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Informist, Friday, Jun. 19, 2026

NEW DELHI – The two-day interbank call money rate is expected to open below the Reserve Bank of India's repo rate of 5.25% on Saturday, amid low demand for funds as banks met their needs on Friday, dealers said. Government bonds and overnight indexed swap rates are not traded on Saturdays. 

Goods and services tax outflows and tight liquidity in the banking system may pull up both the call money rate and volume, some traders said, while most expect sluggish activity as usual. "There won't be much outflow for GST tomorrow (Saturday) and the volume in both the market (call and tri-party repo market) will be low, as usually happens over the weekend," a dealer at a state-owned bank said.

Dealers expect the call rate to be at 4.60–5.25% Saturday. The tri-party repo rate is expected to be in the range of 4.80–5.20%. The weighted average call rate is expected to be around 4.90–5.15%, and that of the tri-party repo market is likely to be at 4.90-5.10%, they said. On Friday, the three-day call rate ended at 5.30%. 

GOVERNMENT BONDS

Monday, government bond prices will track movement in crude oil prices, dealers said. Even with a US-Iran peace deal, many traders think Brent crude is unlikely to remain around $80 per barrel due to continuing supply disruptions. The 10-year benchmark gilt yield is also seen as unlikely to fall below 6.80%. Some traders do not expect crude oil prices to fall to pre-war levels and instead expect prices to continue to hover near the $75-$85 per barrel mark, dealers said.

Market sentiment is expected to remain positive, given the likelihood that FPI flows will be sustained for at least two weeks, dealers said. The FPI inflows are expected to increase the liquidity in the banking system, which is likely to support bond prices, they said. If the US-Iran peace deal holds, traders are likely to pare bets of a rate hike by the RBI's Monetary Policy Committee in 2026.

Traders also await the release of the state borrowing calendar for the September quarter, and a higher-than-expected borrowing quantum will pull bond prices down, dealers said. Traders are divided on the size of state borrowing in Jul-Sept. Some expect the quantum to be broadly in line with the borrowing quantum in the June quarter, dealers said. Others expect it to be slightly higher than the borrowing in the September quarter a year ago.

The 10-year benchmark 6.94%, 2036 bond is seen trading in a range of 6.80-6.90% Monday. On Friday, the bond ended at INR 100.61, or 6.8533% yield. 

OIS RATES

Monday, swap rates are seen tracking Brent crude oil and any indication of the inclusion of gilts in Bloomberg's Global Aggregate Index, with several dealers expecting the review this month. Traders will also assess the minutes of the Monetary Policy Committee's June meeting, released after market hours on Friday.

Swaps are seen rising in the medium term as domestic inflation is likely to increase due to a weak monsoon and crude oil supply disruptions, dealers said. Swap rates may fall if there is an uptick in non-resident dollar-denominated bank deposits of three- to five-year tenors. This is likely to lead to demand for short-term bonds and banks may begin to unwind their paid fixed rate positions that were hedging against a fall in the prices of their bond holdings, dealers said.

A likely liquidity boost from the RBI's measures to shore up capital is seen adding to the fall in short-term rates, but the RBI is also likely to drain this liquidity ahead of a rate-hike cycle, dealers said. Most traders no longer expect a repo rate hike in August, though concerns over deficient rainfall and higher food prices remain. The Monetary Policy Committee may raise the repo rate in October, especially if the US Fed begins raising rates, they said.

The movement of the rupee could also lend cues. The one-year swap rate is seen at 5.75-6.00% and the five-year at 6.20-6.42%. On Friday, the one-year rate ended at 5.90% and the five-year rate closed at 6.34%.

RBI AUCTION

--Nil

LIQUIDITY

Total net inflows of INR 51.95 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 11.40 billion as coupon on state bonds

--INR 40.55 billion as coupon on 7.38%, 2027 gilt

* Outflows

--Nil

End

US$1 = INR 94.32

Reported by Aaryan Khanna

Edited by Saji George Titus

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