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Informist, Wednesday, Oct. 7, 2026

 

MUMBAI – Bond prices and swap rates will track developments in the war in West Asia and its impact on crude oil prices. Significant overnight movement in US Treasury yields may also lend direction to prices, dealers said 

 

With the completion of the RBI's MPC meeting, bond and swap prices are likely to turn to global scenarios for cues, dealers said. The RBI's comments on growth and inflation did not seem to suggest a pre-determined path for rate hikes but current crude oil and inflation readings made the case for at least two more repo rate increases, dealers said.

 

With swap rates already reflecting rate hikes of about 100 bps more from the current 5.50%, dealers do not expect short-term swap rates to rise further without a strong trigger, dealers said. The next domestic cue on OIS rates will be the CPI inflation print for September, set to be released Monday. 

 

GILTS

Any significant movement in the rupee and swap rates will lend cues to bond prices, dealers said. Traders also await the likely announcement of OMO sales this week. Some traders expect the auction size to be between INR 1 trillion and INR 2 trillion, concentrated on bonds maturing in up to five to seven years, dealers said. Traders will also await the release of India's September CPI print on Monday, which will lend cues to bond prices, dealers said.  

 

On Wednesday, the 10-year benchmark 6.94%, 2036 bond ended at INR 97.94, or 7.2410% yield, the highest closing since Dec. 13, 2023. The bond had ended at INR 98.26 or 7.1928% Tuesday. The bond moved between 7.21% and 7.27% Wednesday.

 

OIS

On Thursday, swap rates are likely to take cues from the overnight movement in crude oil prices and US Treasury yields and developments in the war in West Asia, dealers said.

 

Lack of liquidity-draining measures announced by the RBI along with the MPC release may also cap the upward rise in OIS rates as Mumbai Interbank Outright Rate fixings are likely to remain below the new repo rate of 5.50% for most of October, dealers said. The one-year swap rate is seen in the range of 5.95–6.35% and the five-year at 6.55–6.90%.

 

The one-year swap rate ended at 6.25% on Wednesday, against 6.24% Tuesday. The five-year OIS rate rose to 6.72% from 6.67% the previous day. The total notional trading volume on Clearing Corp. of India Ltd.'s derivatives trading platform was around INR 400 billion Wednesday, sharply lower than INR 598.25 billion Tuesday.

 

CALL

Thursday, the one-day call money rate is expected to hover near the RBI's repo rate of 5.50%. Dealers expect the tri-party repo rate to open around 5.40%, similar to Wednesday. Dealers expect outflow of around INR 800 billion for excise duty and tax deducted at source between Tuesday and Wednesday together. They also expect the RBI to continue with variable rate reverse repo auctions to drain liquidity. 

 

Wednesday, the RBI announced a 29-day variable rate reverse repo auction for INR 2 trillion between 0930 IST and 1000 IST Thursday. The central bank has given banks the option of premature reversal of the amount lent. Partial reversal of a bid will be allowed. Banks can request premature reversal at least two working days before Nov. 6, the scheduled date of reversal.

 

On Wednesday, the one-day call money rate ended at 5.40%, up from 5.20% Tuesday. The tri-party repo rate was at 5.03%, sharply up from 4.75%. 

 

RBI AUCTION

--RBI to hold 29-day VRRR auction for INR 2.00 tln 0930-1000 IST Thu 

 

LIQUIDITY

Total net inflows of INR 105.27 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 116.00 billion as redemption of 91-day T-bills 

--INR 60.00 billion as redemption of 182-day T-bills 

--INR 101.74 billion as redemption of 364-day T-bills 

--INR 25.18 billion as coupon on state bonds 

--INR 65.35 billion as coupon on 7.10%, 2034 bond

--INR 2.56 trillion on reversal of 1-day VRRR

 

* Outflows

--INR 102.00 billion as payment for 91-day T-bills 

--INR 86.00 billion as payment for 182-day T-bills 

--INR 75.00 billion as payment for 364-day T-bills 

 

End

 

US$1 = INR 96.78

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

 

Reported by Kabir Sharma

Edited by Avishek Dutta

 

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