, with heavy supply expected from both.

 

Any significant movement in the rupee and swap rates will also lend cues, they said. The yield on the 10-year benchmark 6.94%, 2036 bond is seen moving between 6.90% and 7.05% Monday, dealers said. Friday, the bond ended at INR 99.83 or 6.9625%.

 

OIS RATES

Swaps are not traded Saturdays. Swaps are seen falling Monday after the RBI refrained from conducting permanent measures to drain systemic liquidity and instead chose to conduct a 30-day variable rate reverse repo operation Monday with the option of premature redemption. Systemic liquidity is seen hitting INR 12 trillion by the end of this week, which is likely to support the fall in swaps, dealers said. 

 

Dealers had expected the RBI Friday to announce measures such as incremental hikes in the cash reserve ratio to drain durable liquidity in the banking system. However, traders will also track the movement in crude oil prices and US Treasury yields, along with any fresh developments in the US-Iran war. US yields rose post-swap market hours after US non-farm payrolls for August rose sharply higher than expected at 162,000 against 53,000 estimated in a Dow Jones poll. The one-year swap rate is seen in the range of 5.82-6.10% and the five-year at 6.35-6.65% Monday. The one-year swap ended at 5.99%, while the five-year swap rate ended at 6.47% Friday.

 

RBI AUCTION

--Nil

 

LIQUIDITY

Total net inflows of INR 16.33 billion. The calculation does not take into account redemption of the Standing Deposit Facility and scheduled variable rate repo and variable rate reverse repo operations.

 

* Inflows

--INR 16.33 billion as coupon on state bonds

 

* Outflows

--Nil

 

End

 

US$1 = INR 94.4850

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

 

Reported by Cassandra Carvalho

Edited by Shubhayan Bhattacharya

 

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