More Stories

Informist, Tuesday, Jun. 16, 2026

MUMBAI – Government bond prices and overnight indexed swap rates are expected to take direction from crude oil prices and developments surrounding a proposed US-Iran peace deal on Wednesday, while traders also assess the impact of tax-related outflows on banking system liquidity and prospects of sustained foreign portfolio investment.

Traders will also track the movement of US Treasury yields ahead of the Federal Open Market Committee rate decision late Wednesday, which will be the first meeting under newly appointed Federal Reserve Chair Kevin Warsh. A status quo on interest rates is expected, with the commentary from Warsh on inflation and employment being keenly watched to chart US rate expectations. Some traders expect the new chair to be "dovish" due to political pressure on the Fed to ease borrowing costs.

Data for Tuesday, when released on Wednesday, may show the banking system liquidity surplus has shrunk to near-neutral after advance tax outflows, some dealers said. An outflow of INR 204.61 billion is scheduled Wednesday for the payment of the state bond auction though it will be largely offset by scheduled coupon payments of INR 152.41 billion.

Traders will also track any development on the inclusion of Indian government bonds on Bloomberg Index Services' flagship Global Aggregate Index after the RBI and the Centre unveiled a slew of measures to improve foreign inflows earlier this month, dealers said. Government sources said that such measures were intended to secure the inclusion. Bloomberg, which deferred its decision on the inclusion of Indian bonds in January, said it plans to provide the next update on the potential inclusion by mid-2026. The review could be as soon as next week, dealers said. The movement of the rupee could also lend cues. 

Bond market sentiment is expected to remain positive, given the likelihood that FPI flows will sustain for at least the next two weeks, dealers said. This will depend on Bloomberg's review of India for the possible inclusion of gilts in its flagship bond index, they said. The FPI inflows are expected to increase the liquidity in the banking system, which is likely to support the market, they said. Demand for short-term gilts in the secondary market is expected to rise as well, with more inflows, dealers added. If the peace deal holds, traders are likely to pare bets of rate hikes by the MPC this calendar year.

GOVERNMENT BONDS

On Wednesday, prices are expected to track crude oil prices, with traders cautious about whether the US-Iran peace deal will be signed by Friday. Traders don't expect Brent crude to stay below $80 a barrel for long, even if a peace agreement between the US and Iran is reached, as supply disruptions are likely to persist. The 10-year benchmark gilt yield is also unlikely to hold below 6.80%. Traders expect the bond yield curve to steepen further, with strong demand expected for gilts maturing under five years. 

On Wednesday, the government will also sell INR 240 billion of Treasury bills at its auction. Some traders expect the cut-off yields at the auction to be similar to the cut-off yield set last week. Some traders expect the cut-off yields to be slightly lower than in last week's auction.

The benchmark 10-year 6.94%, 2036 bond ended at INR 100.52, or 6.8651% Tuesday. The 10-year benchmark bond yield has fallen over 15 basis points so far in June.

OIS RATES

Swap rates are seen trending lower Wednesday, though caution ahead of the FOMC decision may limit activity, dealers said. Swaps could also fall more if the peace deal between the US and Iran continues without further issue until the official signing scheduled for Friday.

The one-year OIS rate could fall to 5.80% while the five-year swap rate is seen falling to 6.20% if the peace deal continues as planned and the Strait of Hormuz is reopened, dealers said. On Tuesday, the one-year swap rate ended at 5.89% and the five-year swap rate ended at 6.31%. 

A likely liquidity boost due to the RBI's measures to shore up capital is seen adding to fall in short-term rates, dealers said. Most traders now do not expect a repo rate hike in August, though concerns over deficient rainfall and higher food prices remain. The MPC may hike the repo rate in October, but a rate-hike in the near-term seems unlikely with the peace deal coming to fruition and May's CPI inflation lower than expected, they said. 

CALL

The one-day call money rate Wednesday is expected to open above the Reserve Bank of India's repo rate of 5.25% on demand for funds from primary dealerships amid tightening liquidity, dealers said. Some banks are also likely to borrow to meet their credit disbursal requirements approaching the quarter-end, they added. The one-day call rate ended at 5.35% Tuesday. 

Dealers expect the call rate to be in the 4.70–5.50% range Wednesday. The tri-party repo rate is expected to trade in a 4.90–5.30% band. The weighted average call rate is expected to be around 5.25–5.30%, and the weighted average rate in the tri-party repo market is likely to be around 5.15-5.20%, they said.

RBI AUCTION

--RBI to auction 91-day T-bills worth INR 120 billion at 1030-1130 IST

--RBI to auction 182-day T-bills worth INR 60 billion at 1030-1130 IST

--RBI to auction 364-day T-bills worth INR 60 billion at 1030-1130 IST

LIQUIDITY

Total net outflows of INR 44.72 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 7.48 billion as coupon on state bonds

--INR 55.86 billion as coupon on 7.57%, 2033 gilt

--INR 14.96 billion as coupon on 7.69%, 2043 gilt

--INR 49.75 billion as coupon on 6.67%, 2050 gilt

--INR 31.84 billion as coupon on 7.63%, 2059 gilt

* Outflows

--INR 204.61 billion as payment for state bonds

End

US$1 = INR 94.5600

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

Reported by Meera Nair

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.