More Stories

Informist, Saturday, Oct. 3, 2026

 

MUMBAI – Gilt prices and swap rates will take cues from movements in crude oil prices and US Treasury yields, and developments in the war in West Asia on Monday, dealers said. Lower-than-expected inflation for August in the US eased bets of a rate hike at the US Federal Reserve's next meeting, but the September non-farm payrolls data on Friday will be closely watched to cement those bets.

 

Traders widely expect the Reserve Bank of India's Monetary Policy Committee to begin a shallow rate hiking cycle in October with a 25-basis-point interest rate increase Wednesday, dealers said. They look ahead to the commentary of RBI officials after the rate decision, including Governor Sanjay Malhotra's assessment of growth and inflation. Gilts are pricing in repo rate increases of around 100 bps from current levels and a convincing argument from central bank officials on a shallower rate hike cycle despite high crude oil prices and US yields may lead to a sharp increase in bond prices, dealers said.

 

GILTS

Gilts are not traded on Saturdays. Developments in the West Asia war over the long weekend and their impact on crude oil prices and US Treasury yields will be closely watched, dealers said.

 

Traders also expect the RBI to announce an open market operation to sell bonds and absorb liquidity from the banking system. Some dealers do not feel such an action would be necessary, while others see the RBI announcing it on Wednesday along with the rate decision and broader commentary on liquidity.

 

Any significant movement in the rupee and swap rates will also lend cues, dealers said. The yield on the 10-year benchmark 6.94%, 2036 bond is expected to move between 7.10% and 7.25%, dealers said. Thursday, the benchmark 10-year 6.94%, 2036 bond ended at INR 98.12, or 7.2133% yield, compared with its previous close of INR 98.29, or 7.1879% Wednesday. The yield on the 10-year benchmark bond ended at its highest closing level since Apr. 19, 2024, and moved between 7.18% and 7.23% during the day.

 

OIS

India's financial markets were shut Friday for Gandhi Jayanti. Swaps are not traded Saturdays. On Thursday, the one-year swap rate ended at 6.27%, up from 6.21% Wednesday. The five-year swap rate closed at 6.73% against 6.65% Wednesday. Both benchmark rates ended at their highest since May 22.

 

The next significant domestic rate trigger is the MPC's rate decision next week, they said. As the US Federal Reserve hiked interest rates in September, the RBI's rate-setting panel is seen following suit with a 25-bps repo rate hike next week, dealers said. Inflation readings are rising, while growth indicators show resilience, strengthening the case for repo rate increases. A quarter-percentage-point rate hike is already factored into OIS rates and a lack of further policy tightening announced Wednesday will lead to a fall in swap rates, they said.

 

For direction, traders will focus on comments by RBI Governor Sanjay Malhotra after the policy decision. Traders expect the central bank to introduce more measures to drain systemic liquidity, beyond the government bond sales it conducted this month and variable rate reverse repo operations, they said. Some expect more open-market operations sales of up to INR 1 trillion in October, while others expect a hike in banks' cash reserve ratio. The one-year swap rate is seen in the range of 5.95–6.35% and the five-year at 6.55–6.90%.

 

CALL

The one-day call money rate is likely to open near the Reserve Bank of India's repo rate of 5.25% on Monday. The RBI will hold an INR-2-trillion variable rate reverse repo auction to absorb surplus liquidity at 0930-1000 IST. Saturday, the two-day call rate ended at 4.85%. 

 

Government spending is likely to infuse more liquidity into the banking system over the next few sessions, which may drag overnight money market rate, dealers said. They expect the one-day call rate to be at 4.50–5.30% Monday, while the one-day tri-party repo rate is seen at 4.50-5.25%.

 

RBI AUCTION

--RBI to hold overnight VRRR auction for INR 2 tln 0930-1000 IST Mon 

 

LIQUIDITY

Total net outflows of INR 298.56 billion. The calculation does not account for redemptions of the Standing Deposit Facility and scheduled variable rate repo and variable rate reverse repo operations.

 

* Inflows

--INR 10.67 billion as coupon on FRB 2028 Sunday 

--INR 20.77 billion as coupon on state bond Sunday

--INR 1.68 trillion on reversal of 4-day VRRR Monday

 

* Outflows

--INR 330.00 billion as payment for gilts

 

End

 

US$1 = INR 96.32

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

 

Reported by Kabir Sharma

Edited by Deepshikha Bhardwaj

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.